The Republican triumph in the midterm elections has given the GOP control of the House of Representatives. While many people think some parts of President Obama’s health-care reform legislation may be changed, no one believes it will be scrapped completely in the next two years. So a new world of costs and care is here, and the million-dollar question is, can providers survive it?
Signed into law in March, the reform measure’s main goal is to cover the uninsured and expand access. But it is also going to change the way health care is delivered because it concentrates on cutting medical costs and improving quality and safety.
One safe prediction is that reform likely will cost much more than anticipated. The hospitals and health-care providers that adapt to managing cost and reimbursement will be the ones that survive and thrive.
The reforms will move hospitals toward a system under which they receive a set amount, i.e., a bundled payment, for treating a patient’s overall condition, from diagnostics to treatment to rehabilitation. Reimbursement will be based on the care a patient receives from 72 hours prior to admission to 30 days following discharge. In cases where patients must be rehospitalized, health-care providers will not receive full reimbursement.
Under a bundled payment system, industry players will be forced to reinvent themselves as “accountable care organizations” with a much more integrated, coordinated and collaborative approach to patient care. It’s important to realize that this is an entirely different model. The process will have to be streamlined. It will no longer be sufficient merely to get the patient in and out of the hospital.
Health-care institutions already face numerous challenges, such as aging technological infrastructure, personnel shortages, quality of care, customer satisfaction and serving the uninsured. These challenges are compounded by a very competitive health-care delivery system.
The legislation affects hospital revenue in some new ways. It’s true that as the number of uninsured decreases, hospitals and health systems will benefit from reduced charity-care write-offs and bad-debt expense.
However, this will be offset by cuts in Medicaid and Medicare reimbursement. The latter will be trimmed by $155 billion over the next decade, with provisions potentially leading to additional Medicare cuts for less efficient hospitals in high-cost markets.
Hospitals also will face more difficult negotiations with commercial and managed-care insurers who themselves will face increased scrutiny.
Correcting the existing deficiencies within our health-care institutions and re-organizing under a new system will require a significant investment in the effort to cut costs and improve quality of care.
Hospitals with better ties to physicians and other care providers are likely to do better, but many stand-alone, not-for-profit community hospitals may struggle.
Naturally, the new model of care resulting from reform will favor hospital design and layouts that optimize flexibility and operational efficiency. In addition to stronger physician relationships, hospitals will need to either strengthen partnerships with preventative or wellness providers and continue partnerships through post-acute care services or develop their own services. Existing facilities will be restructured and new buildings designed based upon this new patient-centric system in which patients are followed closely across the entire continuum of care.
Likewise, providers will need to be more efficient in terms of staffing and throughput in their emergency departments, diagnostic imaging areas, and operating rooms. Plus, they will need to increase their volume of throughput by arranging these particular departments so they are more functional and efficient. With declining access to capital, the trend toward large replacement hospitals may be a thing of the past.
Most hospitals should be able to navigate relatively unscathed for the next three years as many key provisions do not start until 2014. Also, the changes brought by reforms may evolve. But with so much to be done, it would be wise for providers to start planning now.