With Donald Trump as the new commander in chief, the healthcare industry is in the midst of many changes. In order to survive as a managed care organization, it’s important to stay on top of policy changes and reimbursement trends, such as those related to Medicare, Medicaid, and the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). Healthcare executives also need to know if trends, such as consumerism and consolidation, will continue as is or change course. Industry experts weigh in on what to watch as the year unfolds.
Trump’s presidency has already brought and will continue to bring a flurry of activity and discussion around healthcare policy. Pathways exist for Congress and the administration to repeal many key elements of the Affordable Care Act (ACA) quickly. “But developing and enacting a replacement will be much more difficult,” says Ankur J. Goel, partner, McDermott Will & Emery. “We may see a second effort at healthcare reform but with Republicans in charge of developing the replacement and from a different starting point with Medicaid having been expanded in many states, millions of individuals with subsidized coverage, and consumer protections for individuals purchasing insurance in the individual markets. Republican efforts to enact a replacement will need to take the current landscape into account—as well as assemble the necessary votes.”
Bob Atlas, president of Epstein Becker Green’s consulting affiliate, EBG Advisors, says that beyond repealing many key elements of the Affordable Care Act, Trump and the Republican-controlled Congress may look to reshape Medicaid and Medicare into more of a defined contribution for the federal government. For Medicaid, this means converting federal financing to block grants or per capita spending caps. For Medicare, it may entail a shift to more of a premium support (or voucher) approach that would have the effect of moving most beneficiaries into private plans.
The impending ACA “repeal and replace” is likely to put an end to Medicaid expansions. But states do see its value to their citizens and their economies, including many states governed by Republicans. One way Medicaid expansion might survive is if Republicans insert “personal responsibility” features of the nature found in Indiana, where then-Gov. Pence led an expansion effort. Personal responsibility in this context translates to participant cost sharing, incentives for healthy behaviors, and work requirements.
Also, some ACA provisions must stay in place for other laws to operate, Atlas says. For example, MACRA, enacted in 2015 with strong bipartisan support, can only work if the “advanced alternative payment models” (APMs) spawned by ACA, such as accountable care organizations, continue. And then there are technical provisions of the ACA that aren’t visible to the public but matter a lot to the healthcare industry, such as the payment formula for Medicare Advantage plans.
To prepare for big policy changes, Atlas advises anticipating what may be coming and modeling how it could affect your organization and its key stakeholders. “While right now there is no certainty about the shape of legislation, there are proposals from conservative groups that could be the basis of new policy,” he says. “Sketch out possible scenarios, then prepare action plans for different potential outcomes. Then get going. For some, action will mean advocating early and assertively in the political arena. For most executives, action also means tailoring the healthcare organization’s strategy and tactics to suit the new, altered reality. Waiting and hoping it won’t affect you is not an option for a responsible healthcare leader.”
Louis J. Goodman, PhD, CAE, executive vice president and CEO, Texas Medical Association, and past president, Physicians Foundation, does not expect many significant changes in physician payment in the first quarter of 2017.
One reason is that MACRA final rules provide for a one-year transition with a minimal data submission requirement. Goodman does, however, expect major challenges as physician payment migrates to value. “The 2017 MACRA Quality Payment Program (QPP) transition year will be a critical year for physicians and healthcare executives preparing for full implementation of the QPP in 2018,” he says. “Additionally, decisions will need to be made on which track to report Medicare data: Merit-based Incentive Payment System (MIPS) or APMs.”
Goodman believes physician organizations will express strong dissatisfaction with the current bonus and penalty structure of QPP as they continue to advocate for reduced regulatory burden, restoring the ability of physicians to own hospitals, national professional liability reform, and additional protections for private practice.
On another front, a significant national reimbursement issue is the current recommendation by The Medicare Payment Advisory Commission to combine Medicare Parts A and B—especially considering that hospital costs are attributed to total physician spending under value-based systems that employ population management technology, Goodman says.
Another reimbursement-related issue that Valerie Barckhoff, principal and practice leader for Healthcare Advisory Services, Windham Brannon, foresees in 2017 and beyond is organizations’ readiness for bundled payments. The proposed rule on CMS’ new episode payment models has a go-live date of July 1, 2017. “This will be a significant data analytic opportunity for healthcare organizations as they will have unprecedented access to healthcare data across the continuum,” she says. “The need to understand the episode spend and identify opportunities to reduce Medicare’s costs to improve an organization’s profit margins are critical in 2017.”
Regardless of any changes, Philo Hall, associate, Health Care and Life Sciences, Epstein Becker Green, says providers working with public and private payers can expect to face either lower fee-for-service rates or more demands to take risk (e.g., capitated payments, APMs), or both. “Executives should be cautious to not take on risk for costs that are outside of their control and therefore seek partners who can help them increase efficiencies and spread risk,” he says.
