Competition and Consolidation: Understanding Recent Trends in the Health Care Market

1:30 – 2:45 p.m. ET

1:30 – 1:35 p.m. Welcome and Introductions

• Sarah J. Dash, MPH, President and CEO, Alliance for Health Policy

1:35 – 2:05 p.m. Opening Remarks

• Tom Scully, JD, General Partner, Welsh, Carson, Anderson & Stowe
• Anu Singh, MBA, Managing Director, Kaufman Hall
• Chapin White, PhD, Senior Policy Researcher, RAND Corporation @ChapinWhite
• Matthew Herper, MS, Senior Editor for Pharma and Healthcare, Forbes @matthewherper

2:05 – 2:45 p.m. Question and Answer Session

Note: This is an unedited transcript. For direct quotes, please see video.)

Operator: The broadcast is now starting. All attendees are in listen only mode.

Sarah Dash: Good afternoon and welcome to the Alliance for Health Policy’s webinar on “Competition and Consolidation: Understanding Recent Trends in the Health Care Market.” I am Sarah Dash, President and CEO of the Alliance for Health Policy and I will be facilitating today’s discussion. For those who are not familiar with the Alliance, we are a non-partisan organization dedicated to advancing knowledge and understanding of health policy issues. Today we will be delving into the broad topic of healthcare market dynamics and we’ll take a closer look at consolidating, concentration and integration. We hope that you’ll leave today’s presentation with some knowledge about the basics of market concentration and competition, how experts measure the effects on different areas of the healthcare market and how regulators approach assessing proposals.

You’re going to hear from four excellent speakers whom I will introduce in a moment, and each of who brings a different perspective to this discussion. We’re very grateful to have them shed some light on this critical and evolving topic.

Before we begin, I want to take a moment to thank our partners. The Alliance for Health Policy gratefully acknowledges the support of the National Institute for Healthcare Management Foundation, in collaboration with the association of healthcare journalists for this event.

And if you are using Twitter and interested in joining the Twitter conversation, please use the hashtag #allhealthlive and follow us at allhealthpolicy.

Just a couple of brief technical notes regarding the go to webinar platform. We’ve taken a screen shot here of the attendee interface. You should see something that looks like this on your own computer desktop in the upper right corner. And you can click the orange arrow to minimize and maximize this menu. When you join today’s webinar you were muted, and you will be muted throughout the presentation. You can use the question panel to ask us about any technical issues you may be experiencing. You can also send in questions that you have for the panelists at any time. We will be collecting these and will address them during the Q & A session at the end of the presentation.

Finally, all of our presenter’s slides are available to download in the handout section of your attendee interface. And you’ll find additional materials on our website, allhealthpolicy.org including further reading, expert lists, speaker bios and presentations. A recording of today’s webinar will also be available there soon. Here’s a roadmap of our conversation today. Each panelist will give some opening remarks and then we save plenty of time for Q & A.

Let me introduce today’s panelists joining us today. We have Tom Scully, general partner at Welsh, Carson, Anderson & Stowe. Prior to joining Welsh Carson he was the administrator of the Centers for Medicare and Medicaid services for three years under President George W. Bush and was president and CEO of the Federation of American Hospitals for six years. Tom also served as deputy assistant to the president and is the associate director of the Office of Management and budget under president George H.W. Bush. I want to note that Tom has graciously fit us into his busy schedule and will have to leave the webinar following his presentation. But, we are so glad to have him here to give some of his thoughts.

Next we will hear from Anu Singh, managing director of Kaufman Haab. Mr. Singh provides financial and strategic advisory services to healthcare organizations and companies nationwide. Particularly on the planning and execution of mergers, joint ventures, partnerships and other forms of transaction. His clients include health systems, physician practices, health insurers, non-acute care providers and other healthcare entities. So, he will be able to provide commentary on many of the facets of the healthcare market. And we are excited to have you here today Anu.

After Anu we will hear from Chapin White, senior policy researcher at the Rand Corporation and a Pardee Rand graduate school faculty member. Chapin’s work combines quantitated and qualitative methods and focuses on provider payment reform and the implementation it impacts of the Affordable Care Act. Prior to joining Rand, Chapin was a senior health researcher at the Center for Study Health Systems Change and a principle analyst at the congressional budget office.

Finally, we’ll hear from Matthew Herper, senior editor at Forbes where he covers pharmaceutical and healthcare coverage both in the magazine and online. He started at Forbes in 2000, when stellar genomics was the white hot stock and has lived through the bio-technology industries booms and busts ever since. Along the way he has written cover stories on drug marketing, antibiotic resistance and genomics, profiling many prominent speakers and experts in this area. And Matthew has a Bachelor of Science Degree from the Massachusetts Institute of Technology and a Master’s of Science and Journalism from Columbia.

So thank you all for joining us and with that I’m going to go ahead and turn it over to Tom Scully to get us started. Tom go ahead.

Tom Scully: Thanks. Great, hopefully you can hear me, thank you. So if you all are looking for my slides they’re not there because I’m an old technically incompetent guy. I don’t do slides anymore without the old _____ [00:05:20]. But anyway, I’m sorry that I have to leave a little early. I managed to double book and I have another speech at 2:15. But I love doing Alliance things and I love the fact that you guys have been doing these great policy issue forms for so long.

Anyway, let me just jump in on some of my views on anti-trust and competition and the competitive rise in healthcare. I think the number one thing that I believe we should focus on in healthcare with every market is completely different. So, every city, every county, every region of the country – even sometimes within sub-regions I’ll discuss in a minute. Markets are totally different; generally in a good market you want a healthy balance between the hospitals having power, but not too much power. The docs having a little more power, not too much and the insurers having a little market power, not too much. Rarely does that actually exist in the balance, almost any place.

So I think if you look around the country you’ll find some places for example the south, where for example in Tennessee, Alabama, Mississippi, some other states you have very dominant Blue Cross plans that have massive market share. Not a lot of competitive – a lot of competitive competition between insurers in most states for example, because they do a giant blue that essentially has not had much push. And they also don’t have a lot of competition between hospitals or doctors. They’re essentially old fashioned fee for service markets that look like a lot of the other more modern markets.

You look at Pittsburgh, which is one of my favorite to look at. Incredibly competitive market between two giant systems. One is Pittsburgh Medical Center, the biggest hospital system in town that probably 10 years ago started to get into the insurance business, which as you might imagine upset the local Blue Cross Plan which is Highmark. So the local Blue Cross plan, Highmark then turned around and got in the hospital business about the second biggest hospital chain.

