Healthcare Reform: The Good, The Bad, and The Ugly (Part 3)

I spent the last two posts talking about the good and then the bad aspects of the new healthcare reform bill. I want to close this discussion today by addressing the significant changes ahead which can be viewed as opportunities or, more realistically, challenges. These challenges may not truly be ugly, but they will certainly require that hospitals adjust how they do business. Changes extend beyond the delivery system to concern tax exempt status and pricing transparency.

First the delivery system changes. We have long complained that the current system rewards volume and not outcomes. Well both Medicare and Medicaid are now shifting to value based payment systems. Unfortunately the approach will be largely punitive such as not reimbursing for readmissions or hospital acquired conditions rather than rewarding true high value providers. Also, as the system goes forward, hospital payments will be initially withheld and then released only after the hospital shows quality improvements from the prior year or attains defined quality benchmarks. By FY2013, hospitals with higher than expected readmission rates for certain diagnoses will have their payments reduced substantially. CMS expects this alone to save them over $7.1 billion over a ten year period. By FY2015, the same thing will apply to hospital acquired conditions.

The intent is to radically reshape the healthcare delivery system. There will be pilot programs to test bundled payments to providers and create accountable care organizations both of which are intended to promote further collaboration between physicians and hospitals. Again, this would be a positive development if the payment approach was not strictly punitive in nature.

Hospitals need to be aware that their tax exempt status will continue to be challenged under the new legislation. It will require them to conduct a community needs assessment and report annually on their actions to address these needs including reaching out to charity care patients. There must be a publicized a financial assistance policy which meets federal requirements and collection efforts can only proceed after reasonable efforts to see if the patient qualifies for charity care.

In closing, it is imperative that hospital be prepared for the changes coming. First of all they need to understand the legislation. These three posts only scratch the surface of the legislation. As you wade through the pages and pages of change, you will see that some of it is good, some bad and some downright ugly.

More on this later.

Mark Brodeur