Matthew Bassett
Senior Vice President, Revive
Even outside of the pivotal Supreme Court hearing on the health care overhaul this Spring, state governments are intervening in areas many health care executives had not anticipated. Rather than an organization’s board, senior management, or shareholders making the decisions, government forces are increasingly weighing in and often making decisions that have major operational consequences. For two cases-in-point, consider Kentucky and Pennsylvania.
In Kentucky, Gov. Steve Beshear just rejected a proposed merger involving three major hospitals. The merger would have created the largest hospital system in the state, as University of Louisville Hospital would have joined Jewish Hospital & St. Mary’s HealthCare and St. Joseph Health System. Governor Beshear noted that the transaction was “not in the best interest” of Kentucky, and “the risks to the public outweigh the potential benefits.” Kentucky’s attorney general stated the merger would bring about ”a material change in the level of service at the historically public” University Hospital, and raise questions surrounding the “excessive entanglement between state and religion.”
The result for now is that the two systems will merge sans University Hospital. University was left out in the cold with no access to the sorely needed funding the new entity would give it access to, raising questions about the hospital’s future.
With the extensive due diligence involved in this type of merger, one has to wonder how hospitals failed to add the Governor and Attorney General of the Commonwealth to their list of key external stakeholders. In this case, government intervention prevented market forces from moving forward as planned.
Likewise, in Pennsylvania, a contracting dispute between the University of Pittsburgh Medical Center and Highmark, the Blue Cross Blue Shield affiliate in western Pennsylvania, has garnered national attention and produced a bevy of legislative proposals designed to bring an end to the stand off. Proposed legislative measures ranged from binding arbitration to an unprecedented expansion of powers that would give the state’s Insurance Commissioner significant authority over private-sector contracting disputes. Among other things, one measure would grant the Commissioner the authority to require private parties to stay in a contract (for years), if it was deemed to be in the consumers’ best interests. As the public and political din escalated, Gov. Tom Corbett, a Republican, announced that he was “deeply” concerned and became involved.
Republicans control both the House and Senate in Pennsylvania, but if any of these measures becomes law, they would affect far more than just the parties involved. This type of aggressive legislative intervention would have a profound effect on all of Pennsylvania’s health care contract negotiations.
You can debate the wisdom of government intervention on an ideological basis, but you can’t deny that increasing regulatory and government actions can profoundly affect your organization’s best-laid strategic plans. If government communications are not part of your strategic plan, or fully integrated with your senior management team, now is the time. It could be the only thing that separates the winners from the losers.