So that market, which is still quite expensive you have basically an intense competition knife fight between UPMC, which is the giant hospital system now and the insurance business and Highmark Alleghany which is the Blue Cross plan that bought a hospital chain. So that is one model. You can look in a place like New Mexico, the Levla System and the Presbyterian system, which are two totally vertically integrated systems. If you’re in Albuquerque you join one of the two. And it’s basically a vertically integrated HMO where the systems own the physicians. They own the health plan, they own the hospitals. And you join one or the other, which is very rare outside of some parts of California.

There are other markets, for example Orlando and Tampa where if you look at them, probably 60 miles apart. Orlando is a totally hospital dominated market where the physicians are fairly weak. The insurance companies are relatively weak. Hospital costs are very high, hospitalization is very high. The doctors in my opinion, are not that strong. But if you go 60 miles away to Tampa you’ll find it’s an extremely insurance and physician dominated market where the docs take a lot of risk. Capitated the insurance companies, hospitalization is probably depending on the usual data 30 to 40% lower on the hospitalization and the insurance companies are very influential, and have very tight partnerships with physicians who take a lot of risk. So, my point there is that Orlando and Tampa look totally different.

But you can go around the country and market by market and look at it and say what are the common denominators between markets? Usually there aren’t any. It all depends on local history and how these things grown up and how strong or effective the Blue Cross plans were. How aggressive the other private insurers were getting in to compete with the blues. So no two markets are the same. So when you’re looking at the anti-trust side and the competitive market side, which is obviously a hot issue the last couple years, generally – I’m sure we’ll get into this, the FTC and justice look at the competitive dynamics from the consumer point of view, what is competition is great. But the number one thing is to make sure that consumer power is protected.

So when you look at mergers like the Aetna merger last year with Humana, did that go through? I think the decision there was largely because in that particular market it was defined, Humana and Aetna just did too much market clout, especially Medicare Advantage. And they overlapped too much and the government decided not to allow it. Similarly the Cigna, Anthem merger went through the same basic competitive dynamic which was that they overlapped too much in certain markets in the insurance business was just too much consolidation and too much of a negative effect on consumers. And so the government basically shot down both those mergers.

The two mergers that are going through right now that are getting the most attention are the Aetna CVS merger, so Aetna obviously did not go through with the Humana merger. CVS is acquiring Aetna. I think most people think that probably will go through because whether it works is another question. But CVS is basically not the competitive market competing with Aetna. It’s a vertically integrated merger where you’re going to have basically the concept CVS is going to deliver more and more healthcare through local CVS shops and work with Aetna. They don’t compete with Aetna. It’s basically a separate market segment, but where they provide services in a different level.

Similarly when you look at Cigna who announced a couple weeks ago merger with Express Scripts, which is probably the biggest PBM. I think most people think that will also go through because Cigna’s insurance company does not really directly compete with the PBM’s. So I think when you look at market by market what they will allow and hospital mergers, what they’ll allow in physician mergers and what they’ll allow insurance mergers totally depends on the market and the effect on consumers. And you look at the national mergers between insurance companies, it really depends on what their – how the government defines the markets.

And generally what you’ll find is these – I think most people think the current mergers were likely to go through because the markets were not – companies really don’t compete with each other very much.

But I would just say in summary when you look around the country, healthcare is a very, very local business. And the healthcare system in West Texas looks nothing like it does in Dallas. And the healthcare system in Harrisburg, Pennsylvania looks nothing like it does in Pittsburgh. And it really is a very local market test. And the goal here for regulators and hopefully for reporters is to look at your local markets and make sure that the balance between docs, hospitals and insurers is relatively fair and even. And if it’s not the government should probably intervene. And if it’s not, hopefully reporters will also complain about it. But that’s a quick summary. Hopefully my five minute of my view of where this should start out as a discussion.

Sarah Dash: Thank you very much. Thank you very much Tom, and since you won’t be able to join us for the Q & A, if I could just ask you one question, which is you mention that balance in the local and regional markets. How can observers look at that balance? What are some of the measures or metrics that they can look at, or is it more of a qualitative assessment?

Tom Scully: Well some of it also depends on the – the government won’t look at this but you know there are places, California in my opinion is 20 – and Mexico too probably 20 figures rest of the country. They’re used to managed care. They used to close networks. Consumers are used to being in a Kaiser; we’re used to being in a relatively closed network managed care environment. Some of the rest of the country that’s harder to swallow, more troubling from a consumer point of view. The government won’t look at that, but when you’re looking at I think the tolerance for consolidation is probably higher and more developed market. So, there’s two ways to look at it.

One is competition from the journalist, consumer point of view and one is from the anti-trust government’s point of view. You know I think the reality is over the years the biggest, until recently the big insurance mergers, the biggest number of consolidation people have generally been in the hospital markets. And my own personal views there aren’t many places in the country where the government has been way too easy on allowing hospital mergers. So you know in a healthy market I think if you have a couple of hospital systems that are competing with each other, and you have physician groups that have you know relative market clout to organize from the doc point of view, which rarely happens.

And you have multiple competing insurers; I think you’re in good shape. I love the Blue Cross plans, but I personally think that you know the situation in Tennessee, Alabama, Mississippi that I mentioned earlier is kind of pretty wild. I mean they’re really – those states are effectively one dominant insurance company. There’s two in North Dakota, basically one insurance company. So you know I think you have to look at market by market.

Sarah Dash: Thank you and let me ask you one other question, which is rural and urban. You know can you talk about some of the different dynamics there between more rural and more urban areas when it comes to this issue?

Tom Scully: Yeah it’s tough; you know rural areas are just different. You’re never going to have more than obviously many rural areas you have a hard time recruiting physicians. You’re rarely going to have more than one hospital, most of the time you’re lucky if you have one that’s 30, 40, 50 beds. As you well know from your West Virginia background so I just think the whole competitive dynamic in rural markets is just different. I think really there you go look at the insurance dynamic and you know, a lot of rural markets, especially some of the states I mentioned, you have one insurance company dealing with one small, usually with no clout at all, rural health system. I just think it’s a totally different measure and rarely is that the kind of anti-trust issue that really aren’t going to come up. But I just think rural markets have to be looked at differently, they’re totally different.

Sarah Dash: Thank you, thank you so much or your remarks. So we’ll now turn to –

Tom Scully: I’ll hang in. If I can stick around and answer questions I will, but thank you for including me.

Sarah Dash: Fantastic, thank you. So we’ll now turn to Anu Singh, Managing director at Kaufman, Hall & Associates. Anu go ahead.

Anu Singh: Thanks, and thank you Tom for taking us a tour around the country. I think some of the examples you cited in various practice around the nation sure to illustrate the change in the transformation of healthcare services that are under way. And some of the concepts that I think that culminate in are really some of the shifting priorities on the next slide here that we come to realize and come to observe in the market, in very clear and empirical ways and so we’ll go through that.

