INDUSTRY INSIGHTS | SUMMER 2010 EFFECT

The Six Major Themes of Health Care Reform

by Rob Schile 

With the recent passage of health care reform, the time for debate, denial, and avoidance is over. Providers of all types should refocus their energies on transforming behavior to ensure future success.

Much uncertainty remains on how reform will impact day-to-day operations. Even amidst this ambiguity, we believe the general themes are clear:

1. Providers will be asked to accept greater financial risk for health care outcomes.
2. Operational efficiency will be critical.
3. Collaboration among all providers will be required for long-term survival.
4. Significant investments in technology will be necessary.
5. There will be increased expectations for quality, reporting, and monitoring.
6. Providers will be subjected to elevated regulatory risk and scrutiny.

Greater financial risk for outcomes

Under the new reform, many elements of reimbursement will be tied to improved quality of care and better efficiency in the delivery of that care. Provisions, such as value-based purchasing and increased penalties for excessive readmissions or admissions due to hospital acquired conditions, are all aimed at reducing reimbursement or shifting it away from those with poor levels of quality.

In order to be successful in this elevated risk environment, providers will need to understand the correlation between quality and finance, and how variations in quality outcomes can impact the organization’s financial performance. In today’s world, the vast majority of providers monitor quality and finance, but the two are not considered as interrelated operational components impacting finance.

Operational efficiency

Another overarching goal of reform is to reduce the overall cost escalation of health care. Under a market-based approach, one person’s cost equals another person’s revenue, so for providers, reducing the cost of health care simply means reductions in reimbursement. To remain financially viable, it will be essential to scrutinize not only operational departments, but also non-operational areas as well. Successful providers will be those that continually push the status quo and identify new and innovative ways to reduce costs across their entire organization.

Collaboration among providers for long-term survival

To achieve improvements in quality and efficiency in a more patient-centered environment, providers of all types will have to elevate levels of collaboration. This will be essential across the entire continuum, from physicians to hospitals to post-acute services. In many respects, increased cooperation will be forced through redesigned payment systems. These systems will most likely involve some form of bundled payment methodology. Successful providers will work together in the delivery of care, to avoid redundancy of resource utilization and ensure quality goals and objectives are achieved.

Investments in technology

At the heart of reform is the electronic health record or EHR. In a recent presentation by Dick Clarke, President and CEO of the Healthcare Financial Management Association (HFMA), Clarke shared a diagram that reflected EHR as the foundation for health care reform. I thought this was a great way to illustrate the key elements to reform infrastructure. While some providers have fully functioning EHRs, vast majorities do not, and a significant number have not even begun the adventure of EHR implementation, let alone mastered the use of this technology. Success in a reformed health care world will require investments in technology to transmit critical medical information from one provider to another.

Source: Healthcare Financial Management Association

Increased expectations for quality, reporting, and monitoring

Beyond increased expectations of quality, providers will have to demonstrate quality through elevated levels of reporting. Specifically, providers will be required to develop and implement systems to ensure the data being gathered is accurate and reliable, because it will be used to establish reimbursement. Poor data will directly impact financial outcomes.

Elevated regulatory risk and scrutiny

Concerns over fraudulent and inaccurate reimbursement remains at the forefront of the regulatory landscape. This is evident in the Recovery Audit Contractors (RAC) Audits, Medicaid Integrity Contractors (MIC), and other types of governmental reinforcement initiatives. Health reform will focus on reducing fraud as a critical component in the overall cost reduction strategies. Even though billing accuracy under the Medicare system has improved dramatically, Medicare still ranks second among all government divisions for fraud and abuse. Health care leaders should anticipate increased inquiries and scrutiny of the reimbursement they receive.

Will providers embrace or reject reform?

Times of dynamic change often represent periods of tremendous opportunity. For health care providers, the transition that lies ahead represents one of those periods. Health care leaders that are willing to accept the challenge, develop a framework to transform their organizations, and refuse to accept the status quo will undoubtedly come out successful on the other side. Those that continue to debate, remain in denial, and fail to plan and implement, unfortunately will have a different fate.