Divided Government: Fiscal Cliff & Future of Reform

Credit for this article goes to author Haydn Bush, 11/9/2012 Health & Health Networks/ For use in Doctoral Research Forum.REH

 Divided Government, Fiscal Cliff and the Future of Reform By Haydn Bush H&HN Senior Online Editor November 07, 2012 The focus in Washington moves from the election to the fiscal cliff and the implementation of reform. What will that mean for hospitals? The grueling, seemingly endless presidential campaign is now a memory, and with no changes to control of the White House, Senate and House of Representatives, attention now shifts in earnest to the looming Fiscal Cliff. To be sure, there will be some time for celebration by the Obama camp and soul searching by the GOP, but those are bound to be short-lived. Even before we all sit down to gobble up turkey, stuffing and pumpkin pie in a couple of weeks, lawmakers are sure to stake out positions on the contentious issue of sequester and the 2 percent cuts in Medicare reimbursements that are slated to take hold next year. Oh, and hospitals, physicians and insurers eagerly await a slew of expected rules on the Affordable Care Act that were essentially put on hold during the last weeks of the campaign. "The election has been decided and the time for politics is over," says AHA President and CEO Rich Umbdenstock. "It is now time for governance. We must address the serious issues facing our country and have conversations that address real reform to improve the nation's health care system for patients and communities. Cuts to hospital care are not real reform. It is now clear that implementation of the ACA will move forward and we will continue to improve and build on it to advance quality of care and reduce cost." In a statement, Jeremy Lazarus, M.D., president of the American Medical Association, congratulated the president while focusing squarely on the projected cuts to physician payment scheduled to take effect next year. "The AMA is also committed to working with Congress and the administration to stop the nearly 27 percent cut scheduled to hit physicians who care for Medicare patients on January 1," Lazarus stated. "It is time to transition to a plan that will move Medicare away from this broken physician payment system and toward a Medicare program that rewards physicians for providing well-coordinated, efficient, high-quality patient care while reducing health care costs." Many experts, however, believe that in the short-term, the president and Congress will delay action on these issues well into next year. "My gut tells me that they punt the tax rates, the sequester and the debt ceilings," says Christopher Condeluci, who served as tax and benefits counsel to the Senate Finance Committee during the crafting of the Affordable Care Act and now is an attorney with the Washington, D.C.-based law firm Venable. While it's unclear at what point the federal debt limit would have to be raised — forcing action to alleviate a default — Condeluci guesses that action to move those conversations into February or March could occur, creating a new deadline of the August 2013 Congressional recess to make meaningful progress on a grand bargain around federal spending and taxes. Reform Moves Ahead In the meantime, the president's reelection means that implementation of key provisions of the ACA will continue. Most notably, open enrollment in health insurance exchanges is slated to begin Oct. 1, 2013, to prepare for coverage under the exchanges at the start of 2014. And while the final rules on the exchanges are out, Condeluci says there are a slew of other insurance market reform issues that still need to be resolved. "There will be an onslaught of regulations issued by the end of the month, and the end of the year," Condeluci says. Allowing time for the public comment process, he says, the rules could be in place by February, giving health insurance carriers eight months to prepare for open enrollment. From a longer-term perspective, of course, that means hospitals will need to continue preparations to care for the estimated 32 million Americans who are anticipated to have new access to health coverage. That means hospitals will have to carefully anticipate shifts in utilization and the impact on ED use, says Steve Valentine, president of the health care consulting firm Camden Group. One potential scenario: the potential growth in primary care offered by federally qualified health centers could contribute to a reduction in hospital utilization, he says, adding, "Inpatient use will get squeezed." And while it will take years, if not decades, to sort out all of the impacts of reform, Valentine says that in the short term participation in the Centers for Medicare & Medicaid experiments around cost containment and quality improvement, including its bundled payment and shared savings ACO programs, may not be high enough to hit the expected cost savings associated with those programs. Ultimately, the success or failure of those initiatives will trickle out to providers, he adds. "The goals of the Obama administration are not being met in terms of people in bundled payment [programs] and ACOs," Valentine says. "He's overestimated the savings, so taxes will have to go up or payment will have to go down. That's a wake-up call." 'Hospitals Will Double Down' Beyond the Beltway, of course, the health care industry is already in the midst of a major internal transformation outside of government reimbursement and oversight, from consolidation of hospitals and physician groups to the advent of insurance innovations like "narrow networks," or health plans linked to services offered by a single or handful of providers. Both Condeluci and Valentine expect these trends to pick up speed, with Condeluci predicting continued movement in the private market to embrace narrow networks, even if the plans may not initially pass muster for inclusion in the health insurance exchanges. And regardless of how federal changes to health care spending and ACA implementation shakes out, Valentine says the movement in recent years to aggressive cost containment — an issue we've covered extensively in our Fiscal Fitness series — will continue no matter what happens in Washington. Ultimately, Valentine says, that means more scrutiny for all nonclinical positions, the reevaluation of operations as they relate to the hospital's mission and a renewed focus on fundraising. "Hospitals will double down on squeezing more expense out," Valentine says. "There is no getting around this." The opinions expressed by authors do not necessarily reflect the policy of Health Forum Inc. or the American Hospital Association.