First of all probably one of the most important drivers of what we’re seeing in the transaction and partnership activity today is a shift. And that shift is moving away from hospitals that are taking the view that there is an element of financial distress or some component of challenge that they face in the next few years, that’s driving them to pursue a partnership strategy. To those that are actually well situated, strategically, financially, operationally and even from a market competitive standpoint that are electing to go down this path of evaluating, structuring and in many cases with an increasing amount of incidents, executing on these strategic partnerships. We have very clear evidence now of higher rated organizations, larger scaled organizations that are participating in this activity. We’re also seeing them leap frog to graphic boundaries and akin to the discussion that took place around anti-trust and legal and regulatory review. In some cases, we’re actually seeing geographical boundaries be addressed as an important component for partnership growth, the formation of new systems with that same point in mind, which is how do we leap frog geographies? How do we partner with organizations that for which we don’t have an overlap of geography, where the sites of care are not on top of each other but that actually and completely different geographies and there’s a rationale for that diversification.

Finally, in addition to the breakdown of the traditional barriers around clinicians, providers and payers being separate entities, we’re seeing the combination of entities in each of those three once distinct verticals across – what I’ll call diagonal transactions. We’re now getting into those three components where payers and providers are collaborating, providers, clinicians and so on. Nearly every permutation is demonstrated in the marketplace today. And as Tom mentioned, there are some that are even going beyond that from a consumerism aspect we’re seeing retail organizations or organizations that once had a tangential view of the patient care experience for delivering care becoming more involved with some of the transactions that are taking place.

So, clearly a lot happening in the market place. But if we go to the next slide we can talk a little bit about the historical run up of transactions that we’ve seen. And if there’s truly a way to think about this from a picture being 1,000 words, this is probably 1,000 words just on this slide alone.

First off, and at least on my copy it looks like on 2017 there is something missing here in the circle. That should be the number 115, just to point that out on the top of the bar graph in 2017. That’s 115 transactions of hospitals and health systems that took place last year in 2017. And again, you can see how that’s nearly doubled. Many of the years prior to the challenges we saw in the cautionary crisis and the limitation, municipal tax exempt financing. It’s also prior to the period of the launch of Obamacare where in the early 2000’s we saw 50-60 transactions taking place. So, again back to our – back to the early part of the discussions have always stressed hospitals in the mix here, in those periods and they continue today. What’s being supplemented or complimented to that is organizations with much larger size, much larger scale, and there’s a very quick anecdote to prove that.

Take a note of the text box off to the right here. In 2015 there were 112 transactions that took place in the same space, hospital and health fitness. And if you aggregated the revenue of the smaller organization in those partnerships. And for the sake of simplicity we’ll just call them targets for the purpose of this discussion. They amounted to about 32 billion in revenue. Now in 2017 we had almost the same number and again, that would be corrected for 115 on the side, it was 64 billion of revenue measured the exact same way. So, clearly we’ve seen a significant change in the size of the organization that are participating in this M&A activity. But it’s more than that. On the next slide we also looked at credit quality.

And on the left hand side of this chart is a very important observation in terms of what we’re seeing in this industry transformation process. Organizations with a credit rating of A- or above have demonstrated to the rating agencies that they’re at the very lowest risk of default in the market. That essentially means they have a high degree of success, and pursuing the strategies they have under way. In fact, most could say that they have a very clear path to be independent market leaders in their region or in their market.

Still the number of those organizations that are elected to become the smaller organization by size, again in the potential partnership is listed by year here over the last 10 years. And as you can see in the last three years alone there are 35 organizations give or take, that had that same level of credit ratio, that had that same ability to remain independent, that have elected not to do so. That they see the strategic partnership component of their strategic plan being more favorable, either from a benefits or a lower risk standpoint than remaining independent.

You can also see on the bar chart to the right, when you stack these organizations by size there was virtually no mention of organizations that were 500 million or a billion, or a billion plus that were undertaking this activity in 2009. It started to happen a little bit in 2010, but as you can see off to the far right there’s been a significant growth in the number of those orange and teal colored transactions, which per the legend below indicate the larger organizations. So this is a pretty dramatic change from what we’ve seen. And while this involves all M&A activity, I think an important point on the next slide and I’ll close out my remarks, is also that organizations are taking a customized approach to this transaction activity. And what we simply did is we took a comparison of 2007 right in the midst of when we saw more of the financially distressed transactions and 2014 just to recent year where we saw the more – the higher degree of joint operating agreements, joint ventures, management services agreements and even minority investment or minority member interests if you are not for profit organization type transaction.

And again, this is the same population of hospitals and health systems as the – as the base that was selected and we can see that in 2007 there were four types of transactions that weren’t fully integrated mergers or for those that involved exclusively not for profit organizations, membership substitution that took place in number. And off to the right you can see in 2007 that amounted to a little bit more than a billion in net revenue of associated organizations transacting. Seven years later not only have we grown by a factor of five times in terms of the number of transactions on the left, but the revenue associated with these organizations is significantly higher. It was approaching 4.5 billion in terms of net patient revenue. And again this is the size of the smaller organization going to the partnerships. So not only are we seeing increasing amount of M&A activity, we’re seeing increasing customization of the mechanism by which these two parties will work together or these two organizations were to work together going forward. And that further supports the rationale we see that the strategies is what’s driving M&A activity. And it’s in response to industry transformation.

Sarah Dash: Thank you so much. Those were really fascinating remarks. And I’m going to just ask you for a technical note. For those who maybe aren’t following this on a day to day basis can you define what you mean by fully integrated versus less than fully integrated as it pertains to your last slide.

Anu Singh: Sure a fully integrated structure, if it was an acquisition of a hospital generally more often done by for profit entities they would have acquired the assets and fully consolidated those operations and assets of their balance sheet. So, traditional form is an acquisition. When two non for profits come together in addition to the rare instance of an asset purchase, there’s also something called a membership substitution, or a combination of the two non for profit assets into one. When that happens you’re also operating and reporting as a single organization going forward in most cases. And so that’s what we mean by a fully integrated structure, where you essentially agreed to operate as a single unit going forward operationally. And agree essentially to a single consolidated form of reporting in your organization. And that’s a general rule, there are a few exceptions.

The non-fully integrated are ones where you have a joint operating agreement where maybe assets remain separate, but operations come together. A joint venture or a minority interest where perhaps a change of control hasn’t actually occurred. There’s some level of co-investment or collaboration between the two partners that doesn’t result in an operational and asset change of ownership.

