At first glance, national health care reform seems to be an unmitigated boon to hospitals: An additional 30 million insured Americans over the next decade and expanded federal support for Medicaid could lead to a sharp reduction in uncompensated care and bring billions more dollars through the door.
A closer look reveals a landscape that is dramatically more complicated, however, and hospital leaders need to be quick and nimble to clear the hurdles and thrive under the new law.
"The bottom line is that reform most certainly is not a piece of cake for hospitals to prepare for, because there is so much uncertainty," says Paul B. Ginsburg, president of the Center for Studying Health System Change, a health policy research organization in Washington, D.C.
Although laws have been approved and rules are being written, health care reform remains a moving target: Will the mandates really force Americans to carry insurance? Will state budgets be sufficient to cover the expanded Medicaid caseload? Which of the payment and health delivery demonstrations will eventually be adopted? Will communities really be able to expand their primary care capacity?
Hospitals can't wait for every uncertainty to be resolved before they act, experts say, because the only certainty is that more change is coming.
Will Expanded Access Lead to More Patients?
The impact of reform will vary from state to state, Ginsburg says. States with historically low rates of coverage, like Texas, face greater changes than, say, states in the Upper Midwest. For some hospitals with large charity care loads, there may be about the same number of patients, but far higher numbers of insured patients. In general, most hospitals will see patient numbers increase.
However, hospitals should be cautious about taking the traditional response to an increasing census—added capacity—because the increased demand for hospital space could be temporary.
"Hospitals must know today that at some point in the future, there is going to be real change in the delivery of care," Ginsburg explains. "With better coordination of care, whether it is medical homes or accountable care organizations, there is a good chance that rates of use of hospital care are going to decline."
While hospitals may experience a "transitory crunch on their capacity" as millions of people gain health care coverage, Ginsburg warns that "it's not going to be business as usual indefinitely. At some point, there will be this change where better coordination of care will lead to more judicious use of the hospital."
Hospitals already have been moving toward improved coordination of care and better integration, and the trend will be accelerated by health care reform programs, says Rich Umbdenstock, president and chief executive officer of the American Hospital Association. But with 30 million newly insured patients entering the system, the years leading up to 2014 will be a good time to take a hard look at all aspects of care delivery and payment.
"Many of the currently uninsured are already being cared for through the existing system, but often at the wrong place at the wrong time," Umbdenstock says. "The question will be, can we supply access for the newly insured so they can be cared for at the right place at the right time?"
Don't Wait and See
The reform legislation calls for a wide variety of demonstration projects to test innovations in care coordination and payment systems, including managing for chronic disease and bundling payments. In addition, federal economic stimulus programs are providing incentives for upgrading medical record-keeping, an important foundation for new payment systems that will nudge health care away from the fee-for-service tradition.
Hospitals that have highly integrated delivery systems and advanced electronic medical records will probably be first in line to participate in these pilot projects, Umbdenstock says. The demonstrations will likely transition to mandates, but hospital boards and administrators should not wait to see what develops.
"Hospitals need to be building out some of these capabilities now, whether they are in the demonstration projects or not," says Umbdenstock. "They can't wait to build out those pieces until all the experience has been gathered."
Ginsburg agrees. "The important thing is to get a head start, finding ways to meet the demand for hospitalization for newly insured persons, thinking all along the way that the payment systems and rewards are going to be changing."
Fiscal Outlook Remains Cloudy
Another critical uncertainty involves the ongoing fiscal crisis among states. Much of the expanded access comes in the form of broadened Medicaid eligibility, and although the federal government has pledged to cover additional costs at 100 percent at the outset, revenue-strapped state governments have struggled to cover their existing responsibilities to Medicaid.
Anxious state finance officers point to Massachusetts, where health care reform has been playing out on the state level since 2006. When the reform program was launched, state officials pledged to increase Medicaid reimbursements, which had been averaging about 71 cents on the dollar prior to reform, says James T. Kirkpatrick, senior vice president of health care finance for the Massachusetts Hospital Association. Over the next two years, the state budget increased payments to 85 cents on the dollar.
Then the recession hit, and now the state is paying less than it was before the reform—averaging about 69 cents on the dollar.
"The fiscal outlook for our country is very grim, and to think that public spending for health care is going to be insulated from that is going to be foolish," Ginsburg says. "There is the potential for a much more constrained public funding of health care once the country starts to seriously grapple with its fiscal problems."
