Just as retail stores have been developing into “super-stores”, such as Target and Wal-Mart — combining a wide range of retail clothing, sporting goods, toys, etc. along with groceries, pharmacies and retail clinics – so “super-systems” are developing in healthcare.  First hospitals merged with each other, and physician groups grew larger by acquiring each other.  Now the multi-provider systems created thereby are merging with each other to create massive super-systems combining both elements of healthcare.

In Milwaukee, Wisconsin, for example, Advanced Healthcare, Inc., a 250-physician medical group is discussing a merger with Aurora HealthCare, the area’s largest multi-hospital system.  In Waukesha County, Wisconsin, Medical Associates Health Centers is discussing the idea of joining with ProHealth Care, a two-hospital system.  Similar activity is growing in major metropolitan areas, while many super-systems already exist, such as Mayo Clinic, in Rochester, Minnesota, with “outposts” in Florida and Arizona.

There is certainly a lot of potential for economies and qualities of scale in local super-systems, which need not duplicate increasingly expensive high-tech equipment, and can share medical records to avoid duplicating diagnostic tests and scans, for example.  These super-systems can share best practices to achieve competitive quality and cost levels for all participants, as more third-party payors and consumers make provider choices based on published performance data.

For physicians, joining groups in the first place promises to relieve the stress of being personally available to patients 24/7, along with creating qualities and economies of scale.  As physicians increasingly demand or strive for work-life balance, being part of a group is usually the best way to meet patient demands while enabling a normal home life.  Independence has given way to the desire for a more normal life.

Not to be overlooked, of course, is the advantage of being part of a large super-system when it comes to negotiating with insurers, which are themselves busily merging to create super-payer-systems.  Local business leaders often support provider consolidation, to create both qualities and economies of scale and the ability to cover their entire workforce when negotiating with or selecting provider networks.

There is a downside to such consolidation, however.  One may be a decline in the effective availability of physicians, who often shoot for reducing their workweek from 60 to 40 hours in pursuit of a normal life.  If the super-system fails to improve physician productivity through better technological and ancillary staff support, this could effectively reduce the physician manpower available to serve the local community by one-third at a time when physician shortages are common.

Super-systems also reduce competition for consumers, and may tend to increase local prices as a result.  After all, that is what providers hope for from consolidation when it comes to negotiating with payers.  But the coordination of care and medical records across super-systems may make up for this, since it should reduce duplication of expensive testing and scans when patients seek care in an emergency, for example.  Plus, Medicare and Medicaid do not “negotiate” with local providers anyway, and their payment systems greatly influence local payment levels as well.

One of the major issues that super-systems will have to deal with is the growing demand among all third-party payers for proactive health management (PHM) as a way of controlling the unaffordable growth in reactive sickness care costs.  Super-systems typically have far more “procedure-focused” specialists, as compared to primary specialists in their medical staffs.  And while payment for primary physicians is already changing to make primary care more profitable, when it includes and focuses on managing patient health as opposed to merely diagnosing and treating sickness, this takes money away from most specialists.

After all, PHM is deliberately aimed at reducing the incidence and prevalence of acute, and especially chronic disease.  This means reducing the volumes of sickness care business and revenue for both hospitals and specialists, though this will happen only gradually even if PHM is widely successful.  While orthopedists are probably guaranteed plenty of joint replacements from damage already done, and even growth in such damage if everyone adopts a more physically active life, other specialties would lose volume of other chronic conditions decline.

There may be some serious conflicts when other super-systems consider joining with current PHM providers such as Mayo Clinic and Northwestern Memorial in Chicago.  Both are among systems that are at least “hedging their bets” by seeking added “wellness” revenue as the stinginess of third-party payers for sickness care makes total reliance on such care for survival increasingly dangerous.   While the primary physicians in super-systems may support such a balancing of proactive and reactive care, specialists may have quite another view.

The risk in the creation of super-systems is that they may overburden these large providers with capital facility and equipment investments that can only be supported through continuing emphasis on reactive sickness care and revenue.  While these are arguably “sunk costs”, they already represent roughly 95% of total healthcare revenue, while prevention and wellness only represent 5%.  On the other hand, it has been predicted that wellness/healthy living services are well on their way to being a $1 trillion market, which will at least represent a major potential for super-systems, which currently operate almost completely in the $2+ trillion sickness care market.

It could turn out, of course, that the desires of physicians, including specialists, to enjoy a more normal life by reducing their hours, will fit right into a decline in at least the growth of, and even in the absolute size of the reactive sickness care market.  PHM will certainly increase the market for primary physicians and ancillary staff willing and able to “coach” patients in health rather than just treat their illness.  Many specialists, who already depend on the crises, complications and worsening of chronic illness for increasing demand, may find they can live quite will while reducing this demand while managing the disease already existing.

At a minimum, the creation of super-systems will change the dynamics of thinking about PHM investments, and create the infrastructures that will be better able to deliver competitively-priced, as well as competitively-successful PHM results.  It would be a shame if these new structures complicated discussions of PHM strategies so much that they led to super-systems missing out completely on PHM opportunities, and left the field to the non-traditional “vendors” already doing quite well in this market.