Sarah Dash: Thank you so much. Wonderful. Well next we will here from Chapin White, senior policy researcher at the Rand Corporation. And again, for those who are following on Twitter, you can go ahead and use that hashtag, #allhealthlive. Thanks again Chapin, go ahead.

Chapin White: Okay. Let’s see, I want to make sure everyone can hear me. Yes, it looks like I’m on. So I just want to put a little context around my remarks. So, I am a health economist. I focus on analyzing healthcare spending trends, price patterns and prices for healthcare services. I’m not going to focus on the health insurance market, but we’re quality of care. I’m mostly going to focus on consolidation and how it relates to the cost of the healthcare system. So, let’s go to the next slide.

One thing that I think is really critical when we’re talking about consolidation or spending trends or the price of healthcare. It’s really important to recognize that the US healthcare system, you can think of as being consisting of two big halves. That on one side we have the Medicare program, which is the 800 pound gorilla of the US healthcare system. We have state Medicaid programs. Both of those are publically run health insurance systems. They generally use administered prices where the classic example is in the Medicare fee for service program. You have Congress enacting laws that say this is how much we’re going to pay hospitals for what they provide. This is how much we’re going to pay physicians for what they provide.

On the other hand we have private health plans that’s mostly health plans where employers are offering private health plans to their employees. It’s also the non-group market. In those private health plans the health plans are negotiating prices with hospitals and with physicians and all of the other providers. Those two worlds look very different when you look at how prices are determined, when you look at spending trends. Also when you look at consolidation; so I want to start out by saying it makes sense to think about the US healthcare system as consisting of these two halves.

Let’s go to the next slide. So when we talk about forms of consolidation. I’m mostly thinking about consolidation among healthcare providers. The University of Pittsburgh Medical Center becoming a health insurer. Those are interesting complicated examples. But mostly I’m thinking about hospitals and physicians; this is just going to simplify the discussion a little bit. Among hospitals and physicians, you can think about their being four forms of consolidation.

The first is hospitals merging, acquiring each other. That’s a type of horizontal integration or horizontal consolidation. Another type of horizontal consolidation is physicians moving into larger practices. You also have vertical consolidation where hospitals are purchasing physician practices. And then the fourth form of consolidation is clinically integrated networks. Clinically integrated networks are this strange species of organization where you have in multiple hospitals, multiple physician groups, jointly negotiating with health plans, but not operating under a single common ownership. In other words, the assets remain separate, but their negotiations with health plans are done jointly.

Let’s go to the next slide. When I think about consolidation among healthcare providers, I’ve sketched out some of the major drivers. Some of the reasons healthcare providers will want to consolidate. And again I’ve put the administered prices on one side, the negotiated prices on another side because the reasons for consolidating and the impact of consolidation differ depending on whether prices are being set on a take it or leave it basis by the government, or if they’re being negotiated bilaterally between the providers and the health plans.

So, why might providers be consolidating? Why are they consolidating? One possible motivation is economies of scale providers might want to operate more efficiently. Another is clinical integration that might want to smooth the transitions between let’s say the physician treating the patient to the hospital to the post-acute. There’s some clinical rationale for joint operations to improve clinical care. And those motivations apply whether prices are administered by Medicare or whether they’re negotiated with health plan.

In the upper right the pricing leverage, fortunately that’s in a smaller font, but I think the pricing leverage reason for consolidation is really the main push behind the consolidation activity that we’re seeing. If two hospitals join together that increases their negotiating leverage with private health plans. Now Medicare doesn’t care if two hospitals join together. Those hospitals are going to get paid the same raid by Medicare. But if those two hospitals join together and are jointly negotiating payment rates with private health plans those hospitals will bring more clout to the negotiating table.

And then in the middle I have this exploit site of service pay gaps. That’s getting at the notion that if a physician practice sells its practice to a hospital and then transforms itself into a hospital outpatient department, they can take advantage of payment differentials both on Medicare and private plans. And get paid more for providing essentially the same service by virtue of billing their claims through the hospitals billing system. That’s – I’m kind of glossing over a lot of details here, but that’s the rationale for consolidating that applies both to Medicare and also to private health plans.

So, let’s go to the next slide. The punch line that I see here is when we talk about consolidation and competition among healthcare providers, we in the same breath, in the same space we should also be talking about pricing policy. How prices for healthcare services are determined and are they being determined by an administer prices or are they being negotiated between providers and plans.

Now let’s go to the next slide and I’d like to give a very high level overview of what I see is the evidence on the impacts of consolidation. First, if you look at hospitals merging, there’s pretty strong evidence that at least for the prices that private health plans pay, those prices are going to go up when the hospitals merge. There’s also pretty strong evidence that if you have a more consolidated hospital market, you’re going to have reduced quality of care and worst patient outcomes. The idea there is if hospitals are competing based on the quality of services they’re providing, there’s less competition for patients, for referrals from physicians you’re going to see some degradation in quality and outcomes. On the economies of scale I haven’t seen strong evidence that when hospitals merge they manage to operate more efficiently.

Let’s go to the next slide. On physicians moving into larger practices, we see them able to extract higher prices from health plans. They tend to provide higher volumes of services and there’s on the plus side finally we’re getting to a plus from consolidation. There’s some evidence that larger physician practices do better when you look at their processes of care. They seem to have better – they have enough wherewithal to implement care process improvement measures.

Let’s go to the next slide. On hospitals purchasing physician practices. This is an area where there’s been an incredible amount of activity. The most direct impact of hospitals purchasing physician practices is that instead of that physician practice just generating one bill for the service, one professional bill, they’re generating two. One is the hospital outpatient department and the second for the professional services. In general, those practices get paid more when they exploit that billing differential.

We also see these physician practices in these hospitals jointly able to extract higher prices from private health plans. The other phenomenon that I think is really interesting is when physician practices get purchases by hospital or hospital based system they tend to channel their patients to the hospital that now owns them. And the rational from the hospitals perspective is they want to protect their volume. They don’t want their patients leaking to other systems, that’s one of the main rationales for this type of consolidation.

Let’s go to the last slide here. Clinically integrated networks again are this strange animal where there’s multiple providers negotiating jointly with health plans. My sense is we don’t have a good handle at all on what impacts these types of organizations are having on prices, healthcare spending or clinical processes of care and health outcomes. I would encourage everyone on the call to investigate and inspect these arrangements. In my mind, the rationale that’s presented for this type of consolidation is that it will improve care processes, improve outcomes but my sense is that’s mostly window dressing for coming to the negotiating table with a bunch of providers, and being able to demand higher prices from private health plans.

