The new landscape of U.S. health care has yet to be determined—and many of us believe the uncertainty about what form it will take will linger for many months to come. Current policy making clearly is aimed at lowering the federal share of the cost to fund insurance programs, and many envision a swing back to the “bad old days” of higher bad debt and charity care as a result.
While sobering to consider, such a result might be the “new normal” we need to ponder. Health care is expensive, and so far, the insurers bear the brunt of media exposure for the high costs. As I mentioned in my April Healthcare Matters column, providers may be flying under the radar of public scrutiny for only a limited time. We, as leaders in the industry, need to start looking at how to get our figurative house in order before the spotlight moves to providers, as I predict it soon will. However, in doing so, we will need to consider moving around the parts of our enterprises, which will require us to contemplate our partnerships in delivering patient care. As leaders of hospital organizations, we need to think about the value of our physician partners as we look to become more efficient and to present a defensible cost proposition to the marketplace.
Effectiveness of the ACO Experiment
If we consider that the “experiment” with accountable care organizations (ACOs) launched by the Affordable Care Act has yet to really take hold, it seems to me that we are still an industry in want of a different organizational model. We see recent evidence that the Medicare Access and CHIP Reauthorization Act (MACRA) has given physicians an extra push toward the ACO model. But we still need to find ways to better organize care to improve affordability for the consumer while delivering better care.
Physician employment models seem of interest in many markets for some specialties, but I would argue employment arrangements are not going to help providers work cost-effectively with respect to high-cost specialist care, where we may have the greatest exposure to unfunded-care losses. The incentives between institutional and physician providers have changed very little since as far back as 1982. Our high-cost specialties continue to thrive in a fee-for-service world, where physician financial success can lead to financial ruin for hospitals that operate in value-based models. What incentive is there for a physician to coordinate care or discharge resources to keep a readmission from happening? Looking at many markets, I would be hard-pressed to come up with an answer.
A Possible New Focus
But perhaps there is an answer. Health plans and consumers are becoming increasingly focused on the value proposition in health care. Specialty care and hospital care are big cost exposures all around—for the consumer and the insurer. Why not look for ways to get hospitals to partner with specialists to expand bundled payment experiments that seem to be working in orthopedics? Why not open a dialogue between the emergency department (ED) and on-call specialists to identify cost savings for the uninsured?
Certainly, cutting ED cost exposure could be a big opportunity if the Congressional Budget Office is even close in its estimates of the increased number of uninsured arising from passage of the Senate’s Better Care Reconciliation Act (BRCA), the latest healthcare legislative initiative of congressional Republicans. That’s not even considering that affordability is getting tougher for consumers in current individual-insurance markets. Any retrenchment in Medicaid funding will make that line of business tougher to operate in as well. What if we started to think of the bundled payment relationships we develop in Medicare and with some health plans as a way to cut our cost risk among the uninsured and in Medicaid? The underpinnings of cost containment and care coordination would be the same with an uninsured patient or Medicaid patient, wouldn’t they?
So we could benefit from reexamining our bundled-pricing arrangements and looking for ways to get our same partners to help reduce costs to the uninsured. Yes, this approach would require our health plan partners to foot the bill for free care, just as it would the hospital, but I suggest that partnerships are made for better and worse.
Perhaps hospitals could lead the effort to organize this new approach and disseminate some cost-reduction incentives to physicians. After all, hospitals will spend the money on uninsured care one way or the other. And hospitals must remain price-competitive to attract bundled-pricing deals and sustain them. So perhaps we could benefit from creating incentives for our partners to work with hospitals to prop up the entire team.
The Solution: Bundling for the Uninsured
Fragmentation in the care of the uninsured—just like in care of the insured—increases overall costs and reduces quality of care. And it contributes to repeated ED visits and readmissions, which have the greatest impact on hospitals and specialists. By this reasoning, setting a cost-reduction target and creating a gain-sharing program helps all in the bundled payment team. I could envision a shared budget for uninsured care that, if managed in the same way as insured standard bundled payment, would align incentives to help all participants in the bundle better manage the risk we must face.
We do a good job of using data and care protocols to reduce costs to live within bundled payment constraints. We stand to benefit from doing the same thing with a focus on the uninsured. Moreover, by measuring team performance in reducing costs for both the insured and uninsured, we should be able to obtain great marketing data to use in negotiating with insurers to expand market share in those high-cost lines of business.
Preparing for a Looming Challenge
Not to sound like a pessimist, but the prospect of a rise in the number of uninsured in U.S. healthcare markets seems likely in the short term. Even if the Republican effort to pass the BRCA or a similar bill fails, the failure of many insurance exchange markets, premium increases in ongoing markets, and the direction of the administration in declining to enforce ACA mandates add up to a recipe for increased risk from caring for a larger uninsured population. Provider organizations will need to be creative to maintain margins with that potential adverse impact on revenues. It may be time to expand our revenue-producing arrangements to optimize our nonrevenue (or non-collection) business. Seems like a quintessential “win-win” scenario, doesn’t it?
Jeff Helton, PhD, FHFMA, CMA, CFE, is associate professor, health care management, College of Professional Studies, Metropolitan State University of Denver.