Four things hospitals are fretting while health legislation hangs in limbo

As the Senate heads out to the July 4th break with no vote on their health care bill, hospital leaders continue to pursue strategies to care for more uninsured patients and higher instances of chronic disease while pursuing financially resilient business initiatives. Here are four things they’re fretting this holiday, and two efforts likely to gain momentum no matter which way legislation moves.

1. Tax cuts will likely set off a spiral of cost increases: Many people don’t realize that the various taxes baked into the Affordable Care Act, and now on the chopping block under the proposed House and Senate bills, are a self-funding mechanism to pay for the cost of health coverage for more people. More uninsured people Less preventive care  Sicker people seeking costlier care  Bankrupt hospitals.

The tax dollars ensure hospitals and other providers get paid for at least some of the care they provide, if not 100 percent. And the provision of insurance coverage helps route people into the health care system earlier so caregivers have an opportunity to manage them before they become high risk/high cost.

Strip out those taxes, and the funding mechanism for the coverage goes away. There’s nothing in the House or Senate bill to replace that—hence, the bottom falls out and the country has 22 million more without insurance. With no one putting those dollars back on the table, providers are asking themselves how they’ll care for a growing number of uninsured, and how to provide for those with bare-bones insurance plans that might bankrupt those who can’t afford their $5,000 deductible.

2. If they provide insurance, they’re likely to consider raising rates this year: The attempt to repeal and replace the Affordable Care Act is coming at an extremely awkward time of year for hospitals that offer individual health insurance coverage through their own health plans. Health plans need to set their rates around this time in order to meet all regulatory deadlines and to be ready for open enrollment this Fall. With continued uncertainty around key provisions of the ACA (Will the individual mandate be enforced? Will the government fund the Cost Share Reduction program to reduce out-of-pocket costs?), many plans will have little choice but to hike rates as a precaution against this uncertainty.

3. The silver tide could drown them...especially rural hospitals: Many U.S. care providers’ primary source of predictable financial margin is patients with commercial insurance. By comparison, they tend to break even on Medicare (perhaps) and lose money on Medicaid. This is why providers who offer their own health plans have been so interested in the commercial markets and health exchanges of late.

Right in the middle of the projected 22 million that could lose coverage in the coming years are the baby boomers, who will be aging out of commercial plans and into Medicare in droves. This shift alone could put those hospitals already operating on thin margins at risk of complete failure. The combined uncertainty with the ACA plus the silver tide of baby boomers creates instability for virtually all provider systems and most do not have good solutions to address this challenge. Cost and quality can be tackled to some degree by implementing value-based care approaches—if they’re well executed—but systems need a leader with that vision, adequate capital to try new things, and, probably, willingness to find a third-party partner to help them get there quickly. Urban systems with strong balance sheets may be able to weather the coming storms but many rural systems may not survive.

4. Their doctors are getting older, too: The bulk of our practicing doctors and nurse practitioners are baby boomers. More than one-third will be 65 or older in the next decade, according to the Association of American Medical Colleges; the same report cites a 2016 Physician Foundation finding that 47 percent of physicians plan to accelerate their retirement due to changes in the health care system, up from 39 percent in 2014. Very few systems today are adequately focused on building a sustainable 2025 clinical workforce along with the infrastructure they will need to attract the talent they’ll need by that point in time. Team care is the only way we will have enough capacity to care for the baby boomers, so this is the era in which we need to transition and incent value-based care in scalable, team-oriented operating models.

In Pursuit of Resilient Business Models
Some business approaches will gain momentum as health systems and physician organizations seek out “no regrets” initiatives that are resilient to legislative and demographic shifts.

Patients could see more co-branded health plan partnerships: In search of greater control over payer reimbursements, many provider organizations will seek to take on more accountability for value-based care. Once providers that have invested in population health and clinical engagement platforms, they need both risk-based payer contracts and delegation of key care management responsibilities so that the financial benefits accrue to them. Outside of select geographies like California, there have not been many viable options to increase upside potential beyond CMS’ Next Generation ACO program or the relatively rare provider-sponsored health plan that has been successful.

While some providers are “partnering” with national commercial payers, many remain skeptical that incentive and strategy conflicts with traditional payers can be overcome. For this reason, we expect to see a trend toward a new breed of provider-centric payers who support co-branded health plan partnerships and empower providers to succeed under value-based reimbursement. These new payers will manage the traditional health plan administrative functions but be far more transparent with providers and seek to radically reduce the money that goes into health plan administration today.

Doctors will begin to predict the future rather than trying to treat the past: With Medicaid cuts on the horizon and the likely need to treat more uninsured patients, pressure will increase to keep high-cost patients out of the hospital in the first place. But in focusing on health care’s “frequent fliers”– those who have multiple hospitalizations within a year—providers new to Big Data have been targeting high-touch interventions to the wrong high-cost populations.

Predictive data modeling can now show that the individuals driving the bulk of a population’s health costs this year aren’t the same people who will be high users next year. Such predictive models will increasingly challenge health practitioners’ assumptions on where to focus population health outreach initiatives and provide incentives for community investment in pre-care initiatives that address social determinants of health such as access to transportation, safe housing and affordable medication.

Regardless of what policies are enacted at the federal and state levels in the future, the health systems and provider organizations that will thrive will be those that find innovative ways to use integrated financial and clinical models to improve the health of the communities they serve. Putting politics aside, this is the health care reform that we desperately need.

Ken Wood is Senior Vice President, Health Plan Development, for Evolent Health, which supports leading provider organizations in gaining the operational scale, financial partnership and clinical capabilities they need to improve health outcomes and lower cost for patients at both the individual- and population-level.

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