Not long ago I would roll my eyes whenever a futurist or consultant would say healthcare was undergoing the greatest period of change in its history. It seemed like people were always talking like that. Now, this has truly come to pass.
We are seeing a challenge to the business models we have come to know and love for all these years. The stand-alone hospital, the solo doctor, fee-for-service medicine, bad customer service, ignorance of evidence-based medicine, apathy about medical errors — all of that is headed for extinction, and fast. 
It is being replaced by a focus on quality and value through population health management delivered through integrated delivery networks. Some health systems are even revisiting a strategy from the 1990s and acting more like payers by starting health plans to achieve true integration of the system of care. On the other hand, some payers are entering the provider realm and buying medical practices.
Many people attribute the disruption we are seeing to the Patient Protection and Affordable Care Act. There is certainly some truth to that. But change goes much deeper. Overturn the reform law, and you still have disruption staring you in the face regardless of what goes on in Washington.
The problem is not whether we need health reform; it is what kind of reform. To date, the PPACA has been plagued by poor design, poor execution and spectacular political missteps, amounting to a failure of basic competence and oversight.
But having been observing healthcare as long as I have, I can say the current furor over the botched rollout of the healthcare exchanges and the many delays and obfuscations around coverage mandates is not unprecedented.
If you were around when Medicare rolled out, you would have thought it could never survive the onslaught of opposition from physicians, hospitals and free-market supporters. Similarly, only 26 states adopted Medicaid when it began in 1966; Arizona didn't enter the program until 1982. After Congress approved the Children's Health Insurance Program in 1997, it was several years before every state made it available. And you may remember that Medicare Part D and Medicare Advantage raised quite a ruckus only 10 years ago.
So there is some hope, but I actually think the biggest potential pitfalls of reform are still to come. One is that the means to pay for the coverage expansion through subsidies and Medicaid hasn't really begun to pan out yet.
This year alone, at least 900,000 people may enroll in Medicaid via Healthcare.gov in 26 states. The way in which they have chosen to pay for it is a series of significant Medicare cuts that have not yet begun to occur. When they do, there will be another round of disruption and discontent, and another round of political anxiety. It may not mean the program will fail, it just means it will continue to be an issue long into the future.
In addition to the Medicare cuts, reimbursement rates under the exchanges do not appear any more ample. The Advisory Board Company has found that reimbursement rates under the typical exchange plan are a single-digit point above Medicare reimbursement rates, which generally cover only 85 to 95 percent of costs.
High-deductible health plans, which make up a majority of those offered on the exchanges, will also place a huge new collection burden on hospitals. Historically, hospitals' recovery rate for collections has ranged from 18 to 30 percent, meaning organizations will need to significantly upgrade their collection capabilities. This means bad debt will increase as margins from patient care shrink. Hospitals will see increased severity of their patient populations, fewer with commercial coverage and tougher negotiations with folks in the commercial insurance world.
All of these cost pressures are pushing hospitals and health systems toward radical redesigns of clinical processes and operating structures. Most are aligning along the continuum of care and bringing physicians on board. Whether through employment or contractual means, exclusive relationships with a high-performing group of clinicians unafraid of risk, receptive to team-based delivery and accomplished in the use of clinical and administrative IT is the most difficult challenge facing hospitals.
In the era of population health and accountable care, integrated delivery networks will have to engage patients in their care. Many providers, and not a few health insurers, are forming accountable care organizations. In fact, I would argue that this is a much bigger story than industry consolidation, and one of the true potential success stories in reform. It represents a real leap of faith on the part of providers and payers alike.
Retail clinics also present a wealth of opportunity for health systems and hospitals, many of which have been eying consumer-facing primary care with great interest. Moving forward, hospitals will have to cater to consumer demands in an unprecedented way as more take on the costs of their care.
Then there is technology. Reducing costs by making the best use of resources and improving clinical quality often involves technology. In Utah, Intermountain Healthcare is using savings from its ACO-like model of care, known as shared accountability, to invest in telemedicine infrastructure in every single inpatient room and ambulatory exam room, which will allow consultations with any physician in the system.
I ask you to begin to think about something: Payers and providers battle each and every day of the year over contracts and claims. Narrow networks are the latest weapon in the fight. And yet, we are already seeing a blurring of the lines over who is a provider and who is a payer.
Look at how both sides are working together on ACOs, for instance. Maybe this is the time to find even more ways bridge this divide between payer and provider, with positive ramifications for costs, quality and, most importantly, for patients. Joining forces to form a more cohesive system that provides evidence-based, coordinated care for populations instead of volume-based, disjointed care to the sick — to me, that's a once in a lifetime opportunity.
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