Health reform will present many challenges for hospitals in the coming years. This will be a tumultuous period for our industry. Organizations that find their way through it will be the ones that have developed new ways of doing things. They will learn how to be smarter, perform better and, I believe, even prosper.
One imminent change under the new law involves reduced Medicare payments for hospitals. Medicare reimbursements will fall, as will Disproportionate Share Hospital funding for uncompensated care. This drop in funding will no doubt be tough on hospitals that have a comparatively high Medicare payor mix and DHS payments, such as my own. At Heartland Health, Medicare makes up nearly 50 percent of income and uncompensated care makes up 5 percent.
Hospitals are supposed to recoup these losses by getting more paying patients, because an estimated 32 million previously uninsured people will begin to get coverage under the new law. But just receiving more patients won't ensure a hospital's survival. To get through the next few years, we are all going to have to become more efficient and do more with less.
Accountable care organizations
Changes in payment methodologies will prompt hospitals to grow accountable care organizations, which align hospitals with physicians and others to provide the full continuum of care. This prospect really intrigues me. Basically, it means that a health system will have to become involved in all manner of care, including outpatient care, home health and hospice. It may mean directly hiring more physicians. Health systems will be held accountable for quality outcomes and they will likely have some sort of financial risk for managing these outcomes and the cost.
Hospitals and regulators are just starting to define how an accountable care organization would function. In the next two to three years several pilots will emerge, and leading health systems will be working on a definition. Health systems will have to create a model of seamless delivery and coordinate care among many different venues in an efficient way that sustains high levels of quality. It's a tremendous opportunity to do things in a better way and to improve the health of people in our country.
Here are a few other thoughts about health reform.
Medicaid will become bigger and better paying. About half of the newly covered will be on Medicaid. While Medicaid provides needed coverage for a lengthy hospital stay, these new recipients may have difficulty getting access to physician care. There is a shortage of primary care physicians in many parts of the country and many physicians have closed their practices to Medicaid because it has been paying low reimbursements. These physicians either don't take Medicaid at all or they have put a limit on how many Medicaid patients they can afford.
The new law sets out to improve Medicaid patients' access to physicians — for the next few years, at any rate. It brings Medicaid reimbursement to primary care physicians up to Medicare payment levels and raises it even higher in rural areas, to the level of Medicare plus 10 percent. However, this change is limited to only the next three or four years.
People with preexisting conditions will be protected. The law gradually eliminates insurance companies' ability to deny coverage based on pre-existing conditions. It starts by financing new insurance exchanges that should make it easier and more economical for people not covered at work to purchase individual policies. It eventually places a ban on denials of coverage based on pre-existing conditions.
Lifetime coverage limits will be thrown out. I applaud a provision in the law that disposes with limits on the amount of coverage insurers provide. Policies with a $1 million lifetime cap on coverage are not uncommon and they are a real problem. For a premature infant, it is possible to reach half of that limit just in the first few years of life.
Undocumented residents will have no coverage. The bill does not address coverage for undocumented residents, meaning that hospitals with high levels of undocumented residents will have extra financial hurdles. This will be a major problem in states like California, Arizona and Texas.
Mark Laney, MD, became president and CEO of Heartland Health in St. Joseph, Mo., in 2009. Previously he was president of Cook Children's Physician Network in Fort Worth, Texas. He is a pediatric neurologist who received his fellowship training at Mayo Clinic. He received his MD degree from University of Texas Medical Branch and graduated from the pediatrics residency program at the University of Arkansas.
One imminent change under the new law involves reduced Medicare payments for hospitals. Medicare reimbursements will fall, as will Disproportionate Share Hospital funding for uncompensated care. This drop in funding will no doubt be tough on hospitals that have a comparatively high Medicare payor mix and DHS payments, such as my own. At Heartland Health, Medicare makes up nearly 50 percent of income and uncompensated care makes up 5 percent.
Hospitals are supposed to recoup these losses by getting more paying patients, because an estimated 32 million previously uninsured people will begin to get coverage under the new law. But just receiving more patients won't ensure a hospital's survival. To get through the next few years, we are all going to have to become more efficient and do more with less.
Accountable care organizations
Changes in payment methodologies will prompt hospitals to grow accountable care organizations, which align hospitals with physicians and others to provide the full continuum of care. This prospect really intrigues me. Basically, it means that a health system will have to become involved in all manner of care, including outpatient care, home health and hospice. It may mean directly hiring more physicians. Health systems will be held accountable for quality outcomes and they will likely have some sort of financial risk for managing these outcomes and the cost.
Hospitals and regulators are just starting to define how an accountable care organization would function. In the next two to three years several pilots will emerge, and leading health systems will be working on a definition. Health systems will have to create a model of seamless delivery and coordinate care among many different venues in an efficient way that sustains high levels of quality. It's a tremendous opportunity to do things in a better way and to improve the health of people in our country.
Here are a few other thoughts about health reform.
Medicaid will become bigger and better paying. About half of the newly covered will be on Medicaid. While Medicaid provides needed coverage for a lengthy hospital stay, these new recipients may have difficulty getting access to physician care. There is a shortage of primary care physicians in many parts of the country and many physicians have closed their practices to Medicaid because it has been paying low reimbursements. These physicians either don't take Medicaid at all or they have put a limit on how many Medicaid patients they can afford.
The new law sets out to improve Medicaid patients' access to physicians — for the next few years, at any rate. It brings Medicaid reimbursement to primary care physicians up to Medicare payment levels and raises it even higher in rural areas, to the level of Medicare plus 10 percent. However, this change is limited to only the next three or four years.
People with preexisting conditions will be protected. The law gradually eliminates insurance companies' ability to deny coverage based on pre-existing conditions. It starts by financing new insurance exchanges that should make it easier and more economical for people not covered at work to purchase individual policies. It eventually places a ban on denials of coverage based on pre-existing conditions.
Lifetime coverage limits will be thrown out. I applaud a provision in the law that disposes with limits on the amount of coverage insurers provide. Policies with a $1 million lifetime cap on coverage are not uncommon and they are a real problem. For a premature infant, it is possible to reach half of that limit just in the first few years of life.
Undocumented residents will have no coverage. The bill does not address coverage for undocumented residents, meaning that hospitals with high levels of undocumented residents will have extra financial hurdles. This will be a major problem in states like California, Arizona and Texas.
Mark Laney, MD, became president and CEO of Heartland Health in St. Joseph, Mo., in 2009. Previously he was president of Cook Children's Physician Network in Fort Worth, Texas. He is a pediatric neurologist who received his fellowship training at Mayo Clinic. He received his MD degree from University of Texas Medical Branch and graduated from the pediatrics residency program at the University of Arkansas.