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With Obamacare upheld, health care firms exhale

Dan Gorenstein Jun 25, 2015
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With Obamacare upheld, health care firms exhale

Dan Gorenstein Jun 25, 2015
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Thursday’s 6-3 Supreme Court vote upholding a major tenet of the Affordable Care Act means health insurers and health care providers are breathing a sigh of relief — this is the outcome they wanted — but that doesn’t mean they can rest. They’re still in the process of figuring out how to thrive in this still-new health care environment.

Crowds hoorayed and chanted “ACA is here to stay” when the Supreme Court ruled in favor of Obamacare. (Linly Lin/Marketplace)  

Hospital stocks jumped eight to 15 percent as the ruling came down, a rare occurrence, says Jason McGorman, a healthcare analyst with Bloomberg Intelligence.

“The last time I’ve seen over 10 percent move for hospitals was back in 2012 when the Supreme Court last had the Affordable Care Act,” he says.

McGorman says Wall Street smiled on insurers and managed care companies today, too. It shows how this industry – one of the country’s largest – is “all-in” on Obamacare.

Drug makers, device manufactures, doctors and nurses have spent the past several years learning the ropes in this new era where they get paid based on better health, says PricewaterhouseCoopers’ Ceci Connelly.

“I know it’s become a cliché, we’re moving from volume to value, but is the accurate shorthand,” she says.

As easy as that is to say, few really know how to provide more value. Insurers are trying to figure out how to price these new insurance policies they sell on the exchanges. Hospitals are trying to figure out how to treat more patients in outpatient clinics and in their homes. As these titans grope for answers, we are seeing many mergers — hospitals, physician practices, and recently, lots of talk about insurers merging.

Nurses supporting Obamacare wait in front of the Supreme Court for the decision. They are members of the American Nurses Association. (Linly Lin/Marketplace) 

“It tells me the industry is reorganizing itself,” says Leemore Dafny, a health care economist at Northwestern’s Kellogg School of Management“My concern is, is it reorganizing itself in a way that is likely to benefit us, the consumer? Unfortunately the evidence we have to date suggests that most consolidations are associated with higher prices,” she says.

Dafny says companies hope being bigger will help them navigate these new waters, and if not, at least shore up market share. And while more consolidation could mean higher costs, Dafny says this push toward value — as hazy as it is — leaves her optimistic consumers will one day get more for their money.

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