Let’s go to the last slide. So, if we take the long view. My sense is that the health insurance premiums for private health plans and the spending trends in the private health insurance market is on an unsustainable path that the growth in those premiums is really sucking all the productivity gains out of the population that gets their health insurance through their employer. That’s not sustainable path. In the big picture what I see is the two big options going forward are applying more broadly an administered price system, and that can come in a bunch of flavors from kind of a soft touch, limiting payments for out of network services that can talk more about that. It can range up to single payer type arrangements where you have a single health plan setting provider prices. I know that sends chills down the spines of some panelists and probably a lot of people listening. I’m not advocating that approach, but that’s one way of dealing with the negative byproduct of consolidation.

The other general approach is to promote competition and rather than bury it, promote it. And that would include things like blocking mergers and acquisitions if they seem suspect, banning certain types of contracting practices that give providers too much clout. Allowing or promoting new entrants by scaling back things like certificate of need programs. And obviously we’re not going to go all one or the other you know? We’re going to choose some path that’s kind of down the grassy path and in the middle here. But if we don’t do either one of these, the private health insurance market it’s not going to last in its current form. And something fairly dramatic is going to have to change.

Sarah Dash: Great thank you Chapin. I want to turn now to Matthew Herper from Forbes. Matthew go ahead.

Matthew Herper: So I want to talk about something a – I want to zoom way out, I guess that’s what we do and talk for a second about what mergers are, and what they mean. And that mergers and acquisitions when you talk about them the way we have been here, you kind of get this mental image of things just kind of being shuffled around. And you’re moving cards in a deck, but you’re left with the same deck. But that’s not actually what I think most of us live when M&A happens. When the local hospital in my hometown was bought by what was then North Shore University Hospital and what’s now Northwell. The hospital changed. When my dad’s defense plant was bought by another defense company, that company changed and I think we’ve all kind of have a sense of that.

Often when people particularly in my part of the press, business press cover deals it’s something like this Forbes cover I wrote, which is about Brett Sanders from a drug company called Allergan. Didn’t used to be called Allergan, it used to be called Actavis, before that it changed names and again it’s very _____ [00:40:30] several times, but you know we’re kind of _____ [00:40:33] look at these great big giant deals that happened, money moving around; it’s really exciting. It can be kind of cool and there are these swashbuckling CEO’s were making a lot of money who are shifting things around.

Next slide. But there is an obvious downside and you know I’m only going to be stick on pharma for a second here, but this is of course Martin Shkreli, who I think everybody heard about at nauseum over the past couple years. And was just recently sentenced to jail for fraud. But what happened with Martin that got him kind of universal probium was actually the result of several mergers and acquisitions and people didn’t see the result that happening at various steps along the way. Galaxis Miscline sold a drug as a part of a whole bunch of different drugs they wanted to offload because they weren’t profitable enough. One of those drugs called Daraprim wound up in the hands of another company, and Martin bought that. And with the intent of hiking up the price, and that was how you got the headline of an aged drug with the price going up 5000%. And the point I wanted to make here that I think is easy to lose when you’re talking about this stuff, is that mergers have unintended consequences. And we don’t see them coming along.

Next slide please. So companies merge for different reasons. With drug companies they’re often merges of weakness. A lot of this has been previously covered now in the previous talks. But basically the price competition among both hospitals and insurers as we’ve just heard from a couple different vantage points is about pricing power. They’re arguing over who has the ability to charge who more or less.

Next slide. But as I said mergers do have consequences. And it’s interesting to kind of think about. The two deals that Tom talked about at the beginning of the call, first the ones that fell through. Between Human, Aetna and the big insurer deals that fell through last year. And then which were blocked because of anti-trust. And then the deals that we do seem to be getting between CVS, which is not just a drug store, but also one of the two largest PBM’s buying Aetna an insurer. And Cigna an insurer buying Express Scripts, the other big PBM. This means that the landscape by which drug prices are negotiated is actually going to change a lot in ways we don’t – I don’t think we really understand. We’ve created in the US this stand-alone industry called the pharmacy benefit manager that has affected drug pricing in some positive ways, switching people to generics. And maybe also in some negative ways. It’s often offered as one of the reasons drug prices are so high. There may not be a competitive reason that those companies shouldn’t integrate. As someone who covers the pharmaceutical industry I think that it’s not unlikely that having – going from a world where most of these companies stand outside insurance companies. There is one big PBM Optim, which is part of United Healthcare to one where they’re all inside is going to have an effect.

And the other effect, which we’ve kind of been dancing around through this conversation is that we’re not seeing independent physician practices nearly as much as we used to. If you go to a doctor they’re very often in a group practice or at a hospital. And between 2000-2013 according to exenture data the percent of independent – of physicians who were independent dropped from 57% of physicians to 33%.

Next slide. And we often are – these changes are often being driven by regulations and by decisions. This is an interesting piece that was written by Bob Coacher who is a venture capitalist who was previously one of the architects of the Affordable Care Act, saying that yes, the lost rafters were looking for hostile consolidation and maybe that’s not such a good thing. So as we’re covering this, and I think it’s important to remember that there are – this isn’t just what companies decide to do. One of the reasons we’re getting the PBM mergers is because the insurance companies thought they needed to merge because of the Affordable Care Act. They couldn’t, and they looked for another way to get scale.

Next slide. And I just want to go back to the PBM example by closing with a story. This is a guy I just talked to recently named Tommy Mann. Tommy Mann is stuck in the middle of the battle going on over drug prices in the US. He is a – he has a disease called familial hypocholesterolemia, which means that his LDL cholesterol, the bad kind was nearing on – if he was taking cholesterol drugs. I’ve spoken to a lot of patients with this disease. There are new drugs that lower their cholesterol. The drug companies decide to charge $14,000 a year for them. The plans and the PBM’s kind of decided that they just weren’t going to take it and they’re just not granting access to anyone. So, he spent a couple years trying to get access to this drug, which brings his LDL down to 50. This is someone who saw his father die after a series of heart attacks, and a heart transplant. And you know he said, you’re tucking your kids in at night and you get a letter that they’re not going to cover you because you haven’t had a heart attack yet, which was the reason for denial. One of the few times he actually got a reason.

The structures of insurance plans and of benefits managers and of hospitals and the way that all these things are structured do filter down to individual people whose lives are deeply affected and for those of us who do, who do journalism or try to I think that’s really important to try to remember. So, that’s my piece. Thanks a lot.

Sarah Dash: Great. Thank you so much Matthew and thanks to all the panelists for your remarks today. So we – that was excellent background. Of course to proceed our question and answer period, I can see we have lots of questions already to explore the remarks further. As a reminder you can still submit questions through the questions panel in your attendee control panel which should be on the right side of your screen.

