Publisher’s Letter

Closing Thoughts

The voters have spoken. Now the future is much clearer, right?
President Obama has been re-elected. What exactly this means to healthcare and the supply chain won’t be known until many of the components of the Affordable Care Act are set in motion.

One such measure is the medical device tax of 2.3 percent on revenue to qualifying device manufactures, which will be implemented in a few short weeks. This 2.3 percent tax on revenue can mean 20, 30, 40 percent or more of a manufacturer’s profit margin. For example, a manufacturer with $500 million in revenue with a 12-percent profit margin will pay nearly 20 percent of profits for this one tax.

Proponents of this tax see this as the device industry’s fair share of covering the newly covered patients in a system with declining commercial reimbursement. But many of the manufacturers have shown they will protect stakeholder value by decreasing employees and reducing R&D. What we have yet to see is if these costs will be passed on to providers and patients.

In this issue, the cover story is by Jim Francis and David Loeb, M.D. It is a great essay on what to expect in the future from successful leaders in our nation’s healthcare organizations. Their insight is invaluable on the crucial characteristics, qualities and disciplines needed in the coming new world, but two topics really leapt off the page – sustainability of expense reduction and the imperative need to embrace change management.

The view that “only when expense reductions are sustained does the cost curve begin to ‘bend”” gets lost in today’s negotiations that seem too often to end up in a zero sum framework.

Change management is so imperative in this new world. Change is probably the one consistent we can all count on going forward, so it best be part and parcel to all the systems, processes and leaders we put in place!

Thanks for reading The Journal of Healthcare Contracting!
John Pritchard

About the Author

John Pritchard
John Pritchard is the publisher of The Journal of Healthcare Contracting.
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