3/14/2017 -
The upending of the Affordable Care Act (ACA) began on the first day of President Trump’s administration with the signing of an executive order. While the timeline for “repeal and replace” remains unclear, one thing seems definite: uncertainty has the health marketplace on edge.
“We are currently at a crossroads with the U.S. health system,” says Craig Garthwaite, associate professor of strategy at the Kellogg School of Management. “As with the start of any new market, it’s been a difficult and messy process implementing the ACA. But while it hasn’t been pretty, the marketplace created under the ACA is actually functioning like you might expect a nascent marketplace to perform.”
Co-director of Kellogg’s Healthcare Enterprise Management Program (HEMA), Garthwaite conducts research on health reform. In fact, several studies initiated at Kellogg have recently shed light on the economic effects of the ACA. In one study published in Health Affairs (August 2016), Garthwaite along with HEMA co-director David Dranove and strategy research assistant professor Christopher Ody found that hospitals have experienced a decrease in the cost of uncompensated or “charity care” thanks to the increased funding of Medicaid under the ACA.
In early February 2017, Garthwaite and colleagues published evidence about insurance expansion and hospital emergency department access in the Annals of Internal Medicine. The investigators noted that expanded hospital options due to the ACA have given many more patients access to emergency care at hospitals closer to their homes. “Overall research at Kellogg serves to demonstrate the good and the bad of health reform,” says Garthwaite. “Our research at Kellogg helps to inform current conversations about healthcare in America and what factors firms and policymakers might want to consider in their decision making.” For example, while the ACA has decreased uncompensated care at hospitals, Garthwaite and Dranove have written about a number of problems the law creates with respect to the employer provided insurance market on their blog Code Red.
Kellogg faculty testify on antitrust and healthcare mergers
In the area of health antitrust matters, Kellogg faculty members are a leading voice in guiding effective policymaking. One year ago, the Department of Justice (DOJ) brought to trial the largest merger case in its history involving insurer Anthem’s acquisition of Cigna. The government’s argument? Patients and providers would be harmed by limited price competition, reduced benefits and lower quality of care. Dranove served as the DOJ’s lead analyst and testifying economics expert in the trial that just ended in January.
As healthcare policy shifts, Kellogg faculty continue to pay close attention. The impact of the Trump administration’s promise to scrap the ACA, however, is anyone’s guess, according to Dranove. “We just don’t know yet what repealing the ACA will do to the marketplace,” he says. “Will it make it easier or harder to make a profit? Will insurers, providers, pharmaceutical companies, medical device firms feel more pressure to merge? I don’t see any major change in the rate of consolidation at the moment. On the other hand, the DOJ’s antitrust posture isn’t likely to be any less aggressive. Only time will tell.”
David Dranove, Walter J. McNerney Professor of Health Industry Management and Professor of Strategy, lectures an MBA class. Photo © Kellogg School
Kellogg’s health enterprise management program prepares students to drive innovation
Designed to prepare students to take on leadership roles within the dynamic healthcare industry, Kellogg offers a Health Enterprise Management pathway in both the Full-Time Program and the Evening & Weekend Program. The goal of the pathway is to combine Kellogg’s top-flight training of general managers with health-specific knowledge. The pathway merges health policy and management and are taught by faculty that cross disciplines, further bolstering the diversity of perspectives that fuel research and teaching. The pathway is comprised of foundational courses that center on strategy and economics, and advanced courses such as Biomedical Marketing, Pharmaceutical Strategy, Intellectual Capital Management, Service Operations and Health Analytics.
Additionally, HEMA students are privy to experiential or field courses that allow them to venture further into a particular field such as medical device innovation or an emerging market. Classes within this offering include Medical Product Early Stage Commercialization and Medical Technologies in Developing Countries. The agility and cross-industry focus of the HEMA program influences the careers Kellogg graduates enter within the healthcare space; alumni accept diverse roles in medical innovation startups, consulting, insurance providers or the pharmaceutical industry.
Kellogg alumni positively impact health industry around the globe
Another strength of Kellogg’s HEMA Program is the robust community it nurtures, benefitting students and alumni alike. One example is the HEMA visiting executive program, in which alumni connect directly with students to share their experiences over a shared meal, as well as within one-on-one meetings.
Robert Hilliard ’07, State President of Illinois for insurer Harmony Health Plan, Inc., a WellCare Health Plan, Inc. company, has also participated in Kellogg’s visiting executive program. A former practicing physician, he transitioned from the clinical to the administrative world after earning his Kellogg MBA. Hilliard oversees the delivery of government-sponsored managed care services such as Medicaid and Medicare to some 210,000 members in Illinois. As a mentor, he gladly shares his experience on the payer side of the healthcare equation. As an alumnus, he draws upon his Kellogg network every day. “If I have questions about a variety of issues from IT to human resources, I don’t hesitate to call up alumni in different industries to get ideas or feedback.”
Alumni impact in health enterprises goes beyond U.S. borders. CEO of Liberia-based Snapper Hill Clinic (SHC), Varsay Sirleaf ’10 has built the outpatient facility into the largest of its kind in Monrovia. Founded by Sirleaf’s father in the 1980s, the clinic serves some 15,000 patients annually. In his leadership role, Sirfleaf remains deeply connected to the school, and the HEMA network. In fact, his collaboration last year with Class of 2016 graduates Rogerio Campos and Eric Leventhal provided the foundation for securing SHC’s latest round of funding. The two Kellogg students, along with supervision from faculty member Kara Palamountain, created a pitch deck that Sirleaf used to engage with interested investors.
“Varsay has a high-impact vision for SHC, but he also has the skills to implement this vision. Kellogg students and alumni are the perfect collaborators for a project of this scale and ambition,” says Palamountain.
In late November, TLG Capital announced its intention to invest growth capital in SHC backed by a guarantee from the Medical Credit Fund. The investment will allow for SHC to expand its services and capabilities to reach more than 50,000 patients a year.
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Kellogg Professors David Dranove and Craig Garthwaite cover healthcare management and policy on their blog Code Red
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