PRNewswire - December 28, 2004

* Re-election of George W. Bush. This Bush term will influence the health care sector's evolution in a way that only a second-term administration can. Bush was not elected on a health care agenda, but his mandate will allow him to frame health care policy through Cabinet and Supreme Court appointees. Bush's successes and failures in this arena will feed into the debate, as the highly charged political issue of health care policy increasingly influences presidential campaigns. Each election is an inflection point in this debate, as significant change can only occur along this repeating four-year timeline.

* Passage of expanded Medicare coverage. This is an early indication that the political power of the Medicare population will inevitably trump the increasing demands of the under-insured populations until the industry reaches an unbearable crisis point. Medicare patients' demands increase as coverage expands. The demands of the under-insured increase as funding is diverted to Medicare. Hospitals will shoulder both burdens.

* Apparent failure of TennCare. Innovative approaches to health care reform will continue to emerge from individual states. TennCare was an early and initially promising effort at reform. Its demise is a lesson in the vulnerability of such state-sponsored initiatives. TennCare demonstrated the elasticity of demand for medical care where subsidies heavily influence utilization levels and illustrated how poorly planned attempts at universal care can consume an entire budget. Insurers' and hospitals' incentives were whipsawed in the process.

* Flu vaccine production problems and Asia's avian flu. This season's flu vaccine shortage was just a glimpse at the public health system's vulnerabilities. Plus the World Health Organization (WHO) continues to raise concerns about a flu-related pandemic. A collision of the two dynamics could spell a public health crisis on par with the early days of HIV/AIDS. Support will be slow in coming for hospitals during such a crisis.

* Closure of key emergency departments. Trouble in the emergency department can metastasize throughout a hospital. King/Drew Medical Center in Los Angeles closed its trauma and emergency units to maintain other services. Closure or downsizing of inner-city facilities comes at a time when the health care underclass is growing exponentially. Other major inner-city hospitals will follow suit, spreading the pain across all markets.

* COX-2 problems on hospitals' shoulders. Findings that COX-2 inhibitors, such as Vioxx, may have increased cardiovascular risks illustrate that virtually all drugs have side effects that must be balanced with their benefits in an appropriate manner. As the focus on blockbuster drugs continues, hospitals will be the last line of defense when unexpected costs, such as increased incidence of heart attacks, must be borne.

* Threat of tax exemption loss hits hospitals. As localities and states seek additional revenue from large employers and property owners, movements to more closely scrutinize the tax-exempt status of health care organizations further threaten hospitals' precarious financial position.

* National health information superhighway provides uneven ride. The Federal government's drive toward a comprehensive electronic health record paves the way for a much-needed health information superhighway. But the failure to fund the Office of the Health Information Technology Coordinator is a huge pothole along that path. Despite clarification of kickback rules for hospitals' provision of information technology to physicians, significant roadblocks remain.

The health care consulting group of Kurt Salmon Associates, Inc. (KSA) provides management advisory services in facility planning, strategy, and information technology to multi-hospital systems, community hospitals, academic medical centers, children's hospitals, and physician group practices. The group authored, "A View of the U.S. Health Care System and Implications for Providers: Year 2020." KSA is the premier global solutions provider to the retail, consumer products, and health care industries.

SOURCE Kurt Salmon Associates, Inc.

Web Site: http://www.kurtsalmon.com

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