Welcome to the 14th annual edition of Modern Healthcare's By the Numbers, a compendium of the past year's industry data, rankings and survey results published in the weekly magazine and online. Many of the charts have been augmented with additional data. And the following pages contain just a fraction of the information available for download as charts or in spreadsheet form on our website at modernhealthcare.com/data.
Surveying the year-over-year movement in the rankings reveals a shifting healthcare industry landscape that foreshadows the dramatic changes sure to come now that uncertainty about healthcare reform's implementation is behind us.
In June, U.S. Chief Justice John Roberts gaveled to a close the legal challenge mounted by half the states over the constitutionality of the Patient Protection and Affordable Care Act. While some states may still elect to opt out of the Medicaid expansion designed to provide affordable health insurance coverage to the working poor, the broad parameters of delivery system reform—the sections of the law that are of critical importance to industry leaders—will remain in place. Those reforms—what could be dubbed the accountable care revolution—will guide the business strategies of healthcare industry leaders for the foreseeable future.
The law's fate faced one last critical vote, of course, after the U.S. Supreme Court decision—a referendum by the American people at the ballot box. Republican nominee Mitt Romney, though he had signed a similar insurance reform during his tenure as governor of Massachusetts, enthusiastically embraced his party's call to “repeal and replace” the ACA. But when the votes were counted, nothing changed. Republicans still controlled the House and Democrats controlled the White House and the Senate. The status quo election guaranteed reform would remain the law of the land.
As we went to press, there was still one final political drama to play out, one set into motion in late 2011 when the congressional Joint Select Committee on Deficit Reduction, best known as the “supercommittee,” failed to reach a deal to slash at least $1.2 trillion from federal spending over 10 years. The possibility of across-the-board cuts in government spending—the so-called fiscal cliff—threatened to impose unparalleled cuts to virtually every healthcare program. Whatever the outcome of that drama, there remains one certainty: Every political faction in Washington has put a bull's-eye on healthcare programs as a potential source for huge savings.
And it's not hard to understand why. With a sector of the U.S. economy as large and as fast-growing as healthcare—national health expenditures for 2012 will reach $2.8 trillion or roughly 18% of the gross domestic product as overall growth continues to outpace both inflation and the overall economic growth rate—size is perhaps the biggest problem facing the industry. Its steady growth is putting tremendous pressure on the typical American family as well as on corporate America.
Despite this upward spiral in overall spending, tens of millions of Americans continue to go without health insurance coverage, something that's been with us through times of boom or bust. The most recent data from the U.S. Census Bureau estimated the number of uninsured at 48.6 million in 2011, or 15.7% of the population.
Yet the national experience during the Great Recession and its immediate aftermath stands as powerful testimony to the efficacy of the nation's safety net programs: Medicare for the old, Medicaid for the poor and the Children's Health Insurance Program. Even in this era of sustained high unemployment, the programs helped lower the total number of Americans without health insurance in 2011 for the first time since 2007.
Are we finally going to see an end to the seemingly intractable problem of the uninsured because of the ACA? The prospect of 30 million more Americans with insurance coverage should raise revenue for providers, reduce cost-shifting between payers and lay the basis for the long-term reduction in the healthcare spending growth rate. If it goes as planned by the reform law's architects, near-universal coverage could help put the industry on a sustainable growth path, a must since 2012 federal and state spending on healthcare programs has now reached an estimated $590 billion for Medicare and nearly $460 billion for Medicaid, according to the CMS.
Unfortunately, the political battles over covering the uninsured are far from ended. The intensely partisan vitriol that reached the boiling point in the run-up to congressional votes on the reform law did not go away after the 2012 election, just as they didn't go away after enactment of the ACA, after Republicans won control of the House in the midterm elections two years ago or after the Supreme Court vote. The “repeal and replace” war cry can still be heard in Washington.
But the battle will now play out largely through the regulatory process—the numerous rules and regulations for insurers and providers that will drive decisionmaking, whether in providing essential benefits, setting up accountable care organizations or getting ready for payment reforms like bundled payments. The much criticized Independent Payment Advisory Board will continue to be targeted by lawmakers and various industry trade groups for elimination. As we turn the corner into a new year and a new Congress that will look more or less like the old Congress, there can be no doubt that concerns over the size and scope of federal healthcare program spending will continue to make news.
And when we dissect the ultimate reasons why, it boils down to a simple equation, best expressed last fall by a report from the prestigious Institute of Medicine. The group generated headlines with a controversial report faulting the U.S. healthcare system for squandering an estimated $750 billion annually, or about 30% of overall spending, through unnecessary care, inefficient bureaucracy, waste and fraud.
The study, which was based on 2009 data, charged the system wasted $340 billion on ineffective or unnecessary care and testing; $190 billion on excessive administrative costs; $105 billion from medical products and services priced above competitive benchmarks; $75 billion in fraud by patients and providers; and $55 billion in missed prevention opportunities.
Clearly, solving the problem of the uninsured won't end the healthcare cost crisis. Even as Massachusetts led the way in bringing down the ranks of the uninsured—its percentage is slightly above 3%, according to recent data—it has learned that cost control remains the greatest challenge.
In the year ahead, Modern Healthcare's news coverage and weekly By the Numbers feature will continue to provide snapshots of what's unfolding inside the healthcare sector as it grapples with these new realities. It is our continuing mission to deliver context and perspective along with the data.