Reform and the Bottom Line

Michelle Ponte, for HealthLeaders Magazine , July 10, 2009
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Geisinger is a highly integrated nonprofit system that includes two hospital campuses, a 740-member group practice, a health plan, and two research centers. As described in last month's cover story, it is perhaps one of the top models of coordinated care in this country, and realistically, it is well equipped to ride out this aspect of reform better than anyone else. "But if you are a freestanding hospital and you don't have community practitioners as a part of your entity, or if you are not hooked up in a formal way to nursing homes where some of the patients go, how do you actually transact this continuum responsibility without hurting the patient and decrease the probability of hospitalization?" questions Steele.

Payment for rehospitalizations
Primary care physicians play a big role in the payment process because they hold the keys to reducing rehospitalization. Some communities that have large, well-established hospitals, however, are already at a huge disadvantage, according to Steele, because primary care physicians can't afford to live in the communities they serve. "At Geisinger, with 40 physician practice sites, we can ensure that when a patient is being discharged from the hospital that person will be seen by their primary care physician or nurse practitioner. I don't think you can find a PCP in New York" because of the cost, he adds. "So some of best and biggest hospitals in New York or Los Angeles may have difficulty."

Steven A. Wartman, MD, PhD, president and CEO of the Association of Academic Health Centers in Washington, DC, is also concerned about workforce issues, citing Massachusetts' mandated healthcare reform plan. "By mandating increased access and care, they discovered they had a shortage of primary care providers," says Wartman. His organization is advocating that a workforce solution be part of any comprehensive reform package. "We don't want a situation where there is a mismatch between what the nation needs in healthcare providers and what the nation has."

Financing new systems
At a more granular level, business operations at hospitals may change substantially with mandates and reimbursement changes. Realistically, hospitals don't have a lot of experience with bundling and different payment systems and therefore don't know if decision-support systems will be able to provide leadership with the ability to analyze the data effectively, says Petasnick. CFOs need to look at their information systems and try to determine if they have the right ones in place to handle major reimbursement changes. "There will be a greater emphasis on putting in general accounting systems because there will be a greater demand on cost and financial analysis and physician support. You want your information systems up to snuff in that area," says Petasnick. Froedtert is in the process of acquiring a new general ledger system and also investing in decision-support infrastructure. "We view [decision-support infrastructure] as a critical requirement in resource deployment decisions," he says, adding that their budget process follows a very deliberate methodology.

To be determined
Big questions remain unanswered. "At the end of the day, will these reimbursement systems allow us to meet our financial requirements and enable us to access capital, which has become an incredible issue here given the economic crisis?" asks Petasnick. The prospect of a public plan, which some legislators are calling for, brings up a host of issues, including benefit and payment structures.

"One of the principal values of a public plan is its potential to bring about fundamental insurance reform with regard to guarantee issues and community rating," says Petasnick. For those in the business of running a hospital, the main issue will be payment levels, fixed or otherwise, he says. "If it is built around the Medicare or Medicaid payment levels, this will be insufficient to meet our financial requirements and will dramatically impact the ability to access capital."

One thing Petasnick knows for sure is that reform this time around isn't going to be a redux of the Clinton years. "The error some may make is in assuming that this is a replay of '92 and '93 and in the end nothing is going to happen. I don't believe that is the scenario."

Geisinger's Steele says that while hospitals support reform, it must be manageable at the start. "We are arguing for an engine of innovation that gets us from where we are now, not like Geisinger, but like most of the world, to where we want to be without complete chaos."

Michelle Ponte is senior editor of finance with HealthLeaders Media. She can be reached at
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