Time to Start Looking Deeper at the Impact of Healthcare Reform

As President Obama today signs the new Healthcare Reform Bill passed by the House, the Internet is still buzzing about our future because of this. Republicans are vowing to stop it before it starts and Democrats are saying it is the greatest change in healthcare since Medicare. Conservatives are saying the sky is falling and liberals are saying it is not enough but at least its a start. Whatever it is, its here and probably here to stay in some form or another. So it is time to look deeper at the ramifications of reform and prepare for our future in healthcare delivery (and payment).

Obviously the first priority is to focus on quality improvements and cost efficiencies. We are entering the era of the value provider not necessarily the large provider. I have addressed this issue in a number of previous posts. But to really thrive in the future, the strong value providers will adapt in other areas as well. So today and in upcoming posts I would like to address some of these issues.

The first area I would like to address is bundled payment. In the near future it appears that the reimbursement model for hospitals will include physician reimbursement in one bundled payment. This has some very positive implications for efficiency. No longer will we have conflicting incentives of fee for service physician payment incentivizing longer length of stay against the DRG payment to hospitals incentivizing the opposite. But this also presents challenges to hospitals to work with their physicians on income sharing arrangements like they have never done before.

Your first reaction to this might be like mine; its time to get more aggressive in employing physicians. In fact many of you are already doing this and the new docs coming out of residency largely prefer this arrangement. Of course they also want a life style with shorter work hours and less call than the previous generation. This is where the rub comes in. It is not enough just to have physicians under some level of more control as employees. You must have a relationship that aligns your incentives with theirs, and that is the challenge.

This will be compounded by the fact that the physician shortage is getting worse. According to the American Hospital Association the demand for primary care physicians is outstripping the supply and will leave us with a shortage of as many as 65,000 primary care physicians within five years. Healthcare reform will only make this number bigger as those who were previously uninsured take advantage of their new status. A similar shortage will develop with specialists partially because of the shrinking reimbursement in these areas.

So before bundled payments become the standard reimbursement arrangement, hospitals have a lot of work to do aligning themselves with their physicians. The key according to Ken Mack, a prominent healthcare consultant is to capture their minds as well as their pocketbooks. There are arrangements that are working and I will discuss some of these tomorrow.

More on this later.

Mark Brodeur