Health Care Law's Impact on Businesses Varies

Companies specializing in driving down spending on health care, whether through electronic records, preventive care or consolidating services, are turning out to be the biggest winners from the 2010 health care law. 

Investors, analysts and policymakers say any business that can help health care providers cut costs or keep patients from being readmitted to the hospital soon after an in-patient visit is attracting more customers and seeing more investment.

"We must drive down the cost of, or maintain the cost of, health care," said Albert Waxman, co-founder of Psilos Group, a health care venture and growth equity fund. His firm is investing in companies specializing in controlling administrative costs for health care providers.

He has company: Investing in health services rose from $261 million in 2010 to $368 million in 2011; second-quarter 2012 investments are up $11 million from second-quarter 2011 investments, says the National Venture Capital Association.

Health care information technology spending for the second quarter hit $293 million, up from $86 million for the same period last year, according to Mercom Capital Group, a market research group that looks at health care technology. Those deals included telehealth technology, as well as mobile devices that providers carry to keep tabs on patient data.

Several businesses traditionally associated only peripherally with health care providers may also profit, because the law is forcing change in the way the medical field operates.

There are now 221 accountable-care organizations made up of hospital and physician groups, as well as insurer-based groups, according to a Leavitt Partners report issued in June. Technology, administrative and home care providers that help the ACOs save money stand to do well.

Any preventive-care organization that can help employers or insurers cut costs by lowering rates of diabetes, heart disease and respiratory issues -- such as fitness plans or smoking-cessation programs -- could also see a sudden surge in customers, says Kenneth Thorpe, who co-directs Emory University's Center on Health Outcomes and Quality.

Waxman invested in a company that uses information technology to monitor employees' health habits and to reward them when they go to annual health exams, get checked for chronic diseases and work to take care of any potential health issues.

"We're very excited about the future," said Martin Watson, CEO of SeeChange Health. "Without health reform, we figured we'd get to the $800 million mark (in earnings) by 2016. With health reform, it looks like we'll hit $1.5 billion by 2016."

SeeChange works with clients such as UnitedHealth by providing technology to cut premiums for beneficiaries who engage in healthy behaviors, tracking claims data to see which areas might need improvement, or adding cash to a health benefits account if a person stops smoking or begins a weight-loss program.

Cigna health insurance began moving toward accountable-care organizations in 2008, long before the law took affect. But Matt Manders, who heads Cigna's accountable-care initiatives, said the law has worked as an "accelerant." Cigna has 32 "collaborative accountable-care" organizations and plans to have 100 by 2014.

"It takes some time to have demonstrated results," Manders said. "But more than half (of the 32) have seen significant improvements in quality and cost reduction."

While many for-profit organizations will benefit, non-profits could do well, too. "In 2014, insurers can't profit by denying coverage anymore, so they need to keep people healthy," said Thorpe. That could mean prevention efforts, such as the YMCA's diabetes prevention program, could see an influx of cash.

Investors also see potential in accountable-care organizations, which are included in the Affordable Care Act. Private businesses have been working toward them for a few years.

ACOs gather providers, insurers and pharmacists, as well as home health care and palliative care providers, into a team. Those teams share data to avoid errors and duplication of tests and procedures.

Michael Sparer, health policy chair at Columbia University, cited Montefiore Care Management, a not-for-profit health organization in New York's Bronx, as a good example of a group that began making changes before the law started taking effect.

Henry Chung, Montefiore chief medical officer, said the group decided years ago to be paid by patient, rather than service, to cut costs. Now, it's one of 32 Medicare pilot sites.

As health care continues to change, Chung said, he sees several financial winners. In a non-fee-for-service system, primary-care physicians have an opportunity for greater reimbursement. There will be a greater need for care coordinators who keep patients well and out of the hospital. There will also be a need for palliative and home care services, and for community doctors to make sure they reach everyone in the community who might use their hospital.

"The spotlight will be on plans like ours," Chung said.

(Source: USA Today, 09/24/12) 

Obamacare Just Created a Huge Ad Category

Health insurance companies already moving toward consumer advertising 

It's official: the Affordable Care Act (or Obamacare, depending where you sit on the political spectrum) has been upheld by the Supreme Court as of this morning. While the announcement certainly wasn't the proudest moment for cable news networks (easy on the trigger there, fellas!), it's likely to be very good indeed for television as a whole.

Pivotal Research senior researcher Brian Wieser (formerly the top forecaster at Interpublic) has a solid predictive track record, and he's extremely bullish on the possibility of a rapidly expanding healthcare category on television and in other consumer media as the hotly contested individual mandate becomes a reality in 2014. Individual healthcare policies are the exception, rather than the norm, but if everyone in the country is required to have some kind of coverage, the number of those policies sold is going to skyrocket. That, said Wieser, means new business models.

What will probably happen at first, according to the analyst, is that a single company will grab a lot of attention when it rolls out an effective campaign. "A reference point could be the auto insurance market until the last decade," said Wieser. "It was a lot of smaller companies, and then Geico catalyzed the entire sector. It will make a huge difference in market share."

Since health insurers market mostly (sometimes exclusively) to businesses, there's a steep learning curve ahead for big insurance companies that don't yet have a consumer-friendly infrastructure. "These marketers are going to have to reorient themselves from being B2B brands to being consumer brands," said Wieser.

And it's worth noting that some of them have already started to do just that. Last April, Cigna bgan its pivot toward consumer-focused advertising by hiring Hill Holiday to handle its needs in that department; the company also rolled out its "Go You" campaign a few months later (see link above). Meanwhile, WellPoint has hired Interpublic agency Deutsch, also with a conumser focus in mind, and even earlier—in May 2010—Humana retained Omnicom.

"I'd be surprised if you see them in next year's upfront, but I think you'll see a little in the fall of 2013, more in 2014, and a lot more in 2015," said Wieser. Still, health insurance advertising increases may be a safe bet, but there's no guarantee that it will be a net gain of the $1 billion-plus that Wieser predicts the market will eventually reach. "Health insurance goes up and maybe it makes it more difficult for soft drink manufacturers who were, uh, on the other side of the health proposition," said Wieser with a laugh.

It's also probably safe to expect the larger insurers to start retaining the larger advertising agencies; consumer ad spending hasn't yet been a priority, but the Kaiser Family Foundation (a nonpartisan nonprofit that lobbies on behalf of the health insurance industry and is formerly affiliated with Kaiser Permanente) predicts that the number of individual policy holders in the U.S. will at least double from 14 million to 28 million by 2016.

Sam Thielman - Adweek, 6/28/12