Election Impact on Integration Strategies

Similar to the marketplace right before the passage of the Patient Protection and Affordable Care Act (“Healthcare Reform”) there seemed to be a pause in healthcare providers making any strategic moves as providers waited to see what would happen with the Election. In the second quarter of 2010, following the signing of the Healthcare Reform Act, billions of dollars of acquisitions and transactions occurred. Now that the Election has been decided, healthcare providers are slowly, but surely changing strategic plans and establishing clinical integration models. Because the Healthcare Reform Act will likely be implemented quickly, healthcare providers must evaluate how they deliver care. In 2013 reimbursement models will change and in 2014 the insurance payor sources will transform. Therefore, providers can no longer wait and see what will actually happen, but must act now to be ready for the changes on the near horizon.

One main focus for providers is the redesign of Medicare and Medicaid reimbursement. The Healthcare Reform Act intends to reduce the costs of healthcare and ensure that millions of uninsured individuals have access to insurance. One plan to reduce reimbursement is to provide bundled payments for episodes of care. Therefore, all providers involved in a patient experience will receive one payment. Another model is to require specific quality benchmarks to be achieved in order for the provider to receive a share in the savings attained from a clinically integrated model of delivering services. Other changes include refusing payment for unnecessary readmissions or for hospitals that have a high percentage of hospital acquired infections. All of these models drive providers to work together to coordinate the care to the patient. By coordinating care, providers intend to achieve high quality outcomes which will hopefully reduce the costs of care.

In addition to the reimbursement redesign, the patient populations and the payor sources will dramatically change. There will be an increase in the Medicare beneficiaries because of the aging baby boomer population. In 2014, there will be an increase in Medicaid beneficiaries because of the increased enrollment eligibility for people with incomes less than 133% of the Federal Poverty Level. Likewise, in 2014 with the launch of the State Insurance Exchanges, a new payment system will be providing benefits for the patient population. These state and federal payors may adopt the innovative models created by the Centers for Medicare and Medicaid Innovation and provide reimbursement based upon the patient’s outcome instead of the number of patient visits.

Because reimbursement will change, providers must consider the best means of survival. Historically, physicians and hospitals have partnered to gain efficiencies and exchange patient information. Today, hospitals are partnering with other hospitals. There is a shift in the market place toward consolidation and financial and clinical integration. This complete integration provides for economies of scale for purchasing, recruitment of physicians and ensuring the best practice patient centered protocols are launched across a larger spectrum for use on patients. It appears that this integration will be regional initially, but over time if the reimbursement models change to outcome based payments, the hospitals and providers will be seeking additional and larger resources from high quality organizations to implement national quality processes and protocols.

Therefore, now that the election is final, healthcare providers cannot take a wait and see approach, but instead must assess its individual patient payer mix, its quality metrics and its future strategies for growth and success.

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