HFMA VIEWS

Please put your seats in the upright position, because it looks as if healthcare reform is building momentum to take off in the early days of the Obama administration. This week’s announcement that former Sen. Tom Daschle (D - S.D.) has been tapped as the new Secretary of Health & Human Services was just the latest indicator that the president-elect--as well as Congress--is serious about major reform.

The Caucus blog on the New York Times reported that a bipartisan group of powerful senators gathered in Sen. Edward Kennedy’s (D - Mass.) office on Wednesday, Nov. 19, to plot a major push to reform health care in the next Congress. This meeting, “coupled with President-elect Obama’s selection of Mr. Daschle, sent the clearest signal yet that Democrats will press ahead on health care reform despite a bad economy,” said the blog post. Meanwhile, the web site for the Obama transition team identifies “Providing Health Care for All” as one of five items on the short-list agenda on its home page.

For those of you who might be thinking “here we go again,” there are other signs of change in the air. America’s Health Insurance Plans has said that if there were an individual mandate for health insurance coverage (i.e., required universal coverage), it would support a requirement that insurers guarantee coverage of people with pre-existing conditions. As noted in the Wall Street Journal (subscription required), this is a switch for a key interest group, reversing the insurance industry’s “long-time opposition to rules that bar the common practice of weeding out customers who are likely to rack up too many bills.” The article also notes that, for different reasons, business groups, labor unions, consumer groups, doctors, and hospitals could all benefit from universal (or even near universal) coverage.

If everyone gets on board, we may reach cruising altitude shortly.

Healthcare finance professionals may have felt like singing along with Billie Holiday this week, seeing “no sun up in the sky” as a series of revised outlooks from Moody’s Investors Service forecast conditions turning from stable to negative across most healthcare sectors. In addition to changed outlooks for for-profit and not-for-profit hospital sectors reported in HFMA News, the outlook was also downgraded for the U.S. medical products and device sector and for health insurers, as reported in The Wall Street Journal’s Health Blog. Stormy weather indeed.

All this news arrived on the heels of last Friday’s report from the American Hospital Association that U.S. community hospitals enjoyed record profits in 2007. Have things really changed so quickly? Not necessarily, suggests an analysis by Ken Terry on David Hamilton’s Health Care Industry blog. Terry notes that, notwithstanding the report of record profits, almost one-third of U.S. hospitals lost money on operations in 2007. And the record profits that some hospitals enjoyed came from returns on investments in the stock market that, needless to say, will not be matched in 2008. Adding to the gloom are reports of softening volumes of paying patients and a rise in uncompensated care.

Is there any sunlight breaking through the clouds? One ray of hope was in Moody’s comments on the outlook downgrade for the for-profit hospital sector. “We continue to believe that the U.S. for-profit hospital sector is less directly impacted by the economic environment than other corporate sectors,” stated Moody’s vice president and senior credit officer Dean Diaz. "Although not immune from a downturn, there's a certain level of necessity to hospital services that helps to sustain demand.”

In other words, things could be worse. But let’s all keep our umbrellas handy.

The election is over and attention is already turning to when and how the new Obama administration will take on the issue of healthcare reform and what the implications will be for the healthcare industry.

A story in today’s HFMA News reports on a special comment released by Moody’s Investors Service looking at the credit rating implications of the Obama healthcare reform proposal for various sectors of the healthcare industry. The good news for providers is that Moody’s sees a generally credit positive impact for them resulting from increased volumes and lower numbers for unreimbursed care.

Meanwhile, much attention has focused on the state of Massachusetts, which has been experimenting with healthcare reform that has led to near-universal coverage over the past two years. The Obama reform proposal has drawn many of its details from the Massachusetts plan, so the successes and challenges that Massachusetts has faced in implementing its plan suggest what might lie ahead on the national stage.

An article in this week’s Boston Globe notes that after two years, the healthcare reform initiative in Massachusetts is still a work in progress. Much has been achieved--including a 97 percent coverage rate of the state’s residents. But the reform has required many detailed and delicate negotiations among the state’s healthcare stakeholders. Recently, state legislatures decided to postpone a requirement that small businesses cover more of their employees. All of this suggests--to no one’s surprise--that healthcare reform will not be accomplished as a “first 100 days” initiative of the new administration.

Looming over the entire question of healthcare reform is the already staggering cost of the economic bailout plan that was passed by Congress earlier this fall. There are substantial costs attached to the Obama plan (an estimated $1.17 trillion from 2010 to 2019), and the nation may well be approaching its limit on what it can afford to do.

The momentum and desire for healthcare reform is nonetheless there--it consistently ranked as one of the top issues of concern to voters. What do you think are the chances of reform? Let us know by posting your comment below.