So let me first ask you know, a couple of you mentioned the Affordable Care Act or Obamacare and Anu you talked about the broad changes in terms of the healthcare marketplace. Chapin you talked about the impact on quality. You know and Matthew you also mentioned it; so can you – I’d love for the panelists to talk about what specifically about it would be a driver behind these consolidation or market concentration changes. And if someone wants to go ahead and start us off, you can go ahead.

Chapin White: I can kick it off. I want to hear what the other folks say as well. And the first thing I’d say – I love the – I was wrong from Bob Kocher that kind of a compelling piece and he’s saying that the vision behind Obamacare was to promote consolidation or to promote hospital mergers. If you dig into the Affordable Care Act there’s not that much that directly promotes consolidation. There is the Medicare Shared Savings Program, that’s the Medicare ECO Program. That’s written in the law, in the ACA. That promotes a certain type of integration just within the Medicare Program. It doesn’t require or directly promote mergers and acquisitions. It’s more a type of clinical integration with a reward incentive. I think that the ACA is probably blamed for a lot – for much more of the consolidation activities than it really deserves. The one thing that I would say the ACA did was it expanded through the non-group market. It expanded our system of private health insurance and it entrusted these market place plans to develop networks and it kind of built on the system of private health insurance. That system of private health insurance with prices negotiated bilaterally between health plans and providers inherently promotes consolidation. Both on the provider side and the health plan side. So I would say the ACA relative to a Medicare for all program, I think it promoted consolidation by trying to expand private health insurance.

Anu Singh: This is Anu. I think we need to resist the temptation here in one hand deassign Obamacare that was going to solve our health care woes. And the other extreme incriminating it as being a driver of all these things in the market that maybe we like or don’t like. It honestly is neither. What it was was a reflection of the unsustainability of the ongoing reimbursement or the ongoing way to think about access and payment for healthcare. And the institution of at least some checks, balances and measures to bring better transparency, better clarity, maybe a greater focus on quality and outcomes to what was in the end benefit our community and inpatients in general.

The reaction to that is organizations feel in order to keep up with that, that they have to invest in technology. They have to invest in infrastructure. They have to invest in intellectual capital expertise that is new and different than operating our business as if there was going to be an unending and constant amount of revenue growth in the organization. Speaking on the perspective of hospitals for a second.

And so in doing that when you find that you need more resources for new things, you’re typically going to look for well where are the compliments? Where are the organizations that may have that or how do we get to a size and scale where that research and development function, for lack of a better term, and it’s one that’s very relevant in other industries, can be financed? And can be supported?

And so the downstream effect of that is some of the consolidation activities we’re seeing. But I agree with the concept that I don’t think we could poor through the 3,000 pages of the ACA Act and find something that would say “Here’s exactly where they’re pushing for consolidation M&A activity as part of the act”.

Chapin White: Quick point I’d like to make is that companies don’t necessarily need real reasons to do M&A. They just kind of – they just need a perception. So the Affordable Care Act didn’t have to create a situation where companies really needed to do MNA, it just had to encourage them. And there are a lot of other things encouraging. There’s a lot of money out there for deals right now for funding them, which is part of what’s driving the valuation just about everything to pretty incredible levels, which is why all those high credit rating hospitals and practices that we saw earlier, I think it was on your slide Anu, are probably selling. It’s probably a great deal.

Sarah Dash: Thank you all. Let me continue on this because we have a question about quality. And you know if indeed some of the providers, hospitals, physician groups, etc. looking to increase their capital that’s available to make investments and delivery system transformation. You know what really is the impact on quality and what data – Chapin this maybe goes to your slide about the data showing that quality is reduced. What are the studies that show that quality is truly reduced? Or is that more of Econ 101 assumption, and can you speak more to that and kind of what time frame is that data from, etc?

Chapin White: Yeah so the real kind of intellectual leader in this area is Marty Gainer and he is put out a huge number of studies. He also has a synthesis report that Robert Wood Johnson Foundation put out that he was the lead author on. I would you know, I don’t know if we’re circulating a reading list. I hope after, or as part of this we can circulate the reading list that we talked about internally before that. Martin Gainer synthesis report really encapsulates the evidence and that evidence on consolidation comes from the US experience where if you look at healthcare outcomes among Medicare beneficiaries in areas where hospitals are consolidating, it doesn’t look like it’s helping with quality or outcomes. There’s also evidence from abroad where hospitals that consolidate where patients have less choice which facility to go to seems to be associated with reductions in quality and outcomes.

So it is kind of an Econ 101, you can draw some curves on the blackboard that – where’d you say quality seems to deteriorate when you have fewer competitors. There’s also real world evidence to back that up.

Sarah Dash: Thank you. Would anyone else like to comment? Okay, let’s move on to the next question. And we will move from quality to price and again, the question is will bigger hospital systems always mean higher prices for patients. And what I’d be curious also for comments on you know, is this – this isn’t really happening in a vacuum. Tom Scully talked about sort of the balance between the different entities in the healthcare sector. Is there mitigating factor depending on what the insurance industry looks like in a given market and can any of you comment on that?

Chapin White: Yeah, so this is Chapin again. So, if there is one hugely dominant Blue Cross Blue Shield plan, hospitals merging will have less of an impact on the prices being paid to those hospitals. My sense is that it would still tend to drive up prices, but not as dramatically as in the situation where there are many health plans, all of which are dependent on having some key hospitals in the networks in order to be able to provide viable health insurance products.

Anu Singh: And, you know, I’d add to that. I think we are in a period of industry transformation here, and what that means is rethinking where and how we think about success, where we think about quality, we think about value, which is a whole new construct. That’s relatively new to this industry in terms of that type of care, the quality of care for the cost being spent. And, the only thing I’d submit at this point is, you know, hospitals, again, by example, take a rough average, 52% of their costs are driven by employees. And, in most industries that are that intensive in terms of personnel, you’re always going to see increasing costs of organization for operation. I think very few of us have experienced continuing downward salaries in whatever respective positions are or occupations are. I think that’s a reasonable expectation.

And, so one of the things I would hope we would do is when we evaluate the increase in cost, are we looking at historical increases in cost, are we comparing it to appropriate indices to say are we actually bending the cost curve so that, yes, costs may be increasing, but not at the same pace that they once were, or that other costs and products and services in the broader economic environment are trending. I think that’s one important facet.

