The following three issues involve various stakeholders, political forces and industry dynamics. They have proven fascinating to watch.
Health systems are doing well, but facing more criticism. This has been a fascinating first quarter of the year in healthcare. Large health systems continue to do well and are outperforming expectations. Here, the extent of market power seems more important than ever as a factor in results (a subject for another letter). Further, for the first time in recent memory, hospitals and health systems are taking an increased amount of political flak, such as that delivered from author and media mogul Steven Brill (see "America's Bitter Pill"), the website Slate (see, "Hospitals Are Robbing Us Blind") and others. Despite this flak, hospitals and health systems should continue to do well in Washington, D.C. This is, in large part, due to the fact that every congressperson and senator has hospitals and health systems that are absolutely critical employers for their constituents. Thus, there is a huge interest in not financially harming hospitals and health systems.
Hospital outpatient reimbursements are a larger issue of concern. There are increased discussions about reducing rates paid to hospitals for certain outpatient procedures. This has been a long time rallying cry for the ASC industry and certain other outpatient sectors. In essence, the ASC industry argues that ASCs should not get paid less than hospitals for the same procedures. Here, traditionally, surgery centers lobbied to get paid in amounts equal to hospitals at the higher hospital rates. In contrast, MedPAC and the OIG suggest reducing HOPD rates.
The difference in rates has at least four different contradictory impacts and observations. First, the difference in rates may be seen as unequivocally not fair to surgery centers. Second, the difference in rates has, over the long-term, arguably been a much needed subsidy to hospitals. Third, the differential in rates is sometimes used to allow hospitals to do things that don't help competition or the market for services. For example, the addition in rates gives hospitals a great deal of extra money to employ physicians, which changes steerage of patients and the healthcare landscape considerably. Fourth, health systems view themselves as having given up a great deal of money in the grand bargain made as part of Obamacare. Ultimately, their concerns are that they have given up reimbursement in exchange for additional patients through the health insurance exchanges that may not actually materialize.
The long-term number of insured patients added may also depend on the King v. Burwell case. Either way, (1) the addition of people to the insured rolls has not been as substantial as hospitals hoped and (2) hospital system results continue to be extremely strong in many places. It is the long-term growth that maybe hampered if the King decision goes against the Obama administration. In any event, the difference in rates between outpatient procedures performed at hospitals versus surgery centers remains a key component to hospital profitability. As the heat turns up on this issue, we expect that the lobbying for hospitals will increase substantially as this would be a reduction in reimbursement to what was bargained for in the PPACA and would have a significant impact on hospitals and health systems. It is overall a fascinating issue.
The politics of economic growth. A political tenet heard this past weekend as campaigns started to kickoff stated, "We want to provide for economic growth for the middle class." To me, it is hard to make a more disingenuous statement. In my own view, a system can either provide for economic growth or it cannot. You cannot, in contrast, use government to long- or short-term successfully provide for growth of one class over another. I hope at some point a political leader states simply, "We want economic growth and we want it across the board."
Should you have any questions or feedback, please feel free to contact me at sbecker@beckershealthcare.com