The Massachusetts Model
Politicians and pundits point to Massachusetts and its five-year history of health care reform as a case study of what happens when access to health insurance expands suddenly. There are good reasons for the comparison; in meaningful ways, the federal reform package is modeled after the 2006 state legislation that has expanded coverage to 98 percent of the state's population.
Hospital officials say the program has been successful in many ways, especially in reducing the amount of charity care and uncompensated Medicaid expenses. "We saw real benefits from the increased enrollment," says Kirkpatrick. "In the first year, we documented a 25 percent reduction in the amount of uncompensated care hospitals had to cover."
The first thing hospitals learned, however, was how difficult it is to change behavior through legislation. The law mandated health care coverage and offered insurance to hundreds of thousands of previously uninsured residents; but, Kirkpatrick says, "legislation doesn't get patients enrolled."
"What we learned early on was that the idea that 'if you build it, they will come' does not apply to health care," he says. "It is surprisingly tough to get people enrolled in new programs."
In many cases, the task of figuring out which program is most appropriate for a specific patient falls to the provider, and for hospitals this meant an increase in community outreach and education, funded in part through a grant from the Massachusetts Hospital Association. Hospitals, in fact, were responsible for enrolling about a third of the newly eligible Medicaid participants in the first year of the Massachusetts program, Kirkpatrick says.
At Heywood Hospital in Gardner, Mass., that meant dedicating employees exclusively to matching up patients with a source of coverage, says Daniel P. Moen, the hospital's president and chief executive officer. "It can be a fairly daunting administrative task to get that kind of coverage in place and, for a lot of folks, they don't have the ability to get that done on their own," Moen says. "Anyone who comes to us, through any portal (e.g., outpatient clinic, emergency department), if they're not already enrolled or if they have lost coverage, we do everything we can to get these people covered."
Overall, it's been worth the effort, Moen says, noting that the hospital has seen its charity care cut in half. Heywood now jointly operates the insurance identification program with another nearby health system, together employing about six full-time staff members to keep patients covered.
One reason it requires so much work to keep patients covered is that—like the federal program—the Massachusetts insurance law created a number of different programs.
"What hospitals are concerned about is the flux and churn among the patients," Kirkpatrick says. As an individual patient's circumstances change, his eligibility changes, and he is shifted from one program to another.
Another concern, as access expands, is the availability of primary care providers. Even before health care reform was approved in Massachusetts, Heywood Hospital worked with its congressional delegation to bring a federally supported primary care group to Gardner. Nevertheless, there are not enough doctors to go around. And the lack of primary care may be blocking the achievement of one of the reform package's goals—getting patients out of emergency departments and into doctors' offices.
According to a recent state report, ED visits in Massachusetts rose by 9 percent from 2004 to 2008, to about 3 million visits a year. While experts debate the reasons, Kirkpatrick says primary care just hasn't been able to absorb the new patients.
"Many in the state had expected that hospital emergency room usage would fall as more care would be delivered with primary care clinicians, but even though in Massachusetts we have a high number of primary care physicians, it was found that their capacity to grow was limited," he says. "As people got coverage and needed care, they continued to use the hospitals."
All these factors point to the need for hospital administrators to take a close look at operations, including staffing and processes, Umbdenstock says. "How do you expand primary care in terms of personnel? What's the appropriate role of nurse practitioners and physician's assistants?"
While the demand for additional primary care physicians will continue to grow, training doctors takes too much time to meet the additional influx of patients coming in 2014, Umbdenstock explains. Physician's assistants and nurse practitioners could play an important role in expanding primary care and ensuring that patients don't continue to choose expensive emergency department care.
"We have to think about building upon the capability of others, not just primary care physicians," he says.
Hospitals may need to consider other hires as well, to gear up for 2014. For one thing, staff who can help match up patients with insurance have proved useful in Massachusetts and may help pay for themselves. Kirkpatrick says he's also talked to hospital administrators who are looking at expertise in systems engineering—staff or consultants who can evaluate an institution's physical assets and human resources and identify bottlenecks to efficiency.
Responding to bottlenecks, hiring staff, recruiting primary care providers, upgrading medical records systems: all these things take time. And with 2014 less than three years off, hospitals should not delay, says Heywood Hospital's Moen.
"I would say that any hospital now, with respect to federal reforms, consider this: How are you going to put a system in place to take care of the folks who are still going to show up at your door?"
Randy Edwards is a freelance writer in Columbus, Ohio.