PPACA Upheld: 8 Issues Hospitals Should Keep in Mind Moving Forward

In a historic 5-4 ruling, the Supreme Court decided to uphold the Patient Protection and Affordable Care Act, which means hospitals and health systems must continue to stay on top of pending healthcare reforms.

Here, Sanjay Saxena, MD, partner in Booz & Company's North American Health Practice, shares eight issues hospitals and health systems need to take note of as the PPACA continues.

1. Health insurance exchanges are coming fast. Under the PPACA, states need to either implement a health insurance exchange or HHS will sweep in and establish one by January 2014. Health plans have spent a fair amount of time working on how to adapt to bending consumer-driven health insurance exchanges written into the PPACA. Health systems and hospitals will likewise need to define their exchange strategies, according to Dr. Saxena.  

"I don't think most health systems are ready or have really thought about what exchanges will mean for their business," Dr. Saxena says.

2. Medicaid expansion will depend on the individual states. One of the important distinctions in the Supreme Court's ruling is that Congress cannot withhold all funding from states that opt out of Medicaid expansions called for the in Affordable Care Act. Congress can only withhold new Medicaid funding from states that comes from the PPACA.

"Given that Medicaid expansion is now a state-by-state issue, it will be important for hospitals to know if their state will opt-in," Dr. Saxena says.

If states decide to not take more money from the federal government to expand Medicaid for the uninsured, they may be left with hundreds of thousands of people uncovered. And that would mean hospitals and health systems would not receive the added reimbursements anticipated from the Medicaid expansion in that state.

The best bet is for hospitals to assess what the Medicaid expansion will mean in their individual state. Some conservative states could decide to opt-out of Medicaid expansion, even though funding called for in the PPACA pays in full for the first few years of states' Medicaid expansions.  

3. New payment and care models will move ahead rapidly. Some providers were arguably playing the waiting game to see how the Supreme Court would rule on the PPACA before implementing major changes.

But the waiting game is over, and hospitals and health systems need to prepare for changes ahead. Both payment and care delivery models are expected to continue changing, as hospitals and health systems prepare to offset some of the funding cuts written into the PPACA.

Accountable care organizations will likely continue to move full-steam ahead, as well as patient-centered medical homes and bundled payment models. Dr. Saxena expects to see the shift from fee-for-service to outcome-based payments happen pretty aggressively. Providers will need to shift to fee models better supported in the PPACA.

"Some leading  systems have been taking a wait and see attitude," Dr. Saxena says. "They can't do that anymore."  

4. Physician 'land grabs' may increase dramatically. Driven by the fact that clinical integration is necessary for new payment models, health systems and hospitals will likely continue to partner or acquire more physician groups, Dr. Saxena says.

"These could be either exclusive partnerships or outright buys of physician groups," he says.

Now that the healthcare industry knows the PPACA stands, Dr. Saxena predicts a ramp up and acceleration of physician "land grabs."

5. Upticks in horizontal integration. Some hospitals won't be able to integrate care and service lines alone and will need to partner with other systems, which is already happening. Community hospital systems may not have the necessary assets to achieve clinical integration.

"When they do the math, they will find it's more attractive to part of a larger system that has the necessary resources," Dr. Saxena says.

It may be very difficult for smaller hospitals to implement data analytics, acquire and partner with more physicians, as well as redesign care delivery models alone.

"All these things are very expensive and pretty difficult for standalone community hospitals to be able to pull off," Dr. Saxena notes.

6. Health plans will move more aggressively into care delivery. Insurers moving into care delivery will likely include virtual integration and joint ventures, Dr. Saxena says.

Virtual integration could include more robust health information exchanges and information technology solutions that help the health plans and providers save money.

Joint ventures will likely take the form of ACO partnerships between payors and providers, as well as health insurance companies lending capital to systems. For example, Aetna partnered in a joint venture with Virginia's Inova Health System to sell health plans.

"In some cases, we will continue to see health plans acquire components of the care delivery system," Dr. Saxena says.

There are already examples of other payor-provider deals, including Highmark's acquisition of West Penn in Pittsburgh, Humana's purchase of Concentra and WellPoint's purchase of Medicare Advantage plan provider, CareMore Health Group.

"I think we will see more of these partners, but of all different flavors," Dr. Saxena says. "Health plans will do this for diversification reasons, but also to stress affordability, which they'll need to stay competitive in new health insurance exchanges and existing employer-sponsored insurance markets."

7. Large physician groups may be in the driver's seat. Some physician groups will sell their practice to either hospitals or other physician groups. Physician may also find that large organized medical groups are a better option for them, Dr. Saxena says.

"In selected markets across the country, you'll likely see these groups get bigger," he says. "They will be in a position to run the ACOs, as well as manage the integration."

Some large medical groups may even have the scale and specification to purchase capacity from hospitals and health systems, Dr. Saxena adds. Other medical groups are attractive to payors and may continue to align with health plans.

"Medical groups may be in driver seat and the hospital will effectively be the vendor group for selected services in some places," he says.

A recent Leavitt Partners white paper on ACO growth found that, while a majority of ACO ventures are hospital-led, the rate of physician-led ACOs is increasing at a faster rate.

8. Expect care delivery models like no one has ever seen before. From mid-level care to virtual care to group care, healthcare delivery models have been evolving. Dr. Saxena expects more of this. He also anticipates more widespread care delivery evolution.

Beyond innovative care delivery model ideas spreading across hospitals and health systems, Dr. Saxena predicts an influx of delivery models never before seen, fueled by the need to create lower-cost, high-quality care.

Additionally, new players may get into the care delivery game. Drug retailers such as Walgreens and CVS have already begun offering clinical care, and Dr. Saxena predicts similar moves in the future. Other consumer companies may also get skin in the care delivery game.

"Not only will you see models you've never seen but new entrants who have different ways of innovating and essentially trying to serve a market the existing players have had difficulty doing in the past," Dr. Saxena says.

More Articles on the PPACA:

20 Healthcare Leaders React to the Supreme Court's Decision to Uphold the PPACA
Supreme Court Upholds Healthcare Reform Law
AHA's Rich Umbdenstock: PPACA Ruling Gives Hospitals 'Much-Needed Clarity'

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