As we charge headlong into the future, those of us in the healthcare industry are striving to create a better system that achieves higher quality at lower costs. From the recent State Union Address, Obama said, calling Social Security and Medicare “more important than ever.”
Healthcare costs will become a contentious topic in the 2016 presidential elections. Many of the health care changes in 2015 yield potential risks for patients, employers and the nation as a whole. Consequently, the health care industry could be facing a massive financial after-effect.
- Ever Changing Payment Structures
It’s often difficult to take the steps necessary to kick off change without some kind of financial stimulus in the picture. The way the healthcare industry thinks about cost management is changing.
J.P. Morgan Annual Healthcare Conference in San Francisco discussed that in 2016 will likely will mark the end of the Meaningful Use program as it has existed, particularly in light of the forthcoming changes called for in the Medicare Access and CHIP Reauthorization Act of 2015. The Meaningful Use program will be ending some time in 2016 (1).
Increased deductibles pose reimbursement challenges for providers and billing vendors. Patients who receive services may be unable or unwilling to pay their high deductibles, driving bad debt and charity care at health systems nationwide as reimbursement rates drop.
Bundled payment arrangements are becoming more and more common for commercial payers. The most basic of these arrangements is pay for performance (P4P). P4P is a straightforward incentive system that rewards improvement based on established metrics (and sometimes penalizes if the provider fails to hit the metric).
Still, major healthcare systems and payers pledge to migrate most of their business to value-based payments by 2020 (2). Healthcare will move from a system that was geared toward fee-for-service business models to one that is more outcome-based. This business model change sparks the need for healthcare consultants who can guide providers and help initiate other changes, including the need for healthcare providers to more effectively influence their patients’ behavior.
- Rising Healthcare Cost
Health care costs have risen faster than both general inflation and the Gross Domestic Product. Employers have responded by slowly shifting health care costs to employees to control expenses. Since 2010, deductibles for all workers have risen almost three times as fast as premiums and about seven times as fast as wages and inflation. In 2016 where the offer of benefits coverage threshold will increases from 70% to 95% of full-time employees (4).
To eliminate unnecessary use of health care services, some insurers began increasing employee copayments for office visits and emergency room trips. But as health care spending continued to soar, higher deductibles entered the picture. Most people who have explored options or purchased health insurance on the Affordable Care Act’s exchanges learned quickly that premiums and deductibles are closely related–the lower the premiums, the higher the deductibles will be. According to a report from Kaiser Family Foundation and New York Times. Three-quarters of insured patients says that out-of-pocket costs for copays, deductibles or coinsurance within the past year was more than they could afford (5). Premium projections for 2016 reveal a significant hike for enrollees, negating much of the original appeal of HDHP plans. As a result, among adults aged 19-64 who visited the ACA’s exchanges this past fall, 57 percent could not afford a health plan, according to the latest study from the Commonwealth Fund (6).
Re-focusing on determining strategies to control rising organizational healthcare costs. Prevention can reduce the risk factors that lead to chronic diseases, slow their progression, improve overall health and reduce health care spending. According to the 2015 Towers Watson/NBGH Best Practices in Health Care Employer Survey, the top priorities of employers’ healthcare activities over the next three years include: increasing focus on employee well-being, including health, financial and workplace experience (7). Determining the type of wellness program can positively impact key cost drivers and then take the appropriate implementation action.
Millions of Americans have enrolled in ACA-compliant health plans over the last two years, and majority of those who purchased their coverage through the exchange are happy with both the price and the coverage. But clearly, not everyone is happy with the reforms – or the individual that requires Americans to purchase health coverage. Many uninsured opt to pay IRS penalty rather than insurance plans. A Kaiser Family Foundation (KFF) analysis showed more than seven million people eligible for exchange coverage would pay less in penalties than for the least expensive plan available to them (9). When it comes to determining benefits eligibility and completing IRS ACA reporting, consider consulting as the best option in gaining assurance in writing that will meet key IRS compliance dates, collecting necessary information from all sources, and determining the accessibility of dedicated support team.
