Reform Praised, but Change Still Rocky

When the Patient Protection and Affordable Care Act was passed in March of 2010, the predicted outcomes ranged from nirvana to looming disaster, but two years from full implementation of the law known as ObamaCare, Greater Madison health providers feel pretty good about their position even though they know the impact will include less revenue over the next decade. Citing their ability to deliver better access to health care at a lower cost, made possible by efficiencies of integrating hospital, clinic, and insurance, and acknowledging that changes had to be made, many of them believe it has put the spotlight on all health care providers and insurers to do a much better job. "The reality is that the rising cost of health care is not sustainable," said Dr. Craig Samitt, president and CEO of Dean Health System. "There isn't going to be more revenue."


Smoother transition

In an area dominated by provider-run health plans – Meriter-Physicians Plus, UW Hospitals and Clinics, Dean-St. Mary's, and Group Health Cooperative – the transition to full Affordable Care Act implementation in 2014 is likely to be smoother than most. However, prepping for 2014 and beyond does pose business challenges for local providers, who operate with different degrees of integrated delivery between facilities, doctors, and insurers.

Dr. Frank Byrne, president of St. Mary's Hospital, expects the ACA to result in $30 million to $40 million less revenue for SSM Health Care Wisconsin hospitals, including St. Mary's, over the next nine years. But he hastened to add that it's worth it to accommodate the necessary change of reimbursing providers for quality of service rather than volume.

Byrne said the hospital industry agreed "in general" to support $155 billion in reimbursement reduction over 10 years to advance health care reform. The main reason hospitals supported the cuts, Byrne said, is that the status quo was not sustainable, and with the expanded (nearly universal) insurance coverage made possible by the Affordable Care Act, "we could get out of the cost-shifting mode, where we charge the people who've been paying more for the people who can't – in exchange for the reimbursement cuts.

"We continued to support expansion in coverage because increased access to health care coverage is good for people, it's good for families, it's good for communities," he added. "We know that people who don't have insurance seek care later and have worse health outcomes."

Now in a transitional phase in which reimbursement already is being reduced by government payers, Byrne said hospitals will have to make up for lost revenue by continuing to drive efficiency. That means moving care, where appropriate, to the outpatient setting, where it's less costly and more efficient than hospitalization, and through the deft use of technology like electronic medical records, which health care executives believe can be used to reduce variation in care delivery among providers.

"It's a much smoother transition for the integrated delivery systems, where physicians and hospitals are collaborating and focused on patient needs and actually keeping people out of the hospital," he said. "I'm not saying it's going to be easy, but we're in a position to address it."

Byrne said the health care industry has entered a period of capital scarcity in which capital projects will require extra scrutiny. St. Mary's will lean on its foundation to help raise money for projects that truly improve care, noting that it has raised $1 million for a suite of rooms for the families of hospitalized children.

Not everyone is sanguine about the transition to full implementation. Donna Katen-Bahensky, president and CEO of UW Hospitals and Clinics, would like to have more answers about the Affordable Care Act's impact on reimbursement. UW also is paying a lot of attention to how well it will perform under an outcome-based reimbursement model (aka value-based purchasing), which is predicated on 22 quality metrics.

"They haven't told us how we're going to get paid yet," she said. "We don't know whether it's going to be fee-for-service or some version of that. We have seen the impact of value-based purchasing, but even that has not been well defined enough.

"Right now, because of our quality metrics, we actually don't do too badly on value-based purchasing."

An even bigger concern than the Affordable Care Act is the so-called "Super Committee" in Congress, which is mulling $320 billion in proposed Medicare and Medicaid reductions over the next 10 years. As proposed, Katen-Bahensky believes it takes a disproportionate share from teaching hospitals because it will take a big chunk out of indirect medical education, which is what UW Hospitals and Clinics is reimbursed for the cost of its teaching programs.

"It takes longer for students to learn," she explained. "They order more tests because they don't know yet and they are learning. It costs more to have them here in the environment, so they try to make up for that by providing additional compensation for indirect medical education. That may well be eliminated."

Jim Woodward, president and CEO of Meriter Health Services, said providers are being pressed to become what is known in the industry as an integrated delivery system, where they work collectively with medical staff, hospitals, and insurance companies in the local market to create a system that looks at how care is provided, to remove variability in care among providers, and to look for ways to reduce the cost of care to offset the reduction in reimbursement from government payers. This will, hopefully, result in lower premiums to employers and individuals.

