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Health Care Reform in 2012: Change Is Inevitable, So Embrace It

By Chris Rivard and Karl Rebay (Partners, Moss Adams)

The Patient Protection and Affordable Care Act is two years old. Is it a success? A failure? Has health care been reformed? Is reform on its way? These are but a few of the questions being asked on the second birthday of this monumental and highly divisive legislation. So what’s the current state of play?

  • Children can no longer be denied coverage because of preexisting conditions.
  • Dependents can remain on their parents’ health insurance plan until their 26th birthday.
  • Most health plans now provide preventive services at no cost to the beneficiary.
  • Health insurers can no longer ban those insured for exceeding lifetime caps.
  • Health insurance exchanges are rapidly being set up in many states—but a number of other states are in a holding pattern, waiting for the federal government to design a program before deciding on their next steps.
  • Surveys indicate agreement among most Americans that these are some of the good things that have already occurred as a direct result of the act. Many other residual changes are also taking place:

    • Collaborative discussions, partnerships, mergers, and acquisitions are occurring at an unprecedented rate.
    • Accountable Care Organizations are being established in all sectors of health care, including:
    • Medicaid ACOs in 10 states
    • Some of the largest health insurers in the country
    • Progressive provider entities
    • Consumers are participating much more in their own health care as they become responsible for a greater share of the cost.
    • Technological innovation is advancing rapidly in many areas, including electronic medical records, patient monitoring, home-based care, and overall access to (and sharing of) information.
    • Health care organizations across the spectrum are realizing the value of accurate data collection and operative decision support functions.
    • Cost is voluntarily being driven out of the system, but quality of care remains paramount.
    • And yet the nation remains divided and confused:

      • The majority of Americans are against health care reform if asked the general question.
      • Forty-five percent of Americans know little or nothing about the Affordable Care Act, compared with 44 percent 18 months ago.
      • Seventy-nine percent support insurance exchanges.
      • Seventy-five percent support financial subsidies to individuals in need.
      • Sixty-nine percent support expanding the Medicaid program so it reaches more people.
      • It’s very difficult to draw definitive conclusions from this data. But, like it or not, change is occurring at a very rapid pace, driven primarily by hurricane-force winds of economic reality. Providers need to face these issues, or they may become casualties of the storm. It could also be wrong—even detrimental—to assume that the Affordable Care Act, or any portion of it, will be dismantled.

        Here’s why: A new president or Congress won’t be in place before January 2013. Assuming change won’t occur immediately, any proposed alteration of the act won’t likely be made until well into 2013, mere months before the significant provisions of the act are scheduled to take hold and long after many provisions have been put into place at significant expense.

        What’s more, the current constitutional challenge to the act is directed primarily at the individual mandate, which is probably ineffective anyway, given the small penalties assessed for noncompliance. And the Supreme Court may be forced to wait until 2014 to rule on the case, thanks to the Federal Anti-Injunction Act, which prevents the court from ruling on legislation before it becomes effective. In addition, as noted above, many of the provisions of the act are viewed positively, and it may be politically damaging to eliminate them.

        And finally, if the Affordable Care Act is struck down, there’s currently no substantive or widely acceptable replacement for it—and going back to the status quo isn’t palatable. A recent alternative plan, proposed by Oregon senator Ron Wyden and Wisconsin representative Paul Ryan, is getting some attention, but the political environment is so polarized that it’s hard to predict what will happen, despite this bipartisan effort.

        The clear and underlying message in all this? Don’t be a spectator. Don’t wait for things to change. Embrace the change. Regardless of the politics, consolidation and integration are occurring and they won’t stop, even with potential changes to reform laws. There are significant opportunities to improve your organization, to improve patient care, and to improve the United States health care system in 2012 and beyond.

        Preparing for Health Care Reform: 10 Things Your Organization Should Be Doing Now

        1. CFOs should be running a model for their facility assuming payment at 100 percent Medicare rates. This is a “stress” test for the facility that will indicate its ability to survive the coming changes and highlight areas where improvements or cost reductions must be made.
        2. Commit to a renewed focus on cost containment and efficiency. Decreases in revenue are surely coming and, regardless of quality improvements, will require a reduction in costs. This is important not only to improve the bottom line of the facility but also to make it an attractive partner to other organizations.
        3. Be very thoughtful with spending and make sure your board is clear regarding any revenue return for new capital investments.
        4. Analyze opportunities for integration strategies, collaboration with other partners, or both. The concepts of bundled charges, integrated delivery models, and managed care are real, and planning needs to begin now.
        5. Consider approaching insurers and proactively renewing contracts to prevent tough negotiations in the next year or two. Possibly offer reductions in pricing now to preempt larger cuts in the future. This might also result in more volume directed to the hospital.
        6. Assume your facility is overbedded and that services will continue to be pushed to an outpatient setting. Plan for greater acuity in existing beds but possibly lower census unless markets can be expanded by collaboration, purchase, or some other means.
        7. Develop a plan to create or maintain an image that draws others to your organization for integration opportunities.
        8. Plan for short-term increases in your own employee health care costs.
        9. Put incentives in your own health plan to promote wellness and prevention, and plan for more government enforcement and intervention in your facility, whether dealing with RACs, Medicaid integrity audits, etc.
        10. Consider taking on risk. Evaluate what this might mean for your facility, your capabilities, and your internal tolerances. It’s not hard to envision a future where the majority of providers are also the insurers.

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