The Affordable Care Act's effects continue to accelerate.
by Phil Britt
The Affordable Care Act was designed to make affordable, accessible, high-quality health care available to all Americans while also focusing on patient outcomes rather than fee-for-service. While it is driving people to less expensive urgent care rather than more expensive emergency room visits, it also has continued the trend of employers adopting high deductible plans, meaning earlier out-of-pocket costs for consumers.
As a result, many consumers are delaying some procedures. The Affordable Care Act has also led to lower reimbursements to health care providers, an issue made even larger by the spending reductions for government programs imposed by sequestration, which has reduced reimbursements to local health care providers by millions of dollars.
“I don't know if we wouldn't have seen many of the same things, even without the Affordable Care Act,” says Chrisanne Christ, for $2.7 billion Centier Bank, which has 750 employees. “We certainly didn't expect health care costs to go down.”
The bank has seen health care costs go up by low single digits in most recent years, though there was a 9.7 percent in recent years, a figure that would be higher if not for aggressively addressing plan costs and making shifts in plan options to keep the increases as low as possible for both the employer and employees, according to Christ. Centier pays 70 percent of employees' insurance premiums.
Among the actions the bank has taken to keep a lid on health care expense increases is adding an onsite clinic at its Merrillville location, which is open to all employees free of charge. Bank employees also have access to a clinic Centier shares with Urschel Laboratories in Valparaiso. The clinic offers basic health services for simple procedures, such as checkups and treatments for minor illnesses. This eliminates claims for common procedures, so the employees can use the insurance for major health care needs.
“We've moved more aggressively to high deductible plans,” Christ adds, echoing the sentiment of many other employers. The high deductible plans mean that the insured person pays more of the costs of care until the deductible is reached.
Christ's comments were echoed by top executives of Franciscan Alliance and of Methodist Hospitals.
For health care providers, the Affordable Care Act has emphasized pay for outcomes rather than for procedures, though this was a policy that providers were already moving toward before the plan was enacted, says Jennifer Marion, senior vice president of finance and CFO for Franciscan Alliance. “I don't think the Affordable Care Act was the only driver. Employers have become frustrated with the high cost of health care for their employee population and were already moving to fee for value. They were frustrated payers.”
Franciscan Alliance has 13 hospitals, 667 physicians, has provided $2.43 billion in patient services last year with 10,971 beds and approximately 76,600 discharges. The hospital network has 3.5 million outpatient visits and surgeries per year.
The movement to high deductible plans has resulted in consumers delaying procedures, as evidenced by the 23 percent cumulative drop in discharges between 2009 and 2014, according to Marion. While such plans significantly cut health spending, they also prompt patients to cut back on preventive health care, according to a RAND Corp. study.
Health care spending also was lower among families enrolled in high-deductible plans that had moderate health savings accounts sponsored by employers. But when employer contributions to such savings accounts accounted for more than half of an individual's deductible, savings decreased among families enrolled in these so-called consumer-directed health plans.
However, over the same period, families that shifted to high-deductible plans significantly cut back on preventive health care such as childhood immunizations and cancer screenings.
Lower Reimbursements for Government Programs
Rules for Medicaid payments and for reimbursements for care for the uninsured hit Franciscan Alliance particularly hard because facilities like St. Margaret in Hammond have a high percentage of those patients. Reductions in government payments to St. Margaret alone was about 1.9 million due to the new rules and because initially Indiana did not expand Medicaid. The failure to expand Medicaid initially meant that Indiana health care providers were getting only 22 percent of Medicaid reimbursements, but that changed when Gov. Mike Pence signed the updated Healthy Indiana Plan (HIP 2.0), which among other provisions, boosts Medicaid reimbursements.
The state negotiated the reimbursement increase as part of its agreement with the Indiana Hospital Association, which will help fund the Healthy Indiana Plan so that it can be offered to taxpayers at no additional cost.
Healthy Indiana Offers Benefits
In mid-March, the governor announced that the Indiana Health Care Coverage Programs provider network had added 355 physicians and 939 providers of all types.
A critical tenet of the program since its inception in 2007 has been the higher reimbursement rates that it pays providers compared to traditional Medicaid. The Healthy Indiana plan's reimbursement structure pays for care at Medicare reimbursement rates, not the much lower rates that would have come with the expansion of traditional Medicare. The state also raised the reimbursement rates by an average of 25 percent for medical care delivered to the state's remaining Medicaid recipients who are categorized as aged, blind, disabled or children.
