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InsideHIGPA is pleased to welcome guest blogger Bruce Vladeck, who served for four years in the mid-1990s as the Administrator of the Health Care Financing Administration of the U.S. Department of Health and Human Services (now CMS), where he directed Medicare and Medicaid. Mr. Vladeck is currently Senior Advisor to Nexera, Inc., a wholly owned consulting subsidiary of the Greater New York Hospital Association.
Despite continuing efforts to derail or dismantle the Affordable Care Act (ACA) in Congress and the Courts, implementation moves forward apace. Even as current negotiations over federal deficit reduction - precipitated by Congressional Republicans using the need to act on the federal debt limit by August to force budget cuts - contain the very real threat of further, extremely damaging reductions in Medicare and Medicaid spending, delays or reversals in ACA implementation do not appear to be seriously on the table.
January 1, 2014, the critical date in the ACA, when insurance coverage is expected to become available to millions more Americans, is still, of course a very long time away in political terms, and anything could happen, especially in next year’s election, or in the courts. But health care providers should assume that ACA implementation, with its extension of health insurance coverage to as many as thirty-five million currently uninsured residents, is the best case. Given the continuing – perhaps accelerating – deterioration in private health insurance markets and the near-inevitability of future Medicare and Medicaid cuts, the demise of the ACA would like produce still more of a financial squeeze on hospitals than its implementation.
Question: What are the next major steps for health reform implementation? What are the biggest implementation challenges looming on the legislative and regulatory landscape?
The health insurance expansions and reforms at the heart of the ACA are built around health insurance exchanges, a new (but not unprecedented) marketplace for individual and small-group private health insurance. The ACA contemplates that one or more health insurance exchanges in each state will be created by state governments, with the fallback of federally-operated exchanges if the States fail to act.
To date, the majority of states have taken no action to create exchanges, either because of ideological opposition to the ACA among state political leaders, or simple political paralysis. Given all the complexities and competing pressures on the exchanges, even those states that have already begun implementation, such as California and New York, face a very tight time frame to begin operations within the next year or eighteen months in order to be able to go live in the Fall of 2013. One can only anticipate a lot of last-minute scrambling and improvisation in 2013 if the states don’t start acting much more aggressively.
With all this uncertainty in the political/policy environment, how can hospitals and other provider organizations possibly plan for the future? What strategies make sense in such an environment?
The only certainty amid all this turmoil is that per-service revenues for hospitals are not going to grow at historic rates, or in some cases at all, for quite some time to come. The cuts to Medicare and Medicaid in the ACA are clearly just the ceiling from which both Democrats and Republicans are seeking further reductions; private insurers in the large-group market are already pushing back harder on provider rates and will be under increasing pressure to do so in the next few years, and the general expectation is that private insurance plans sold through the exchanges will be very bare-bones. Hospitals may be able to increase revenues in the near future by expanding market share or assuming risk for the health of their patients across a broader spectrum of services, but expense reduction will need to be the primary strategic imperative in almost all instances.
Where does the health care supply chain fit in? There are two answers to this question, one painfully obvious, the other more subtle – but perhaps more important in the long run. In the first instance, expenses for purchased goods and services are one of the few places hospitals can control spending in the short run, and if done carefully, can reduce expenses without adverse effects on patient satisfaction, the quality of care, or community perceptions. But simply implementing first-round supply savings will not be sufficient. The more sophisticated aspects of supply chain management, including careful analysis of supply spend by clinical category using comparative benchmarks, and value analysis – particularly involving physician preference items - will need to be central to broader processes in which hospitals reconsider and reconstruct their basic production processes. Just doing the same old stuff a little more efficiently will not be sufficient; to survive in the environment they are likely to be facing over the next decade, hospitals are going to have to fundamentally re-engineer and restructure their care delivery processes. Supply chain management will need to be at the center of that transformation.
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