Health Care Reform: Patient Protection, Affordable Care Act and Implications for Health Care Providers
Things we are thinking about now
On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA).On March 30, 2010, he signed into law the Health Care and Education Reconciliation Act, which made a number of significant changes to the PPACA.
These reforms represent one of the most strategically disruptive events for US Health Care Providers in the last century. Only a few other events come close to matching the potential impact of this package of reforms. These include the Hill Burton Act in 1946 which stimulated the growth and expansion of hospitals across the country, the passage of Medicare and Medicaid in 1965, and the Tax Equity and Fiscal Responsibility Act of 1982 which introduced prospective reimbursement.
The 2010 health care reforms represent a ‘point of inflection’ for providers. Opportunities and challenges will come quickly and should be managed in real-time. In our view, providers should begin contemplating a number of key questions immediately:
- Increased Coverage (and Revenues)
Have you estimated the potential impact of increased coverage and associated revenues on your profit margins and bad debt? Do you have the operational capacity to respond to pent-up demand from the newly-insured?
- Cost Structure
Can you dramatically change your cost structure to reduce your operating costs? Or, framed another way, “If reimbursement rates are dramatically reduced, even to the level of Medicare rates for example, could your organization sustain positive margins and replenish capital over the medium to long-term?”
- Physician Relationships
Are your physician relationships strong and diverse enough to allow for the types of integration and alignment which will be required to support success under episodic payment systems like Accountable Care Organizations or medical home models?
If clinical quality and effectiveness were to become the primary measures by which reimbursement levels were established and differentiated among Providers, is it likely your organization would see its revenue grow?
- Access to Capital
Does your organization have sufficient capital to support the investments which will be required to succeed in a post-reform environment (e.g., health information technology, business intelligence, physician alignment, etc)?
- Market Strategy
If your local market were to consolidate and your largest competitors were to align or disrupt your key physician relationships, does your organization have a defined response strategy?
Negative answers to even one of these significant questions could compromise a provider’s future viability and/or market position. The next 12-18 months will be critical. Providers who are able to quickly reorient their strategy and underlying operations to align with the incentives and ‘new normal’ of the post-reform marketplace, have the opportunity to leap-frog their competitors and assume a stronger position going forward.
Chris Brandt, Principal
National Practice Leader, Health Care Providers
Deloitte Consulting LLP
Michael Cohen, Principal
Deloitte Consulting LLP