And, the second one is, is the nature of care actually changing? Are we finding new ways for people to access care? Are we bringing people into the system that either technology or these investments have not once touched before? And, we just talked a little bit ago about ACA bringing more opportunity for those to become insured. Well, here’s another corollary to that many years down the road in a completely different context. If we invest in telehealth, and the question of rural hospitals came up earlier, can we get a diagnosis for a patient in a way that we didn’t before? And, that’s never going to be captured in the cost of care, but it probably it is an enhancement for what we’re doing as an industry, to try to figure out how to better our patients, to keep them from getting ill, or when they are ill, diagnose it and treat it right away.

And, so I would hope that as we think about research and before we go through the process of saying it’s good or bad in consolidation, that we take the same mindset that we did when we just talked about ACA act, let’s look at the data a little bit more holistically, and let us complete a little bit more of this journey, instead of criticizing it in the pact we’re in right now. Because, frankly, I just don’t know if we have enough factors to measure the progress that has been made, or has not been made.

Matthew Herper: If I could just a related question.

Sarahh Dash: Certainly.

Matthew Herper: What, how much of the problem we have here is, is price? And, my general impression as a reporter is that across the board, our system’s done a pretty good, bad job rather, on a macro level of keeping prices under control, of slowing growth or keeping them down, that that’s leading to a lot of the higher costs throughout the system. Am I right there, and if so, what would, what would allow us, I mean, the general consensus is that a lot procedures in other countries where you have government-set prices or other mechanisms, you wind up with much lower prices? Can our system control price and which of these different avenues are most likely to do it? I mean, that’s really a big part of that value equation you just mentioned.

Chapin White: Yeah. So, I’ll say the Medicare program has been doing a bang-up job of controlling prices and healthcare spending for the Medicare population. It’s by far the biggest healthcare program in the U.S., and if you look at per beneficiary costs in the Medicare program, growth year-over-year, it’s been at or below the CPI for many years running. So, in other words, real expenditures per beneficiary in the Medicare program are falling. That’s, I just want to let that soak in for a second. Because, if you’ve been studying the healthcare system in the U.S. for a long time, all we’re used to is excess cost growth, growth in excess of inflation. If you look at private healthcare spending, spending per enrollee among the privately insured, that’s been growing in excess of inflation, in excess of wage growth. That’s where the excess cost growth is happening, among the privately insured. And, it’s precisely because of these, these price negotiation dynamics between providers and health plans that applies to the privately insured, that doesn’t apply in Medicare.

And, Anu, I’m glad you brought up the question of, well, there’s technological improvement. There’s also the question of what price trends, we need some context for talking about price trends. And, what I would say is look at the prices paid per service for the privately insured. You can go to the Healthcare Costs Institute public reports on prices. Prices for hospital care are growing, you know, roughly in the 5% per year range. Again, this is just for the privately insured. That’s well in excess of CPI, that’s in excess of wage growth, that’s in excess of GDP per capita.

Ideally, you’d expect that the hospital industry, like any other industry, is going to be getting productive over time. Prices should be growing roughly inline with other kind of service sectors in the economy. My sense is that what’s happening in the hospital sector is this massive wave of consolidation is just allowing them to keep extracting price increases well in excess of inflation. But, again, that’s just for the privately insured.

Sarah Dash: Let me ask a question that’s come in from the audience, which is do you think the impact of consolidation will change as risk-based alternative payment models begin to take hold and providers have more of an incentive to think about the price of referrals as, you know, the cost of care that they’re delivering.

Anu Singh: So, this is Anu, and I think the process of transformation is going to continue. Whether it involves the same level of consolidation still is probably unclear. I think we heard at the very beginning and to come full circle, Tom articulated that each market’s very different. And, so if you look at a major metro market like Pittsburgh or even Chicago, my hometown, you’re seeing a lot more consolidation activity among the providers. Yet, in metro L.A. and Southern California there’s been very little at this point. And, that’s because each of those markets are a little bit different in terms of how they’re dealing with transformation. And, then the relative advancement of those three pillars, clinicians, providers, and payers in those markets.

And, so I think we’re going to see continued transformation. I think consolidation’s going take different forms in different markets, for sure. And, you know, as we just talked about a second ago, this concept of, well, the commercial payers being an important element of where there’s cost growth higher than everywhere else. Well, that has different implications to hospitals and providers that have a very low commercial mix versus those that have a very high one. So, not only are we seeing geographic diversification, but the payer mix and demographics that explain a patient market you’re trying to serve will be yet another factor in the equation of where and how you solve for the new value, the new value solution for healthcare.

Sarah Dash: Great. Thank you. And, there was a question that came in speaking of kind of very specific markets. There was a question that came in about all payer states, namely Maryland, and whether there tends to be more or less consolidation in that kind of a setting. Would anyone care to comment on that?

Anu Singh: So, the challenge with Maryland, I think you have the markets are pretty well-defined already. And, so I think, I think it’s tough yet to see if that’s an example or a leading indicator of other markets. I wouldn’t necessarily say that that single-payer model has any explanatory power that could be applied to somewhere else in the country at this point.

Sarah Dash: Great. Thank you. We have about eight minutes or so left for questions. So, again, if you’re in the audience and you have a question, please feel free to still submit it through your question function.

I want to go back to this question of payer mix, though, because, you know, Chapin, in your presentation, you really made a distinction between the administered pricing, you know, such as occurs in Medicare and negotiated pricing such as occurs in the private market. And, it struck me kind of from your slides that most, most providers are not in, fully in either one or the other. So, how does that come into play as they’re making these decisions of how to function in today’s healthcare marketplace?

Chapin White: That’s a great question. So, you know, one of the keys for success if you’re a hospital or a hospital-based health system is physically locate yourself in the areas that have large concentrations of privately insured. You’re generally going to be way ahead of the game if you’re treating the privately insured instead of mostly Medicare and Medicaid. And, there’s just been a growing gap over time between how much hospitals get paid to treat the privately insured versus Medicare and Medicaid. There’s a lot of tension in the system where you have hospitals clearly preferring to locate in areas with mostly privately insured patients. You also have some situations where hospitals that are just turning away Medicaid patients, turning some, you know, physicians are turning away Medicare patients. And, if you ask a hospital what the core of the problem is, it’s that Medicare and Medicaid aren’t paying enough for them to cover their costs.

If you flip it around, though, you could also see that problem as we’ve, we’ve allowed this bilateral price negotiation arrangement to exist for private health plans. And, it’s, they’ve gradually come unhinged from our public health insurance programs. And, my read on the price trends, the spending trends, I think the bigger problem is with private health plans paying too much as opposed to our public health insurance programs paying too little.

Sarah Dash: Thank you. And, there’s just one other kind of question related to that, which was that despite the price, price growth in excess of CPI and some of the other trends that were mentioned, the questioner notes that hospital margins have been fairly flat and asks if there’s any idea where the money is going. So, I wonder if anyone, that might be a broader question than this question about concentration and competition, but if someone wants to comment on that, that was a question from our audience.