Goodman says technology will play an ever-increasing role in healthcare delivery; strong oversight of electronic health record vendors and the reliability of their reporting to governmental and non-governmental entities can make the difference between penalty and bonus payments in the new MACRA environment.
In one stroke of a pen the ACA changed health plan leaders’ views of their total imaginable market. “Suddenly, their market became everyone in the market,” says J Pegues, managing director, Huron. “With the doors of opportunity wide open, health plans have sought out potential target plans as they looked to merge local markets and corporate operations. The search for the right target includes rigorous analysis of a plan’s local market demographics and share of that market, competitors, economics, and leadership.”
Pleasing shareholders, strategic leverage, and increasing scale are among the key reasons why consolidation in health plans is occurring. “Shareholders have an endless demand for growth,” says Christopher Kane, principal, DHG Healthcare. “Strategic leverage is a blunt force. If a large health plan has significant geographic coverage, it expands its opportunities and a contract may become essential for the area’s hospitals and physicians.”
Regarding scale, for the past 20 years health plans have been designed to compete on price. “The primary factor in achieving any market’s lowest cost position is its ability to acquire the raw materials to provide service at the lowest cost,” Pegues says. “The more members a health plan has, the greater the ability to drive the best deal with care providers and the greater likelihood the plan can achieve the lowest cost position.”
So how will Trump’s presidency affect consolidation? Gil Irwin, partner, Strategy&, a member firm of PwC, expects the trend toward consolidation to continue. “There are significant market pressures, particularly since the ACA was passed—including pressure on margins, a need to innovate and respond to changes in the marketplace, and access to capital,” he says. “If done well, consolidation can bring access to new markets (as well as any products or services that a plan may provide), as well as access to a plan’s capabilities, capital, and its pool of investing capacity.”
Although it has yet to be seen whether the new administration will be friendlier to mergers, Trump is clear that he wants less regulation, so Irwin thinks the country will become more merger friendly.
“If Trump makes it a more open market, that will drive the healthcare industry to become more scale sensitive and lean toward consolidation,” Irwin says. “If it becomes easier to sell insurance across state lines, that will also promote consolidation.”
Healthcare consumerism shifts the focus of healthcare-related experiences from providers, payers, and other players in the healthcare industry to the end user—the consumers. Joseph V. Sabatina, CPA, director, PricewaterhouseCoopers LLP, says the rise in consumerism has occurred, in part, as a result of the value-based care transition and the focus on population health and longitudinal care. The increase in high deductible health plans and the resulting cost shift to consumers has also played a large part. As a result, consumers are demanding more education, more accurate information, more value-based options, and more transparency.
Rohan Kulkarni, MBA, vice president of strategy and portfolio, Conduent, adds that the rise of health insurance exchanges and patient engagement initiatives also play a role.
Cost and quality of care are top considerations for consumers when selecting a healthcare provider. In fact, according to research from Xerox, at least 50% of millennials said they delayed treatment due to cost concerns.
What’s more, advancements in technology have created consumer expectations for on-demand, everywhere access to everything from banking to booking airline tickets, to buying shoes to ordering takeout, Kulkarni says.
Like those who work in the retail industry, executives can embrace this trend by adopting a consumer-centric approach to providing healthcare-related services, Sabatina says.
Further, “Organizations should analyze their charges and modify them so the result is a reasonable and defensible charge structure that can be publicized in the marketplace along with providing front-end price capabilities in an effort to attract patients who shop for select services,” Sabatina says. He advises having call centers to address patient inquiries regarding charges, patient out-of-pocket costs, and payment-related issues. Likewise, the ease in which a patient can be apprised of the registration process, scheduling availabilities, costs, and financial counseling all help to provide a favorable patient experience.
Sabatina also advises thinking outside the box regarding patient convenience. It’s important to provide ease of access, such as web-based patient portals for patients interested in cost information, scheduling procedures, accessing financial counseling information, making payment inquiries, and making payments. More innovative solutions worthy of consideration are mobile technologies via smartphones, tablets, and so forth that allow access through handheld devices. “All of these efforts toward providing a patient-centric experience build trust and loyalty, and ultimately win customers,” he says.
In addition, Kulkarni says payers need to communicate with their members throughout the year, and not just by mailing flyers or emailing information without taking relevancy into account. “They should follow up on active patients and encourage their patient population to meet preventive needs in collaboration with their payers,” he says.
Lastly, payers should make consumer engagement a metric that they track along with profitability. “We are at an inflection point; those that make the cultural shift will win both the race to the financials and the health outcomes for their membership,” says Kulkarni.