Two news items hit the virtual desk: Hospitals will lose more than $50 billion this year, and consolidation among hospitals and health systems is continuing, isn’t improving quality, and is increasing health systems’ leverage over payers.

Joe Paduda

The bad, awful financial picture for hospitals comes after a pretty bad 2020, a year in which operating margins were slashed in half.

Of course, financial problems are the main driver behind consolidation as health systems with stronger balance sheets take over struggling competitors. Physician practices hammered with revenue declines driven by far fewer patient visits, fewer elective surgeries and more uninsured patients are also being acquired by health systems.

For payers, especially in workers’ comp, the balance of power has shifted to providers. With control over many hospitals and thousands of physicians, systems like Sutter Health in California can dictate terms to huge group health buyers.

I find it ironic indeed that the online ads next to the reporting on the consolidation problem in general, and Sutter Health specifically, include one for "The Walking Dead." Payers’ ability to control costs in consolidated health care markets is challenging at best.

What does this mean for you?

If you operate in Alabama, Florida, Louisiana, Arkansas, Kansas and a bunch of other states, your facility costs are going up. 

Joseph Paduda is co-owner of CompPharma, a consulting firm focused on improving pharmacy programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.