The Health Care Investor : Healthcare Lawyers & Attorneys for Life Science Companies & Investors

In a prior post, I discussed the legislative challenges faced by physician-owned specialty hospitals during the past decade.  One powerful weapon specialty hospitals have in the fight against industry adversaries are research findings showing that specialized surgical care results in better outcomes and fewer serious post-surgical complications such as blood clots, infections and heart problems.

One such study was released online in the British Medical Journal on February 11th.  As reported by Becky Soglin of The University of Iowa Health Care Media Relations, the findings were based on data for nearly 1.3 million Medicare patients who received hip or knee replacement surgeries between 2001 and 2005 at 3,818 hospitals in the United States. The results grouped hospitals into five levels of specialization.  The most specialized hospitals had fewer complications or deaths within the first 90 days after a surgery than less specialized hospitals did.  For one example as cited by Ms. Soglin, the rate of death for patients who had hip and knee replacements was twice as high at the least specialized hospitals compared to patients treated at the most specialized hospital -- 1.4% compared to 0.7% within the first 90 days after surgery. 

Of course both sides of the specialty hospital debate cite statistics relating to the impact of specialty hospitals on the U.S. healthcare system at large.  For specialty hospitals, continued focus on impressive clinical outcomes is critical.  Additionally, specialty hospitals have become popular among patients for their high quality facilities and highly focused care.

Industry adversaries include political powerhouses like the American Hospital Association, which claim that specialty hospitals waste government funded healthcare dollars by permitting physicians to refer to entities in which they own interests and cherry-pick patients with the most lucrative insurance coverage thereby overburdening general acute hospitals with excessive indigent populations.

The future of national healthcare reform efforts is unclear.  Even if specialty hospitals again escape restriction in a consolidated healthcare reform bill,  it is certain that specialty hospitals will not be forgotten by their opponents. 

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The National Health Expenditure Accounts (NHEA) are published by the Centers for Medicare and Medicaid Services (CMS) and are the official estimates of total national healthcare spending.  CMS began releasing the NHEA in 1960. The NHEA measures annual U.S. expenditures for healthcare goods and services, public health activities, program administration, the net cost of private insurance, and research and other investment related to healthcare. The data are presented by type of service, sources of funding and sponsors.

According to CMS, U.S. healthcare spending continued to grow in 2008, increasing 4.4 percent compared to 6.0 percent in 2007. This increase was the lowest in healthcare spending since 1980. Total health expenditures reached $2.3 trillion, which translates to $7,681 per person or 16.2 percent of the nation's Gross Domestic Product (GDP). Data for 2009 has not yet been released.

Through its Office of the Actuary, CMS releases each year projections of healthcare spending for those same categories as are measured in the NHEA.

An overview of NHEA and projection methodologies can be found on the CMS website as well as NHEA historical data. Also available from CMS are the actuarial projections .

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Will healthcare reform help or hurt medical device and medical manufacturers? That is the question on many device managers’ and shareholders’ minds. At first blush, many stakeholders assume that healthcare reform will drive down margins and include new regulations that will hurt device manufacturers. However, a contrary argument says that healthcare reform (at the outset) will dramatically increase patient numbers in hospitals and physician offices around the country. 
 
McGuireWoods hosted a Medical Device Symposium in November and two industry leaders shared the following thoughts:
 

• David Koo, Senior Partner, Roundtable Healthcare Partners, a seasoned investor in the disposable device market, sees significant opportunities over the next three to five years for device manufacturers that provide low cost devices and lower the cost of care and address current hospital and physician concerns (ie, hospital-acquired infections).  According to Mr. Koo, much of this growth will come from the expansion of coverage that will be driven by health reform efforts in Washington, D.C.
• Medical device companies must remain vigilant in the coming three to five years according to Rob Clark, Senior Director - State Government Affairs, Medtronic. The health reform activity in D.C. does not currently contain many significant cost-containment efforts. Mr. Clark’s outlook is that these efforts will likely be introduced at federal and state levels as well as by commercial payors in the coming years as costs increase due to broader coverage. Medtronic has played an active part in helping to shape the outcome of some states’ cost containment efforts already.

This debate will continue into the coming months and years as the details are filled-in on healthcare reform efforts. 

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