Healthcare providers have incurred rising liability costs, Demand for healthcare consultants has increased as providers aim to meet intensifying standards. Mounting healthcare expenditures will
likely catch media attention. As a result, providers and government agencies are expected to turn to consultants to lower or contain costs.
- New ACO Model
The newest of the ACO models, which went live at the beginning of this month, is the highly anticipated Next Generation ACO program. More than 200,000 eligible professionals are set to see a slash in their Medicare payments after failing to meet Meaningful Use standards in 2014, according to a fact sheet released by the Centers for Medicare & Medicaid Services. Over the past five years in learning and implementing the ever-changing ACA. Implementation requirements should slow down over the next year allowing payers to focus on the strategy side of this new world of employee benefits.
Healthcare policymakers argued that value-based care payment models also need to focus on compensation for providers. Changing financial rewards for providers is one way to stimulate innovation in delivering person-centered care. Many providers still receive fee-for-service, but 30 percent of those payments will be routed through some form of alternative payment models this year, rising to 50 percent by 2018 (10).
Bundled payments have become increasingly common in healthcare delivery and financing in recent years, with the Centers for Medicare & Medicaid Services recently announcing a significant project that will bundle joint replacement surgeries, demand for which has risen dramatically in recent years. Many providers have entered bundled payment programs in the initial phase, but are far more reluctant to continue to do so when they have more downside risk, according to a new analysis by Avalere Health (11).
New technology requirements have also contributed to growing benefits for healthcare
consultants. The need for healthcare providers to meet the federal government’s
Stage 1 and Stage 2 meaningful use. It is critical that value based incentives be large enough to motivate providers to invest in and adopt new approaches to care delivery, and over time to outweigh profits that could be generated by increasing fee-for-service billing. The healthcare sector is expected to look to consultants to develop patient-provider relationships to foster motivations and penalties that encourage competitive advantages to determine how firms will address these challenges.
- Rise of Medicare and Medicaid
Medicare spending will increasingly move into value-based contracts with financial incentives for hospitals to manage patients’ medical costs throughout the care continuum. While federal funding for Medicare and Medicaid expected to increase in 2015, reimbursement rates are expected to be pressured. Hospitals and other healthcare providers face lower payment levels. Lower reimbursement boosts competition among healthcare providers for funding, thereby driving demand for healthcare consultants.
Public spending growth is projected to accelerate significantly, largely because the oldest baby boomers will become eligible for Medicare. While Medicaid spending growth is expected to slow with improving economic conditions, spending is expected to remain high during the next five years, as the relatively expensive aged and disabled eligibility groups comprise a larger share
of total Medicaid enrollment. Expanded health insurance coverage is projected to bolster federal healthcare spending. Additionally, as more individuals gain insurance coverage, they are more likely to use healthcare services because the costs are not out-of-pocket. The aging population and expansion of access to government health programs will raise the treatment costs of Medicare
and Medicaid. Consequently, private and public healthcare spending is set to increase. However, regulatory hurdles associated with the PPACA may limit the impact of this increased spending on
industry demand. A shift to quality-based care has imposed Medicaid reimbursement penalties on healthcare facilities with high readmission rates since fiscal year 2016 according newly posted CMS data (12).
Addressing infrastructure constraints that hinder clinical integration. Health plans in many markets have an opportunity to play an important role in driving market-specific or national-level technology standardization, health information exchange adoption, universal patient identifiers, best-in-class
clinical pathways, and transparency to address such structural challenges. Healthcare companies will need closer partnerships with consulting firms due to the climbing complexity surrounding the regulatory environment. Healthcare consultants provide expertise related to facilities planning and advice related to governance procedures. Another area of operations management involves providing claims process analysis by working with staff to decrease the amount of time for claims processing and by implementing a system of checks and balances to improve accuracy. Finally, consultants may work with healthcare providers to ensure the cost-effectiveness of treatments and services.