Healthcare Reform Spawns Daunting Regulations

Cheryl Clark, for HealthLeaders Media , January 13, 2011
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"It wasn't being done with a black hat on, by people saying, 'Well, we know not all of these [procedures] are necessary, but we're going to do them anyway to make money.' It's just that it wasn't even a consideration. Nobody discussed it. Now, since our healthcare costs are so high, we must formally evaluate the options available for a patient.

"Why did spine centers in hospitals take off?" Chessare continues. "They took off because there are a lot of people with back pain and because of the vagaries of the payment system. There was a big profit margin, so people ran with that ball, just as you would expect. Now we have to do a better job of assuring that our actions follow the best evidence for returning the patient to health."

Now, increasing evidence suggests that spine procedures, while exposing patients to infections and complications, may leave many patients no better after two years than if they had been treated medically.
Dolan of AHCE offers a similar view. "I think it would be naive not to realize that eventually effectiveness research will impact on reimbursements."

A side effect of this trend will impact construction, says Craig Samitt, MD, president and CEO of Dean Health System in Madison, WI. "We're not going to see a trend of hospitals building more buildings and adding more wings and racing to add all these brand-new technologies, not at a time when they may very well be facing declining reimbursements."

With the creation of accountable care organizations to come, much of that burden will fall on those entities to manage how they spend the money they receive, he says. They will think twice about buying a second da Vinci robot if the funding stream to pay for it has stopped, he says.

Samitt says his system has evolved more progressively than most to deal with healthcare reform. Already, he says, "about half of our business is with bundled payments.

"Where Dean is today, in essence, is where we envision everybody else is going to need to get, because we live in the new value-based world," he says.

But he believes his organization is an exception. "I think right now there are two different groups of providers," he says. Those who have lived in the "volume-based, more care world, and those that have seen the light and are making transitions to value."

It's in the first group that most providers are stuck, he says, explaining a "change paralysis" permeating their organizations. "The questions they're now asking are, do we move toward a value-based world? Will a value-based world really happen? If it does happen, when do we start? But if our revenues are all based on volume, but we start to focus on value, will we lose revenues if we do that right now?"

For Paul Keckley, executive director for the Deloitte Center for Health Solutions, the key to making this journey a successful one will depend on how hospitals forge relationships with their physicians. After acknowledging their goal to cut costs, "all the hospitals that I speak with quickly say they have to align with their physicians so they can manage this new normal," he says.

It's unclear how many hospitals will actually strive to become accountable care organizations, an option the legislation allows beginning in January 2012.

"But the regulations don't require that a hospital actually be a part of the ACO," Keckley says. "Could we envision groups of physicians organizing themselves and actually competing aggressively against the hospital? That's possible." These days, he notes, only three surgical cases in 10 require an acute care setting; the others are safely performed in ambulatory or surgical specialty settings, many of which doctors already operate.

"Except for inpatient surgery, it's not likely [the physicians] will worry about a hospital, or they could negotiate to buy excess capacity, say 50 beds a day, to use at their discretion," Keckley says.

As more of the regulations are released in coming months, healthcare leaders say much more should be clear. And those who don't have healthcare reform on their front burner will have to put it there.

In August, 80% of 539 ACHE members responded to a survey indicating they are taking steps to reduce their average cost per Medicare discharge. But just 76% said they were studying ways to reduce readmissions, 66% were working to avoid infections to avoid penalties, and only 44% were working to achieve shorter lengths of stay.

"People are just worried about what's happening in this fiscal year," Dolan says. "There are enough problems at our door today, so there's a limit to how much energy you can put into problems that may raise their ugly head five years from now."

Dolan adds that the legislation "is so massive, anyone would be making a serious error if they assumed it would be implemented exactly as written. It will be modified continually."

While many healthcare leaders may be anxious about an uncertain future, Kaplan says that's the wrong way to view the situation. "This is not the time for fear, but for innovation," he says. "We all need to embrace this opportunity to be better for our patients, and look to ways we can do more with less."

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