Providers consider an uncertain market: Will accepting PPACA exchange plans hurt academic medical centers?

Cleveland Clinic has taken a careful approach to Patient Protection and Affordable Care Act exchange plans. While some providers are accepting all exchange plans, the Clinic has selected a few — four in south Florida and three in northeast Ohio, says Michael McMillan, the Clinic's executive director of market and network services.

The Clinic is also partly participating in some other products, making itself available as a provider of specialty services or high-end procedures. Given the uncertainty surrounding how the exchanges would play out, the organization has approached the PPACA exchange products cautiously, considering which plans would likely garner a reasonable membership and ultimately be successful.

"This is a new marketplace," Mr. McMillan says. "It's a price-sensitive market. I think it's important to participate with the folks who are going to win business."

The public health insurance exchanges have created a couple of areas of concern for academic medical centers, says Janis Orlowski, MD, chief healthcare officer at the Association of American Medical Colleges. On the one hand, insurers' increasing use of narrow provider networks to contain costs gives rise to the worry that academic medical centers will be excluded from the new insurance products without having a say in the matter. "The second concern I've heard has to do with how low the prices are," Dr. Orlowski says. "They are offering rates that are close to Medicaid rates. Those are unattractive to most hospitals. You don't want your business to depend on Medicaid."  

What exchange plans mean for academic medical centers
If exchange plans do in fact opt to pay hospitals and other providers at rates comparable to Medicaid, academic medical centers accepting a large number or all of these new insurance products could end up having to make cuts to compensate.

money"Medicaid rates typically have always been supported by commercial insurance," Dr. Orlowski says. "To have a quote unquote commercial insurance product that now has Medicaid rates, what do you cut out? What are the services, where are the opportunities to trim costs?"

There's also concern surrounding the possibility that the lower prices could make it harder for academic medical centers to maintain rich teaching environments and essential community benefits and services, such as burn centers and trauma centers. Dr. Orlowski says centers accepting all exchange plans could be worse off financially than those that are only accepting a couple of the new plans.

However, in the case of academic medical centers that may have shouldered a large amount of no-pay and low-pay patients in the past, the expanded coverage under the exchanges might prove beneficial, offering reimbursement where these was none before. "It's a glass half full or half empty" in that case, Dr. Orlowski says.

Aside from the anecdotally reported low rates, there's also the fact that most of the plans sold through the health insurance exchanges have been in the bronze and silver metal tiers — approximately 80 percent, according to a March report from Moody's Investors Service. These health plans have very high annual deductibles — as much as $5,000 for individuals and $10,000 for families with bronze plans and $3,000 for individuals and $6,000 for families with silver plans.

Although high-deductible health plans could ultimately encourage patients to take a more active role in their care, they also expose healthcare providers to bad debt, according to Moody's. During the last few years, the shift to more consumer responsibility for healthcare costs through high-deductible plans has coincided with a rise in bad debt, as patients who don't understand their plans end up facing bills they can't pay. In the end, dealing with patients enrolled in high-deductible plans might not be much better than serving the uninsured.

"People are opting into the cheaper plans," says Lynn Carroll, vice president for provider economics at the healthcare reimbursement network PaySpan, referring to the lower premiums characteristic of high-deductible insurance products. In the case of these high-deductible plans,  Mr. Carroll urges payers and providers to enact technology or tools to collect the portion of the payment the patient is responsible for; these tools can include payment plans or advancements of patient responsibility, which would involve the payer taking on the burden of patient payment collection.

Mr. McMillan agrees that both pricing and increasing consumer responsibility for healthcare costs are important factors to consider and will shape the exchange market going forward.

"Pricing is always a concern, and I think, in this marketplace, consumers that go into it are price sensitive," he says. "They're looking for lower premiums and comparing…we'll have to see how that evolves. In the near term, we haven't seen huge pricing shifts, but I think, as this market develops, everyone will have to have a sharper pencil."

How academic providers are tackling the uncertain exchange situation
Although it's still not certain how the exchange marketplaces will develop going forward, the Clinic is considering expansion options for 2015 and 2016. "This is an evolving situation and an evolving marketplace," Mr. McMillan says. "We're watching it very carefully and trying to make sure we ensure access to folks who want to come here."

Baltimore-based Johns Hopkins Medicine is taking a different approach, hoping to participate in all exchange plans. "We want to be open to all patients regardless of insurance," says Patricia Brown, president of Johns Hopkins Healthcare and senior counsel to Johns Hopkins Health System.

Johns Hopkins is participating in the exchange products partly because insurers "piggybacked" off of existing contracts. "The insurer didn't separately come to us and say do you want to participate in our exchange product," she says.

Johns Hopkins isn't concerned about exchange plans paying lower hospital rates. The state has the nations' only all-payer hospital rate regulation system, which means Maryland sets the rates and all third parties pay the same rate.  However, lower prices could be a concern for physicians. Most payers haven't tried to negotiate separate rates for their exchange products yet, that could "very well be something that they try to do," Ms. Brown says.

Still, it would likely be difficult for insurers to get providers to agree to lower rates, due to a lack of leverage. "The number of patients that are currenlty in the exchanges are insignificant compared to other patient population…that's going to be a very difficult negotiation for a payer to succeed in," she says.

Overall, questions such as whether health insurers will create narrow provider networks (potentially incentivizing providers to accept lower rates in exchange for more volume as part of a select network) could have a significant impact on the insurance marketplace. For the time being, however, Johns Hopkins intends to continue along its current path. "Right now, I think that we're going to stick to what we do," Ms. Brown says. "We're just going to maintain our mission-driven approach to healthcare, which is we do everything we can to make ourselves available."

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