The Healthy Indiana Plan requires participants to contribute to a POWER account, which they manage like a health savings account and are rewarded for using preventive care. If a participant fails to make contributions, consequences range from mandatory copays for services to loss of coverage. In addition, the plan includes a copay for emergency room use, which is designed to discourage unnecessary emergency room visits.
Healthy Indiana also offers low-income Hoosiers the option to receive assistance in buying private market insurance through their employers via HIP Link. According to the governor's office, the use of a health savings account as part of a premium assistance program is the nation's first such plan.
Sequestration- based Cuts
But even if there is a short-term improvement in Medicaid reimbursements as a result of the Medicaid expansion and the Healthy Indiana plan, sequestration will likely mean future cuts.
Providers face 2 percent cuts, known as sequester, to their Medicare reimbursements. The cuts will reduce Medicare payments by $11 billion a year, the White House estimates. According to Marion, sequestration has meant $8 billion in reimbursement cuts since its inception three years ago.
The sequester cuts were triggered when President Obama and Congress failed to reach an agreement on a total of $1.2 trillion in cuts to federal spending over the next 10 years, as mandated by the Budget Control Act of 2011. The sequester has meant further cuts to government programs each year, meaning dwindling reimbursements to health care providers for government sponsored programs each year.
For providers, the total payment is reduced after the services are added up and deductibles and copayments are applied. The underlying Medicare fee schedule, which attaches a dollar amount to individual services, is not changed. Many other payments will be reduced, including interim payments to critical access hospitals and cancer hospitals, and pass-through payments for graduate medical education, organ acquisition and Medicare bad debts.
A pass-through payment can also include, for example, a new drug used in the treatment of cancer that was not already included in the standard payments for cancer treatment. The new drug would be considered an add-on.
Since the sequestration started and the movement to high deductible plans was already under way before the effective date of the Affordable Care Act, Franciscan Alliance decided to be proactive in reducing costs, according to Marion. “Our financial performance was not where it needed to be. We looked at revenue enhancements, clinical operations and improving the length of stay.”
By doing everything possible to reduce a patient's length of stay, while also being careful not to discharge the patient too early, Franciscan Alliance was able to sharply reduce the chance that the patient would succumb to another illnesses while in the hospital.
Franciscan Alliance also optimized physician practices by consolidating practices as well as reviewing and realigning supply purchase procedures. Additionally, staffing was adjusted, documenting the severity of patient illnesses was implemented and electronic medical records were implemented. All of this was done before the Affordable Care Act took effect.
Among the systems that Methodist Hospitals has installed is electronic medical records. The Methodist system has already achieved stage two of “meaningful use” and is among only 10 percent of health care providers to achieve stage six (of seven) of adoption, according to Healthcare Information and Management Systems Society.
“The Affordable Care Act has forced us to adopt internal systems that will assist us in improving outcomes,” said Matt Doyle, CFO for Methodist Hospitals. “It has resulted in a shift to more preventive care and routine care. Part of the act is to push care out of the hospital setting and into the community setting.”
Methodist Hospitals has 2,200 full-time-equivalent employees, two hospitals, numerous outpatient practices throughout the region, $330 million in annual revenue, 66,500 emergency room visits, and 18,100 discharges annually. Methodist's market share has been growing about 2 percent annually, according to Doyle. Since the Affordable Care Act was enacted, Doyle has seen shifts away from emergency room visits and toward visits at family practice physicians. Other care has shifted from inpatient care to care offered by “mid-level” health care providers such as nurse practitioners.
Doyle says that the Affordable Care Act has also prompted improved transparency so that quality of care and cost information is readily available to the public.
Doyle adds that the law itself is too new to determine how effective it has been and what impact it will have on Methodist's revenues and collections.
Employers and health care providers don't expect many changes in the second full year of the plan, though that could change if the Supreme Court rules that the subsidies that many low- and middle-income people receive through www.healthcare.gov are not authorized by law. The preliminary arguments were heard in the case in early March. A decision is expected sometime this summer. Without the subsidies, many insured people would no longer be able to afford their plans.
Regardless of the Supreme Court decision, the focus will continue to move toward quality/value rather than a focus (and payment) based on procedures alone, according to health care providers. “I think that we are well positioned for that,” Marion says.