Healthcare’s Reinventing Itself. What Are We Doing About It?

Can the healthcare industry help heal Connecticut’s economy?
Or, as Hartford HealthCare president and CEO Elliot Joseph asked at the CBIA/MetroHartford Alliance Economic Summit & Outlook January 8, “Healthcare’s reinventing itself. The question for Connecticut is ‘What are we going to do about it?'”

Joseph and other conference speakers noted that federal healthcare reform and the state’s booming biopharma sector are reshaping the industry’s role as an economic driver and source of well-paying jobs.
MetroHartford president and CEO Oz Griebel pointed out that the state’s Department of Labor puts the healthcare sector’s total employment at 266,400 people and job growth over the past seven years at 12.5%.
According to the U.S. Census Bureau, the state’s healthcare sector generated $29.6 billion in pretax revenue in 2012 and has the fifth-highest number of sole proprietorships and the seventh-highest revenues of any industry in the state.
And three of the top 10 fastest-growing companies headquartered in the state in 2014 were healthcare-related.
Keynote speaker Eric Schultz, president and CEO of the nonprofit insurer Harvard Pilgrim Health Care, which expanded into Connecticut in 2014, agreed that healthcare delivery and coverage are major contributors to the local economy.
Policy Issues
Applauding the state’s recent move to postpone the Cadillac tax for two years—as well the decision by Congress to eliminate the health insurance premium tax for one year—he said the tax unfairly burdens states where healthcare is more expensive.
Delaying it, Schultz noted, received “a reasonable amount of bipartisan support” from state legislators.
On the other hand, he expressed concern about three cost drivers: high pharmaceutical prices; fee-for-service (versus fee-for-value) models, which reward healthcare providers for the quantity of visits and procedures rather than the quality of health outcomes; and the rapid consolidation of healthcare providers, including numerous hospital mergers in Connecticut.
Speaking on a later conference panel, U.S. Senator Chris Murphy defended the recent upsurge of hospital and insurance mergers as natural consequences of the Affordable Care Act’s shift “from volume-based to quality-based” care—compensating for positive health outcomes rather than quantity of services.
"We shouldn't be afraid of that," Murphy said, adding that the ACA is “here to stay.”
"Hopefully, we're entering a period of healthcare policy stability coming out of Washington," Murphy said.
High Price Reflects High Cost
Connecticut Bioscience Growth Council chair Paul Pescatello moderated the panel, offering insights into pharma pricing, calling industry investments “enormous,” and noting the long years and often billions of dollars of research and development needed to bring a single drug to market.
He and fellow panelists also pointed out the multiplier effect of the healthcare sector, which directly and indirectly supports jobs in various industries, including manufacturing and construction.
“For every biotech job, you get an additional four jobs in the community,” said panelist Vanessa Procter, senior director of global governmental affairs for Cheshire-based Alexion Pharmaceuticals, which this month is moving its global headquarters to a state-of-the-art, 14-story New Haven facility that combines operational, research, and administrative functions.
Alexion, ranked third on Forbes’ World’s Most Innovative Companies, produces life-transforming treatments for patients with severe and life-threatening rare diseases, including devastating metabolic and genetic conditions. Its drug Soliris treats an ultra-rare blood disorder.
“Our focus is 100% on rare diseases,” said Procter.
An orphan drug, she explained, is defined in the U.S. as a pharmaceutical that treats a disorder affecting fewer than 200,000 people. Alexion targets illnesses that affect fewer than 3,000 individuals.
Procter said it took Alexion 15 years to bring Soliris, which treats chronic hemolysis, to market.
“We need to recoup that," she said. "There is a lot of discussion about price, but not about cost.”
Procter also said that comprehensive corporate tax reform was critical for economic growth, not just for the healthcare industry, but for all industries.
'An Opportune Time'
Pescatello affirmed that tax and legislative reform, intellectual property protection, and infrastructure improvements could go a long way toward strengthening the state’s position as a hub for bioscience by encouraging innovation.
Murphy, who Pescatello noted “had the foresight to see stem-cell research as the foundation for Connecticut healthcare industry,” noted that 10 years ago, Connecticut became the first state to provide a legal umbrella for stem-cell research.
Responding to federal restrictions on the creation of new stem cell lines for research, Connecticut’s General Assembly passed legislation that authorized the use of public funds to finance human stem cell research and committed $100 million over a ten-year span to support this highly promising area of research.
“We were first out of the gate,” said Murphy, a move that helped spur R&D innovation and led to a more robust bioscience industry in the state.
Joseph commended efforts to “shine a light on healthcare as very instrumental in reviving Connecticut’s economic vitality."
"It’s a very big industry, the second biggest behind finance in the GNP, with 266,000 jobs related to healthcare—a quarter of a million jobs," he said.
"But the industry and financing are broken. When you have an industry that large but also broken, it’s an opportune time for innovation.”
It’s an opportune time, he said, to ask, “How do we make the quality of care consistent? How do we coordinate care across the various silos? How do we make it affordable?”
Several organizations and stakeholders, including CBIA and the Connecticut Institute for the 21^st Century, have called for measures aimed at delivering quality healthcare services—for example, through nonprofit private-sector providers—while controlling costs.
Alluding to the state’s current fiscal situation and the potential for bioscience to become a core industry here, Griebel said, “We do have a spending problem in the state. We also have a revenue problem. The healthcare sector can change that.”