Reconsidering ACA Limits, Fee-for-Value as Firm Payment Fix

As the Affordable Care Act (ACA) continues to evolve, the healthcare industry thrives on crystal ball-esque predictions about what future challenges may arise. How will the Supreme Court’s King v. Burwell decision impact premiums and the individual insurance market? In many ways, the healthcare industry may merely be momentarily trying to keep score as answers begin to emerge.

Paul Keckley, Managing Director of the Navigant Center for Healthcare Research and Policy Analysis, chatted with RevCycleIntelligence.com about how the ever evolving ACA's significance influences the healthcare industry’s greater financial focus as the aftermath of the King v. Burwell decision continues to unfold.

ACA implementation spans the course of a decade with 1965’s Medicare implementation spanning almost 3 years. Compared to previous major healthcare policy changes, King v. Burwell is a bit more complicated, Keckley says, with 50 changes made to the law thus far. The House of Representatives has passed legislation 54 times to repeal the law, cycling about every 3 months, he says; special interest groups are now looking for ways to peel the law back, one layer at a time.

“The Court ruled for the intent of the law rather than the letter of the law. We’re only halfway through its implementation,” Keckley states. “This law is going to be in the courts for the next 5 years and it’s going to be page 1 during the campaign for 2016. It’s the nature of the beast,” he says.

Notable upcoming challenges relative to the law involve the medical device tax, claims Keckley. Ongoing speculation brews currently about the employer mandate and whether or not it will be expanded from 50 full-time employees to 100. King v. Burwell aftermath is guaranteed to remain a hot topic for the next 16 months, he says. The law itself will continue to be tweaked and modified over the next 5 years.

“Some folks in Congress are challenging the President’s executive orders that have changed the law at various points. 14 folks are running from the Republican side on a platform to repeal it,” Keckley confirms. “The stock market responded and gave the hospital insurance stocks a boost. The CFOs slept a little better that night because the bad debt isn’t going to go up the way it might have. The insurance companies didn’t have to go back and recalculate their premium requests for the year.”

Keckley adds that the King v. Burwell decision does not alter the course of the manner in which it has been implemented over the past decade. “The CBO and a variety of independent analysts say health spending is going to increase, costs are going to go up, probably well above 2 ½ to 3 percent the GDP, which means substantial cost reductions, capital is going to cost more,” states Keckley.

“The fact that we’re having these daily reports of mega mergers in the insurance sector, in the pharma sector, in the retail health sector, says the DOJ and the FTC are going to be scouting for antitrust and a variety of issues around competition,” he adds.

Keckley maintains as the healthcare industry tangibly shifts from volume into value, there will be a lot of discussion about how the shift can be effectively hardwired into the system. “What the law did is offer some demos and pilots, move the ball in that direction, but is this a permanent fix?” Keckley asks. “Is there a permanence to the notion that fee-for-service is gone and we’re going to be paying for results and ACOs and bundled payments and other mechanisms are the new landscape?”

“If there is a recurring discussion CFOs are having now, it’s that you don’t want to be on the bleeding edge of the shift from volume to value. You’ve got all manner of requests for capital and dwindling operating margins. You’ve got to play your cards closer than ever. All King v. Burwell did is just take one thing off of the plate,” explains Keckley.

Regarding upcoming legal challenges posed by the law, the healthcare industry will be watching how far employers will be able to push the ACA, says Keckley. “Employer groups are stepping back from the law and saying, ‘Is this really legal? Can you tell me how to cover my employees?’”

“They are considering a range of items, including the Cadillac Tax for 2018 which makes companies say, ‘If I choose to provide a rich benefit to my employees, why is the federal government discouraging that?’”

Regarding the greater implications of what comes next for the healthcare industry, Keckley says if health spending’s spiral ticks back to 6 percent per year, expect increased pressure on margins

“We’re going to have to get very creative about a radical cost reduction, including doing away with certain programs or determining that you do all of your total joints in one place instead of in 5 places in the same market, or substantial expansion of outsourcing instead of making labor costs part of your fixed cost.” Keckley maintains.

“We’re entering into a new uncomfortable wave of radical cost reductions. They’re coming at a time when you’re thinking about your enterprise as not just a hospital in a group of outpatient services, which includes half the doctors in the country that are now your employees, and a lot of post-acute services.”

The notion of unnecessary care is not as obvious to the healthcare industry, says Keckley, who pushes for a focus on making sure work performed is necessary and based on evidence instead of solely a physician’s preference. “If a finance team is not focused on this, they’ll be surprised when the OIG shows up and says, ‘40 percent of the carotid stents you did were completely unnecessary. Send our money back.’ That’s a bad day for a finance team,” Keckley states.

Keckley says although the notion itself promotes widespread frustration, the simple reality is that political cycles shape how King v. Burwell will be implemented in coming years.

“What I’m always conscious of is political cycles are very short term – every 2 years. Finance folks don’t have the luxury of altering their strategy every 2 years. They’re making capital bets that have to either benefit or support the organization for 10 and 20 years out. Their capital budgets reflect big bets on clinical innovation, big bets on how care is delivered, the facilities and technologies necessary," he says.

Similarly, Keckley says those within the healthcare realm cannot simply change course every 2 years. “Finance people have to anticipate what happens every 2 years and they have to access capital markets and help operating budgets for the long term. I can’t imagine a job that’s more difficult than trying to keep score.”