Uncertainty has defined the healthcare industry ever since President Barack Obama won the 2008 election and pledged to help the uninsured by revamping the nation’s $2.6 trillion healthcare system. As we move towards 2011, it is difficult not to look back at 2010 as a year plagued with many questions, but few answers. It feels like we are all waiting for something– anything– to happen. We are anxiously waiting for the government to provide some bit of insight as to what changes we should all prepare for in the upcoming months and years.
Adding to this uncertainty is the fact that our most recent elections resulted in a reversal of power in the House, after Republicans successfully campaigned with a promise to repeal the healthcare overhaul passed by Democrats in March. Considering these facts, physicians may consider it prudent to wait until the dust is settled before taking any action. However, that decision could likely end up being a major misstep in the long run.
Despite the ongoing heated debate between Democrats and Republicans, few executives and industry experts are anticipating any substantial changes to the current healthcare reform legislation. While Republicans have vowed to repeal the law, it is more realistic that they will either target specific parts of the measure or the way in which the reform will be funded.
A New System of Coordinated Care
The relationship between physicians and hospitals can currently be characterized by a shared interest in increasing the volume of profitable patient services on a fee-for-service basis, with limited opportunities for collaboration to reduce costs and improve the quality of care provided. Under our current system, a very small proportion of patients account for a majority of the healthcare costs, and the fee-for-service reimbursement structure fails to reward coordinated care that effectively prevents illness.
The ultimate goal of the Patient Protection and Affordable Care Act of 2010 is to transform our existing healthcare delivery system to a system of coordinated care that can improve the quality of services provided while simultaneously improving efficiency and reducing costs. This is expected to be accomplished through the use of the patient-centered medical home concept. Primary care physicians, identified as general practitioners, internists, family physicians and pediatricians, will assume the responsibility of coordinating the care of each of their patients, especially those with multiple chronic conditions. Achievement of this level of care coordination will require the development of larger integrated delivery organizations, such as accountable care organizations (ACOs).
In turn, the payment model will shift from fee-for-service to pay-for-quality, using bundled, capitated, and other types of shared savings models. Poor quality and inefficiency will have economic consequences for both physicians and hospitals.
Health officials are still in the process of determining how best to implement the many complicated aspects of the healthcare reform law, and hundreds of new rules and regulations must yet be finalized. By January 1, 2012, the U.S. Secretary of Health and Human Services is required to establish a shared savings or similar payment model, and we expect that the regulations for ACOs are coming soon. It is the collection of these specific details that will come to redefine the operations of physician practices. While we don’t yet know what all of the specific details will be, we do know that the anticipated new system and payment structure will have a drastic impact on the way physicians practice medicine.
The pay-for-quality concept means that physicians will face more uncertainy in their revenue stream and increased financial risk. Physicians should be prepared for a shift of income from specialists to primary care as well as Medicare reimbursement cuts that are anticipated to particularly impact specialists. At the same time, physicians will face higher administrative costs in their practices resulting from the increased investment in health information technology (HIT) that will become necessary as well as the many new requirements resulting from increased regulation and quality data reporting.
And all of these changes will occur at the same time that there is a significant increase in the number of insured people. The New Jersey Physician Workforce Task Force has already concluded that there is a shortage of physicians in our state, particularly within the primary care specialties. As New Jersey’s insured population gets set to expand by nearly 1.3 million patients, the supply of primary care physicians as well as certain specialties is anticipated to be insufficient to respond to the growing need.
The Time to Act is Now!
At the moment, it remains unclear whether it will be the physicians or the hospitals that will emerge as the drivers of this new system. Who will take the leadership role, and consequently capture the largest share of the savings? Will physicians manage the flow of funds while contracting with hospitals? Or will hospitals branch out from the delivery of acute inpatient care and gain control of physician practices, ambulatory surgery centers, diagnostic testing facilities and other outpatient services. And will it be the physicians, the hospitals or payors that will control the ACOs?
Immediately out of the box, hospitals tend to be better positioned to develop accountable care organizations than physicians who have less administrative resources, IT systems and tracking capabilities. Experts have predicted that physicians’ ability to take the reins may all depend on local market conditions. In regions where physicians are fragmented and less inclined to collaborate, hospitals will become the dominant force.
Therefore, the time is now for physician leaders in New Jersey to step up and demonstrate an unprecedented level of cooperation. Primary care physicians must work hand-in-hand with specialists to develop models that will work for everyone, and the next few years must be used wisely to build the HIT and infrastructure necessary to thrive under the new system.
Clearly this is no easy task, as most physicians are accustomed to the model of the physician practice as a small, independently-run business. The prospect of changing the very structure in which medicine is practiced must seem complicated and overwhelming at the very least. And all the while that these changes are occurring and the preparations are being made, physicians must remain focused on providing the very best care for their patients each and every day. However, if physicians are not able to come together, it is clear that their status as independent and autonomous professionals and leaders in healthcare will decline, as will their income. The actions of physicians and hospitals during this time will determine the structure of the future healthcare delivery system, and the implications for physicians will be profound.
Patricia Costante is the Chairman and CEO of MDAdvantage Insurance Company of New Jersey in Lawrenceville. For more information, visit www.MDAdvantageonline.com.