As I ponder what might be in store for us in the coming years, it is apparent to me that the Affordable Care Act (ACA) is only one of several forces bringing significant change our way.
We are operating in an environment of unprecedented uncertainty caused by the convergence of four powerful forces: the ACA, the budget crisis facing most governments, Americans actively seeking greater value in health care, and unprecedented political polarization. These forces will have numerous effects on the industry; following are just some of the challenges I see ahead.
Timing of changes. Most of the major provisions of the ACA do not take effect until Jan. 1, 2014, including the individual mandate and state insurance exchanges. The ruling by the U.S. Supreme Court that the federal government cannot mandate that states expand Medicaid has created financial uncertainty for hospitals in states electing against expanding Medicaid. Many hospitals will continue to provide charity care to those individuals who would otherwise have received coverage under this provision. However, as of today, the ACA alone has not yet had much impact on our business.
Revenue impact and focus on quality. One of the major challenges for providers in the next few years will be adjusting costs per unit of service to meet significantly lower payment levels as well as the assumption of significantly more financial risk. However, the market is seeking value, so a focus on quality remains essential. The good news, in my view, is that quality always brings down costs!
Innovation in payment models. We will eventually be required to adjust from the current volume- based payment system to one that rewards quality and lower costs. Rather than waiting to see what happens, or resisting these changes, providers should aggressively work to change their relationship with insurers and employers and work collaboratively with them as partners.
Relationships with physicians. Hospitals and systems that can focus on tighter integration with physicians, both employed and non-employed, will be better prepared to assimilate to new business models and adjust to the evolving landscape.
Innovation in care delivery. Innovation in care delivery, such as the expansion or upgrade of certain key areas and facilities, is essential to the success of many organizations. However, not all innovation requires large capital outlays. Process improvements in care delivery and coordination often lower costs while yielding major improvements in care and the patient experience without significant up-front costs.
On the bright side. Rapid industry change invariably creates opportunity. People will still need hospital services, no matter how much patient care improves or payment levels decline. Despite the challenges that lay ahead, providers should identify their strengths and capitalize on the opportunities that will undoubtedly present themselves in the coming years. All we need to do is have courage and conviction to make the hard decisions when the going gets tough.
Publication Date: Friday, March 01, 2013