Reply #10: Overhaul’s Failure Will Ignite U.S. Health Industry Mergers [View All]

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With Congress’ sweeping overhaul of the health system stalled, industry will seek its own answers to a push by government and the private sector to rein in costs, said Curtis Lane, senior managing director at MTS Health Partners, a New York-based equity fund. An aging U.S. population will spur demand for services and, at the same time, boost pressure to control spending, he said.

One solution will be increased consolidation, with companies led by WellPoint Inc., the biggest U.S. insurer by enrollment, and Community Health Systems Inc., the largest publicly traded hospital chain, scooping up rivals unable to “spread rising costs across fewer customers,” said Paul Keckley, of the Deloitte Center for Health Solutions.

The health-care market “certainly seems to favor bigger, innovative, scalable companies,” said Keckley, executive director of the Washington-based center, in a phone interview. Drugmakers facing the loss of patent protection on top-selling medicines “were looking at decelerating revenues, with or without reform,” he said. ...

One in five working-age Americans lacked health coverage during the first half of 2009, the highest in six years, the U.S. Centers for Disease Control and Prevention said in a Dec. 16 report. Health-care spending last year reached an estimated $2.5 trillion, rising 6 percent from 2008, analysts with the U.S. Centers for Medicare and Medicaid Services said in another paper, released Feb. 4 in the journal “Health Affairs.”

The U.S. government faces pressure to slow the rise in health spending as it tries to plug a budget deficit projected to reach $1.6 trillion this year, said Deloitte’s Keckley. The overhaul bills included cuts of more than $120 billion over a decade to Medicare Advantage, a program that pays private insurers to provide benefits to the elderly. Obama also proposed a $20 billion increase in discounts drugmakers must give Medicaid, the joint U.S.-state health program for the poor.

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