In August, MX.com surveyed approximately 1,000 health system executives and found that nearly two-thirds — 62 percent — were either uncertain or held a negative view about health insurance exchanges (often abbreviated as HIXs) and their impact on health systems.
In the haze of health reform legislation, it is clear that a majority of senior executives have yet to see the promise that HIXs may offer to health systems.
HIXs will introduce dramatic changes to the insurance marketplace: 29 million people — subsidized or not — will eventually get insurance through these platforms. When enrollment begins in late 2013, hundreds of billions of dollars will start to flow through the exchanges.
If current reform legislation remains in place, HIXs will emerge as a new insurance marketplace for employers, small business employees and people who purchase individual/family health insurance. Ultimately, exchanges should help to lower premium rates, administer income-based subsidies, simplify plans and offer a comparison of benefits.
The ongoing political battles over healthcare reform have cast a fog of doubt at both state and national levels. More than half the states appear to be active in developing exchanges at present, but regardless of state-level decisions, the federal government intends to establish and operate HIXs as the default plan. Many states may initially defer to federally administered exchanges, but chances are they will eventually take over management for greater policy and administrative flexibility.
At this point, many respondents are concerned about the impact that HIXs will have health systems. During interviews with executives, several voiced questions about whether exchanges would accelerate commercial payments down to Medicare levels — or lower. Although most executives said they welcome better coverage for their communities, they also worry about another financial straw on the proverbial camel's back. In fact, much of the negative sentiment about HIXs was linked to the financial uncertainties. This is not surprising: In this environment, health systems face real revenue changes and the financial consequences are difficult to predict.
Given the challenges that senior health system leaders face, we've outlined five potential benefits that may not be immediately obvious.
1. Positive financial impact
It's impossible to grasp the full impact of a major new element in the payor environment, but some health systems executives are already anticipating a positive impact on their organizations. Odds are, many health systems will actually experience positive financial benefits resulting from the increase in insured patients and the shift of existing patients from Medicaid to exchanges.
It's important to factor in the full range of publicized estimates about the number of employers who will drop coverage and "push" their employees into the exchanges at lower rates. In fact, many health systems think these rates will be much lower than they receive now in the commercial market, which will offset the financial benefit health systems may gain from the newly insured.
Our careful review of these estimates told a slightly different story. Our assessment led us to conclude that, unless the worst-case scenarios of these estimates prove true, the majority of health systems will actually be better off.
2. Greater demand for services
Since the 1970s, virtually every study on improved health insurance access has shown that greater coverage results in an increased demand for services. Coverage will change the loci of care and increase the number of provided services. As more people are insured, subsequent physician referred services and procedures will rise; this may be one of the few sources of new inpatient admissions. Administrators can project the impact on inpatient, ED, outpatient and physician components of today's health systems.
3. Windows to innovate
HIX can fuel innovation and health system entrepreneurship. Recently, Tufts Medical Center and Vanguard in Boston announced one of the first new provider-based health plans in some time. The announcement didn't specifically reference the Massachusetts HIX, but clearly a large system in a major market could capitalize on an exchange's ability to reduce the enormous up-front cost barrier to market entry. Likewise, Sutter Health System in Sacramento, Calif., just announced a similar step.
4. New price negotiation arena
HIXs will not set health system payment rates, but will allow participating insurers — and most do intend to participate — to negotiate better rates. Negotiation is the key and the result could enable health systems to create competitively-priced products within the exchange. Subsidies on HIXs are tied to lower-priced products. After years on the sidelines, narrow and tiered networks may rejoin the marketplace.
5. Emerging business opportunities
By anticipating the impact of HIXs, some health system leaders will be able to create or seize business opportunities. For example, HIXs may foster an "exchange hothouse" environment that leads to ACO-based insurance partnerships — a goal for many health systems.
Joseph Davis, PhD, an economist and healthcare strategist, founded Medimetrix Group in 1987, which now includes Medimetrix Consulting, MX.com (the Medimetrix Solutions EXchange), Spirit of Women and HeartCaring. In the 1990s, Mr. Davis and Medimetrix helped establish several early forerunner models of today's HIXs in various states as well as many provider-sponsored health plans. In 2010, Davis founded MX.com, an H2H hub with numerous online resources for hospitals and health systems. The site features an extensive inventory of free or low-cost clinical and management solutions developed by leading medical institutions including Duke Medicine, Johns Hopkins Medicine, Partners HealthCare and many others.