Anu Singh: I’m sorry, could you repeat, you said the hospital margins were flat? Is that what the comment from the…

Sarah Dash: Yes.

Chapin White: And, that’s partially true. The hospital industry is dominated by non-profits that by definition are not, they’re cost-minimizers, they’re not returning, they’re maximizing dividends to investors. A non-profit institution that manages to bring in more revenues will pretty much, I guarantee you, figure out a way to spend it. And, hospital margins over the long run of the history of the industry in the U.S. hover right around, you know, at or around zero. They’re above zero if you include non-patient revenue and income. But, the fact that margins are close to zero and are flat doesn’t really tell you anything about the, how financially well-off hospitals are, I would say.

Anu Singh: But, it also highlights the conundrum we’re in, right. Because, I think what, what the comments being made is if there’s not increasing margins from these payer contracts that seem to be rewarding hospitals for the commercial mix. And, if multiples haven’t changed either in terms of the transactions very much within the hospital space or the last six, seven years, and that is true, it’s not like they’re increasing. There’s increasing activity, yes, there’s increasing types of transactions, yes, but valuations themselves aren’t moving very much. Then it does beg the question that is there really that much more of the consolidation in the hospital space that’s eventually going to be influential here? And, that’s a tough question to answer, because it seems to me what’s driving a lot of that movement of funds around reimbursement has just as much, if not more to do with the payers than it does with the hospitals.

Sarah Dash: Great. Thank you. We have just a couple of minutes left, so what I’d like to do is ask each of the panelists, if you would, to maybe take about 30 seconds to share any kind of final points that you maybe haven’t had a chance to make, or key takeaways that you would like to emphasize before we wrap up this webinar. And, I’m pretty sure Tom Scully is no longer on the call, so we will go straight to Anu, and then Chapin and then Matthew to have the last word.

Anu Singh: Perfect. I’m trying to ponder what Tom would say, and I’m trying to unleash the inner Tom in me to say something here. You know, look, I think we’re in interesting times in terms of industry transformation, and I think that leads to probably two very important realizations, at least in my mind. Those participating in this space, thinking about entering this space, tracking this space, really ought to understand one fundamental truth. And, that is simply this. What has led to the historical success of organizations leading this industry in the past? It may not be the exact same factors that will lead to industry success in the future. We absolutely must rethink the business model. We absolutely must rethink the measures of success in our industry. And, the more we can participate in forming those on our own rather than leaving it to government, regulatory or legal intervention, the better off I think we’re going to be. And, we’ve seen proof of that in almost every other industry, that we need a catalyst from the government, but we need, honestly, we need the commercial participants to figure out how to make it better. So, that’s one.

And, number two, I think, as this webinar covered a lot of content, one of the things I think we can all take away from it is it’s very important to not jump to conclusions in terms of where we are on limited data and indicate that we know where this industry’s going to go yet. There’s more that needs to be done, there’s more that needs to be done to shape policy, to modulate reimbursement models, whatever the case may be. There’s a lot more work that needs to be done, and some of that needs to take place before we can say we’re going in the right or wrong direction. What is important, though, is that we recognize we’re probably doing better than if there was no intervention at all and no change at all to what we were doing 5, 10, 15, 20 years ago.

Sarah Dash: Thank you. Chapin, any final comments?

Chapin White: Yeah. Sorry, I just had to find my unmute button. So, yeah, Tom Scully, he’s absolutely right, every market is local. But, but there are big-picture, national trends and patterns that, that really pop out at you. And, in terms of spending, growth, it’s all happening among the privately insured, and it comes back to this consolidation phenomenon. And, there’s this kind of corny saying, you know, when the elephants fight, it’s the grass that gets trampled, or, you know, it’s the grass that loses. The grass here is individual patients, and when you have these massive healthcare providers, these massive health insurers, you know, all bulking up to do better in their battle against each other, we need to keep our eye on the patients, how we’re doing. I don’t sense that we, as patients, as buyers of healthcare are being very well-served by the current wave of consolidation.

And, I also want to point out predicting where this market is going to go is tough. There was a really intriguing op-ed from Ezekiel Immanuel in the New York Times asking the question are hospitals, are hospitals becoming obsolete. And, we, my sense of what’s going on is hospitals to survive and thrive in today’s market are bulking up, they’re buying up physicians so that they can continue to get their volume. They’re demanding higher prices from private plans. We can either kind of fix negotiation dynamic and put prices on a more sustainable path, or the U.S. market will figure out a way around hospitals. And, we see some of that in innovations in care delivery that go around the hospital entirely. And, that may be, maybe that’s the ideal outcome. Hospitals, I think, are putting themselves in the position of hanging on for dear life to inflated contracts that aren’t sustainable for the rest of the economy. And, I have faith we’ll figure out some next step. I don’t know what it is.

Sarah Dash: Great. Thank you. All right, Matthew, and then we will close our webinar.

Matthew Herper: Okay. I mean, just to Chapin’s point, I’ve taken to saying recently that healthcare prices are, healthcare prices can only be decreased by like mountains being worn away by rain. And, the problem is where the rain drops. I just wanted to close out with the basic it’s the price is stupid and that all of these, both the hospital mergers and the larger health M&A space seems to be driven mostly by these pricing pressures. And, I hear a lot of talk about innovation, how things are going to change, and telemedicine and all sorts of different methods of care delivery, but I feel like I’ve been hearing that for a long time. And, it would be, it would be nice to see costs actually reduced. But, as Chapin noted, what I’m used to hearing the healthcare system is that when we get to flat, that that’s as good as down.

So, thanks a lot for having me.

Sarah Dash: Thank you, and as we know, most consumers out there don’t, they want their prices, or their costs, their costs to go down, not sort of bent, if you will. Well, thank you. That is all the time we have today, unfortunately. But, we really appreciate the discussion. Thank you all for joining us. I want to thank our panelists. I want to thank our audience for joining us today. And, we hope that you will take a couple of minutes to complete the brief evaluation survey that you will receive via email this afternoon.

Again, a recording of this webinar will be available on our website soon, along with the slides, the additional reading and an expert list. Thanks again to all of our panelists and to our partners, the National Institute for Healthcare Management Foundation and the Association of Healthcare Journalists, who helped to make today’s webinar possible. And, we hope to see you soon at another Alliance for Health Policy event.

Please join us for our next webinar on Tuesday, April 24, from 2:00 to 3:15 p.m., where we will discuss a completely different topic, the public health implications of state and federal environmental regulations.

So, thank you. Have a great rest of your day. This concludes the webinar.

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