By Robert Hadley
Louisville has been called a hospital town and for good reason. It is the site of the world’s first hand and artificial heart transplants, the home of insurance giant Humana Inc., and boasts half a dozen major hospitals, including those run by Norton Healthcare, Baptist Health System and KentuckyOne Health. Louisville-based medical services provider Kindred Healthcare has no hospitals locally but its 102,000 employees operate more than 100 transitional care and rehabilitation hospitals among its nearly 2,700 locations nationwide.
Among the city’s largest employers, healthcare firms help drive the Louisville economy, employing some 58,000 workers in the area with a median wage of $28 an hour, according to Bureau of Labor Statistics data.
Last year saw three big healthcare stories break: the merger of two insurance giants, the establishment of what is arguably the state’s first accountable care organization, and the launch of a center for healthcare workforce development.
Humana Merges with Aetna
Press reports swirled as far back as May 2015 that Hartford, Conn.-based Aetna Inc. was looking to merge with another insurer to leverage cost savings in the increasingly tight, post-ACA healthcare market. By July, the insurer’s $37 billion deal to acquire Humana was announced, pending antitrust review expected to be completed in the fall 2016.
Humana stockholders approved the merger last October, uniting their company with a rival firm whose CEO and Chairman Mark Bertolini has a reputation as an innovator. For example, earlier this year he told CNBC that he would pay employees as much as $500 to get extra sleep.
“If they can prove they get 20 nights of sleep for seven hours or more in a row, we will give them $25 a night, up $500 a year,” he told the cable channel. In the interview, Bertolini said Aetna uses Fitbit trackers to help oversee the program.
Mergers and Accountability
Insiders say the merger is a symptom of the post-Affordable Care Act insurance market.
“Elements of the Affordable Care Act – particularly value-based purchasing, the development of ACOs (accountable care organizations) and a decrease in Medicare’s disproportionate share payments has contributed to the trend,” said Joseph Gilene, president of Jewish Hospital and Louisville market leader for KentuckyOne Health.
These conditions have “had some impact on hospital mergers and physicians joining hospital systems,” he added.
Beth Munnich, an assistant professor of economics with UofL’s College of Business, said overall trends such as declining Medicare reimbursements and an aging population of Baby Boomers have played a role in promoting mergers.
“While there has been an upward trend in the number of mergers and consolidations in Louisville and nationwide for many years, we have seen a rise in (them) since the ACA,” she explained. “The dramatic increase in the number of individuals with health insurance has led to even greater demand for medical services.”
That pressure, Munnich said, as well as incentives for adopting electronic medical records, has prompted a greater investment in technology.
Both Munnich and Gilene attributed the growth of ACOs as a way providers find operational efficiencies.
According to Medicare’s website, ACOs are “groups of doctors, hospitals, and other health care providers who come together voluntarily to give coordinated high quality care to their Medicare patients.”
These organizations, however, are not limited to Medicare providers. As mentioned in The Lane Report on Jan. 28, Kentucky launched its own ACO, combining 10 medical centers: Appalachian Regional Healthcare and UK HealthCare in Lexington; Baptist Health and Norton Healthcare in Louisville; Ephraim McDowell Health in Danville; Owensboro Health; Claire Regional Medical Center in Morehead; St. Elizabeth Healthcare in Edgewood; The Medical Center in Bowling Green; and the eight Kentucky facilities operated by Brentwood, Tenn.-based LifePoint Health.
The collaboration’s stated goals were to reverse the state’s poor health statistics, share best practices, and reduce the cost of care through greater operational efficiencies.
Although some critics speculated that the Humana-Aetna merger and the drive to consolidate providers could cost the region some jobs, the opposite may turn out to be true.
Measures are already in place to ensure a healthy pool of workers is available to staff the healthcare industry down the road, particularly in light of Louisville’s anticipated population growth.
In January, The Lane Report covered the opening of a new career center targeted at matching qualified candidates with healthcare jobs. The Kentucky Health Career Center at 746 S. Fifth St. is a partnership between KentuckianaWorks and the Health Careers Collaborative of Greater Louisville, a regional health professions collaboration involving local health care organizations, secondary, post-secondary and higher education institutions, community-based organizations and health care providers.
Mary Ellen Wiederwhol, chief of Louisville Forward, the economic development arm of Louisville Metro government, hailed the center as a proactive step to meet future care needs.
“With KentuckianaWorks’ new Kentucky Health Career Center, Jefferson County Public Schools’ medical themed magnets, and local colleges’ and universities’ increased number of nursing, pharmaceutical and medical degrees and curriculum,” she said, “Louisville also will be poised to deliver cutting-edge care to our citizens and meet the demands of an increasingly older population from the baby boomer generation.”