Hospital executives are concerned that Republican ideas for ACA replacement options—such as high-deductible health plans and coverage caps—will reduce coverage for hospitalizations, says the former acting administrator of CMS.

Feb. 7—HFMA News this week caught up with Andy Slavitt, the acting administrator of the Centers for Medicare & Medicaid Services (CMS) during the last two years of the Obama administration, as he travels the country to talk to healthcare payers and providers amid a push by congressional Republicans and the Trump administration to repeal and replace the Affordable Care Act (ACA). Slavitt shared what he is hearing from healthcare executives in the current atmosphere of uncertainty, what hospitals are doing in response, and what approach he thinks the Trump administration should take.

The following excerpts were edited for clarity and space.

HFMA News: What are hospital executives telling you that they are doing to position their organizations amid the current uncertainty over federal healthcare policy?

Andy Slavitt: Let’s start by looking at the last couple of years. They’ve been years where—for the most part—margins have expanded because the [ACA] exchange business has been highly profitable. Bad debt has decreased because of Medicaid expansion.

And the effort to move to value-based purchasing and pay for performance is an enormous change-management effort. You’ve got to change your relationship with your doctors, you’ve got to change your relationship with your health plans, you’ve got to contract differently, you need different kinds of data and technology, you’ve got to do outreach to your community, and you’ve got to move stuff from inpatient to outpatient. So it is all-encompassing and requires both strategic investment and financial investment. And that’s been taking place over the last few years.

And then, of course, people are doing all of the normal competing for [market] share and all of the other good stuff that hospitals still do every day. So they have had a period of relative certainty, clarity of the rules, encouragement to grow because the federal government’s said, ‘We’re going to change what we’ll pay,’ and they’ve got a lot fewer people showing up that are bad debt. So, notwithstanding that all of them will tell you about the dozens of challenges that they have—and those are sort of normal challenges—it’s been a period that’s allowed them to invest in their strategic priorities and so forth.

So when they are in a state today, which they would describe as, ‘We don’t know what’s going to happen because we are getting all kinds of mixed signals’—is the ACA is going to be repealed, is it going to be replaced, be delayed, this, that, or the other? And then the stuff you’re talking about replacing it with doesn’t sound like it’s going to pay for people’s hospital stays. You’re going to have high deductibles, you’re going to have limits, you’re going to have caps, you’re going to have all of the things that [the Obama administration] got rid of. And that would put us in a different financial place.

And so, as they’ve been sitting down with their boards, I’ve been asking, ‘Well, what kinds of conversations are you having about that—not only as far as your strategic initiatives but also how you’re looking at your financial commitments, whether it is jobs or capital?’ They have two basic levers:

  • Labor. Most hospitals have pretty high turnover ratios, so it is not hard for them to shrink because burnout is pretty high. So they control that lever pretty well if they decide to reduce hiring or freeze hiring—in some cases they could shrink the workforce by 10 to 20 percent in a given year, just by turning off hiring or getting a little more conservative, and then you can titrate it.
  • Capital projects and capital dollars. Do you want to break ground on something new, or in some cases do you even want to continue with something you started?

I heard qualitatively from virtually everybody—I’ve been talking with big systems, multihospital sites, integrated networks. So I can imagine if you’re talking to a community hospital the concerns are the same, and the degrees of freedom and the calculus are probably a bit scarier because their upper margins are worse (that’s an assumption, but it is born out of some of the conversations with community hospitals that I have had). It’s entirely uncertainty based on Medicaid expansion being part of what is on the chopping block, and [ACA] exchanges, and a repeal plan that doesn’t look good, and then uncertainty around whether there is going to be a continued focus on delivery system reform pieces. I think there will be, but they are unsure if there will be and whether they will be able to continue to invest in them.

HFMA News: So a mix of factors is driving their concerns?

Slavitt: I think it’s uncertainty over repeal. How that uncertainty manifests itself seems a little different depending on the conversation. There are plenty of folks who have said, ‘No, this is about jobs, this is impacting jobs, it’s already affected jobs, it will affect jobs.’ A couple of them have been willing to go on the record about it. And I’ve been organizing conversations around these topics at the request of hospital CEOs, governor’s offices, and so forth to help them understand what’s going on and what they should do.

HFMA News: Could consideration of a hiring freeze be temporary or is it the beginning of a trend?

Slavitt: If I were in the [Trump] administration now, I would create certainty as soon as possible. I would say, ‘Here’s a package of reforms to get us through 2017, 2018, 2019.’ I would take repeal off the table. I would say delivery system reform is continuing. And I would say, ‘We’re going to improve the ACA, and we’re going to use an open, public process. Even if we don’t love everything about the law, we know it’s the law of the land, and we know it’s what everyone has built their book of business around, and it will continue to grow and improve.’

If people [in health care] believed that, if people believed that there was less volatility and there was some sense of direction, I think that could turn around their outlook.

Short of that, I think people are going to be conservative. And in the current state they’re going to be more than a little conservative. They’re going to decrease jobs and hiring. If the administration didn’t say all that but people still believed the odds were less and less likely that there would be a repeal, then maybe that would cause some of them to hire more.

Of course there is plenty of variation. There are some that are deeper-pocketed and have strategic investments and feel like they can ride stuff out, but most of them aren’t in that position.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Tuesday, February 07, 2017