Last week, a colleague and I spoke at a strategic retreat for the board of a health system in the Southeast. Our presentation centered on the strategies hospitals and health systems should be considering given the changes in both the private healthcare market and federal healthcare policy. Because our presentation was Friday morning, and the House of Representatives narrowly passed the American Health Care Act (“AHCA”) on Thursday afternoon, you can imagine how we spent much of Thursday night.
As we shared with the board of directors the next morning, the AHCA still faces certain obstacles to passage in the Senate. Moderate Republican Senator Susan Collins (R-ME) said over the past weekend that, “The House bill is not going to come before us [the Senate].” To win passage in the House, the Trump Administration and House Republican leadership modified the AHCA to appeal to its more right-leaning Freedom Caucus membership. This rightward shift in the AHCA is unacceptable for Collins and other moderate Republicans in the narrowly Republican-controlled U.S. Senate. To borrow a phrase from rural America, the AHCA faces a long row to hoe before it becomes law.
Despite the uncertain prospect of the AHCA’s passage, policy themes that are common to this and other conservative healthcare policy proposals should still inform the strategic decisions that hospital and health system boards undertake.
The era of increased federal spending for healthcare services is likely over. Both the ACA and AHCA attempt to control the cost of healthcare services, though they use quite different means. The AHCA endeavors to contain costs by limiting federal exposure on healthcare programs like Medicaid. As in many Republican healthcare reform policies, federal funding for Medicaid is changed to either block grant or per capita structures.
For health systems that serve high Medicaid populations, this reduced federal funding for Medicaid likely translates into lower reimbursement for services. To prepare, healthcare leaders must reexamine their hospitals’ or systems’ operations, focusing on margin improvement across all departments, improving staffing ratios, and reconsidering whether certain non-core assets should remain a part of the health system’s portfolio.
Secondly, a common feature to all Republican healthcare reform proposals is the increased utilization of HSAs. The AHCA increases the amount that individuals and families can contribute to their HSAs in a given year. In conservative health policy circles, requiring patients to have more first-dollar exposure for their healthcare is viewed as a vital step in helping to address the ever-rising cost of healthcare services.
Regardless of what healthcare reform bill passes both chambers of Congress, hospitals and health systems should assume that more patients will be paying for their healthcare services with HSA funds and will expect that their healthcare providers provide them with greater price transparency and information about quality and perceived value. Developing a retail and digital strategy is imperative to system success in an environment where more patients will have first-dollar exposure.
Not all healthcare services can be commoditized, but take it from this recovering attorney – there will be a healthcare equivalent to LegalZoom in the near future. Health systems that embrace the coming disruption and proactively develop strategies to compete in this environment will succeed. Those that ignore the ongoing policy and market disruptions face less certain futures.
Past Healthcare Hunger Games Blogs
#1: This Week in Washington and Your State Capital
#2: The Art of the Deal Attempts Herding Cats
#3: Healthcare Hunger Games #3: Consumer-driven Healthcare a la the Administrative State
#4: Healthcare Hunger Games #4: Vegas Vacation, Bubblegum, and the Georgia Rural Hospital Tax Credit Program
#5: Healthcare Hunger Games #5: Rural Community Hospital Demonstration, Cost-Based Reimbursement, and Acting on Strategic Options
Ryan Sprinkle is a consultant at Stroudwater and a licensed (but recovering) attorney. He invites you to send him questions or topics related to federal and state health care policy to be discussed in this ongoing blog series. He can be reached via email at email@example.com or by phone at (770) 913-9046.