Politicians have dramatically saved the country from falling over the proverbial fiscal cliff with a deal struck as the 2013 New Year’s ball descended in Times Square. Health care benefited with a one-year delay in the scheduled 27 percent cuts to Medicare physician payments. Meanwhile, HITECH stimulus funds are now flowing freely to hospitals, many of which are sitting on huge cash reserves built with the benefit of federal income exemptions. Obamacare remains one year away. Healthcare finances appear rosy at the start of 2013.

Yet Medicare’s fee-for-service incentives continue to promote wild spending concentrated in the last six months of life. HITECH efficiencies in healthcare are a mirage. Neither legislators nor technology has made a dent in the inefficient largess of American health care. The country can simply no longer afford this system.

Healthcare industry leaders need to conceive of some real solutions in 2013 before healthcare really does go over the cliff. Unlimited fee-for-service payment is not viable and must be reformed. The healthcare industry as a whole (patients, providers, and insurers) must realize technology efficiencies that most other industries have enjoyed for 10 to 20 years. Healthcare entities must become accountable for the tax exemptions they receive, demonstrating return of those tax savings to benefit taxpayers rather than sitting on huge cash reserves.

Without real healthcare industry solutions, Medicare payment to physicians will be dramatically cut. The federal government will stop throwing good money after bad in search of technology efficiencies in health care. Hospitals serving large numbers of patients without insurance will suffer the effects of $18 billion in payment reductions under the Affordable Care Act from 2014 to 2020. Federal regulators will vigorously seek recoveries under expanded healthcare fraud and abuse laws. Eventually, legislators may be forced to reconsider the value of tax exemptions in the healthcare industry.

The fiscal cliff episode demonstrates the ultimate problem with American health care: the lack of effective governance at all levels. The problem extends to all quarters: Politicians break from the bitter rhetoric only long enough for the grandstanding delay; hospital executives pad the hospital bank accounts and their own wallets without effective oversight of their not-for-profit missions; insurers inhibit technology efficiencies to ensure their own survival; and patients expect limitless health care without having to pay for it.

To create effective governance, patients, providers, insurers, and politicians need to exercise control over health care in a fiscally responsible and ethical manner. All parties need to participate, and in a vastly different way from how they are participating today.

Scott is a founding partner, Withrow, McQuade & Olsen LLP, Atlanta.

Publication Date: Wednesday, January 02, 2013