In the haze of health reform legislation, it is clear that a majority of senior executives have yet to see the promise that HIXs may offer to health systems.
HIXs will introduce dramatic changes to the insurance marketplace: 29 million people — subsidized or not — will eventually get insurance through these platforms. When enrollment begins in late 2013, hundreds of billions of dollars will start to flow through the exchanges.
If current reform legislation remains in place, HIXs will emerge as a new insurance marketplace for employers, small business employees and people who purchase individual/family health insurance. Ultimately, exchanges should help to lower premium rates, administer income-based subsidies, simplify plans and offer a comparison of benefits.
The ongoing political battles over healthcare reform have cast a fog of doubt at both state and national levels. More than half the states appear to be active in developing exchanges at present, but regardless of state-level decisions, the federal government intends to establish and operate HIXs as the default plan. Many states may initially defer to federally administered exchanges, but chances are they will eventually take over management for greater policy and administrative flexibility.
At this point, many respondents are concerned about the impact that HIXs will have health systems. During interviews with executives, several voiced questions about whether exchanges would accelerate commercial payments down to Medicare levels — or lower. Although most executives said they welcome better coverage for their communities, they also worry about another financial straw on the proverbial camel's back. In fact, much of the negative sentiment about HIXs was linked to the financial uncertainties. This is not surprising: In this environment, health systems face real revenue changes and the financial consequences are difficult to predict.
Given the challenges that senior health system leaders face, we've outlined five potential benefits that may not be immediately obvious.
1. Positive financial impact
It's impossible to grasp the full impact of a major new element in the payor environment, but some health systems executives are already anticipating a positive impact on their organizations. Odds are, many health systems will actually experience positive financial benefits resulting from the increase in insured patients and the shift of existing patients from Medicaid to exchanges.
It's important to factor in the full range of publicized estimates about the number of employers who will drop coverage and "push" their employees into the exchanges at lower rates. In fact, many health systems think these rates will be much lower than they receive now in the commercial market, which will offset the financial benefit health systems may gain from the newly insured.
Our careful review of these estimates told a slightly different story. Our assessment led us to conclude that, unless the worst-case scenarios of these estimates prove true, the majority of health systems will actually be better off.
2. Greater demand for services
Since the 1970s, virtually every study on improved health insurance access has shown that greater coverage results in an increased demand for services. Coverage will change the loci of care and increase the number of provided services. As more people are insured, subsequent physician referred services and procedures will rise; this may be one of the few sources of new inpatient admissions. Administrators can project the impact on inpatient, ED, outpatient and physician components of today's health systems.
3. Windows to innovate
HIX can fuel innovation and health system entrepreneurship. Recently, Tufts Medical Center and Vanguard in Boston announced one of the first new provider-based health plans in some time. The announcement didn't specifically reference the Massachusetts HIX, but clearly a large system in a major market could capitalize on an exchange's ability to reduce the enormous up-front cost barrier to market entry. Likewise, Sutter Health System in Sacramento, Calif., just announced a similar step.
4. New price negotiation arena
HIXs will not set health system payment rates, but will allow participating insurers — and most do intend to participate — to negotiate better rates. Negotiation is the key and the result could enable health systems to create competitively-priced products within the exchange. Subsidies on HIXs are tied to lower-priced products. After years on the sidelines, narrow and tiered networks may rejoin the marketplace.
5. Emerging business opportunities
By anticipating the impact of HIXs, some health system leaders will be able to create or seize business opportunities. For example, HIXs may foster an "exchange hothouse" environment that leads to ACO-based insurance partnerships — a goal for many health systems.
Joseph Davis, PhD, an economist and healthcare strategist, founded Medimetrix Group in 1987, which now includes Medimetrix Consulting, MX.com (the Medimetrix Solutions EXchange), Spirit of Women and HeartCaring. In the 1990s, Mr. Davis and Medimetrix helped establish several early forerunner models of today's HIXs in various states as well as many provider-sponsored health plans. In 2010, Davis founded MX.com, an H2H hub with numerous online resources for hospitals and health systems. The site features an extensive inventory of free or low-cost clinical and management solutions developed by leading medical institutions including Duke Medicine, Johns Hopkins Medicine, Partners HealthCare and many others.