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What would happen if employers walked away from health coverage?

Kaiser Health News reviews the scenarios and they aren't pretty; 
"The question, then, is how the reduction in business' health coverage subsidy -- $400 billion a year in the example here -- would be replaced, and what might happen if it isn't.

"...consider that a new dedicated tax of $400 billion per year would be an astounding five times the bailout and economic stimulus that, earlier this year, rightly or wrongly, raised the fury of the American people. Will we also be willing to bail out the health care industry, because it is "too big to fail?" (emphasis mine.) Finding the dollars to keep the current health system and the industry afloat would require a new national commitment of historic proportion, far greater than the recent Wall Street bailout.

"Either of these scenarios could result in massive public conflict and, equally importantly, significantly diminished resources for the health care sector. An inability to continue funding the industry's excesses would surely burst the health care cost bubble, unleashing a cascade of harshly chaotic consequences..."
Yesterday's post covered health care's ratings bomb.

Today it's too big to fail.  Bailouts of historic proportion.  Significantly diminished resources.  Bursting health care cost bubbles.  Cascading, harshly chaotic consequences.

Anyone else hearing echos from the 2006-7 housing market? Health care's credit risks just took a huge leap upward. 
Observing hospitals' build-and-spend strategies, it's easy to conclude that health planners are preoccupied with reform's potential to increase demand.  Paying for it all?  Not so much.  And I certainly don't see many hospitals factoring a "scary meltdown scenario" into their forecasts.

So let's think for a moment about appropriate responses;
  • Conserve cash and build liquidity wherever and however you can (always a good place to start.)
  • Eschew debt.  (Even for that fancy new cathedral, er, bed tower. If all hell breaks loose, you'd rather have cash than debt needing servicing.)
  • Get efficient, quickly.  (Stop looking for savings of 2%.  You now need 20%.  And all the easy stuff is gone.)
  • Get aggressive (finally) about cycle-time reduction, no matter whose ox is gored (finally.)
  • Dump everything deemed non-core or lacking a clear, competitive value proposition.  (Statistically, not everybody can be above average.  And it's just as likely you aren't as you are.)
  • Re-engineer care processes and supply chains with intelligently deployed, low-risk technologies.  
  • Make all your big-ticket projects demonstrate a clear, convincing, ROI-driven business case.  (This means your bed towers and MOBs, your service line expansions and, yes, even that fancy new information super-highway, a.k.a. EMR.)
    • As an aside, you'll comfortably spend $100 million on a new building and $25 million on an EMR, but not $250,000 on iPhone apps to improve the post-discharge process?  Are you KIDDING me?)
  • Finally, keep your acquisition powder dry, as there's likely to be lots of juicy, desperate candidates in a few years for those with capital to spend.  Why BUILD a new bed tower when you'll be able to BUY your nearest competitor's for twenty cents on the dollar?
And as another aside, get creative about your space needs. There's plenty of empty big-box stores out there (think Circuit City) begging to be converted into health care uses, for less than half the cost of traditional space. Plenty of parking! E-mail me if you'd like more details about my working arrangement with a team of architects leading the way.  (


John G. Self said…
Great posts. Thanks so much for your comments on my work at Healthcare Voice. I recently spoke to a group of healthcare leaders regarding the debt crisis and how it will probably impact our industry. They looked shocked, like it was the first time they heard the bad news.

Keep up the good work.
John G. Self

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