Meriter is in the process of "developing and rapidly becoming an integrated delivery system," he said. It has developed the Meriter Medical Group, now comprised of about 100 employed physicians, to partner with physicians from UW Medical Foundation and independent physicians to build a new model of care delivery. He called the group a clinical integration organization that will collaborate on removing variability in care and reduce the cost of providing care.

As part of the clinical integration, the group will examine community data on how care is delivered for various conditions and see if there are any qualitative differences, such as better results with a given medication, that should be adopted as a uniform standard. "Can we agree to develop a clinical protocol around that with our physicians using that data to say, 'This is really a best practice, and let's pilot that and see if it really works?'" Woodward said. "If it does work, then the goal would be to keep patients well, to keep them out of the hospital, and we lower cost of care to everybody – the patient, the employer, the insurance company, and the providers."

Would you like an exchange?

Mike Mohoney, president and CEO of Physicians Plus Insurance Corp., said Wisconsin is ahead of curve nationally in terms of addressing care delivery, the financing of health care, access, and cost. Due to a combination of employer-provided insurance and state and federal health programs, roughly 95% of the state's population has health insurance coverage. "The access issues here are nowhere near what they are in other parts of country," Mohoney said. "With things like covering preventive care requirements, we all pretty much had the kinds of coverages that incent and enable preventive care. The obvious idea is you keep people healthy and don't get into those chronic conditions that are so devastating and expensive."

But even with that, there has been a bump in cost for all insurers – one to two percentage points of premium – to cover some of the enhanced benefits under the Affordable Care Act, Mohoney said.

One aspect of the law that insurers are preparing for is the heath insurance exchange, which for them will represent a very different business model. States have been charged with setting up the exchanges, which will allow small groups and individuals to search in one location for information on various insurance benefit plans. This level of health care consumerism is one way the Act could help bend the cost curve downward.

In preparing for the exchange, insurers know they will have to fight for every piece of business they already have, but Mohoney sees no difference between that and the competitive landscape that already exists locally. "The exchange simply is going to be a more centralized vehicle to do that," he observed. "Every small group and every large group is extremely competitive in terms of trying to retain and win that business on a long-term basis. The exchange, in my opinion, will have a slightly increased impact on that. It's already very intense, and that's good for the consumers."

Larry Zanoni, CEO of Group Health Cooperative of South Central Wisconsin, said the key to having access to the exchange is preparing the GHC website to become operational in the landing zone, where organizations set forth the reasons they should be the health plan of choice for small groups and individuals. "That gets into our treatment structures, benefits as required by the law, and having quality and accessible care available to the members," said Zanoni, who compared the exchange to other consumer-oriented sites. "It's a whole new method of choosing health insurance in Wisconsin. We have been meeting with vendors to get the IT infrastructure ready."

The main worry Zanoni has is whether the exchange will require out-of-state insurers to operate in the same regulatory environment that Wisconsin companies, or domiciled insurance companies, are required to. Zanoni likened competing against non-domiciled insurers with fewer regulatory requirements to traditional retailers having to compete with Internet-only retailers, which are not always required to collect and submit state and local sales taxes. "We compete very well when we're all working under the same rules," he said.

Turning up the health care heat

The Affordable Care Act is not without its critics. They cite ongoing legal challenges to the provision that requires Americans to buy insurance or face a monetary penalty, a dispute that is headed for the U.S. Supreme Court, and they blast the waivers that have been given to various organizations.

Whether or not the ACA survives in its present form, Meriter has chosen to proceed as though some pieces will live on. "We believe there will be a need to keep some of the key tenets of the health care legislation such as removing variability in care, and reimbursing on value and not volume, trying to keep people well, and managing chronic disease differently so we keep people out of the hospital," Woodward said. "That is where the incentives are going to be and that's where we must change the care model. It's incumbent upon us to make that change regardless of what the government says."

Mohoney noted the Act did not contain many specific components to address cost, but he believes it's indirectly having that affect. The ideal, he said, is to have health care inflation rise at about the same rate as overall inflation in strong economic times. "I personally think the ACA will be a good thing because it's putting the heat on the industry as a whole," Mohoney said.

Katen-Bahensky reeled off a number of advantages to not focusing solely on financial reimbursement. "My personal feeling is that if you spend all the time focusing on money, it's probably not going to work out for you," she said. "If you focus on the quality and a very high-quality patient experience and patient satisfaction, you're better off because it's ultimately going to reduce your costs because people will take better care of themselves, they will be part of the process, they will pay attention to what's going to happen upon discharge, and they will get engaged in their own cost management and their own medical management."

Sign up for the free IB Update – your weekly resource for local business news, analysis, voices, and the names you need to know. Click here.