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Healthcare Reform Spawns Daunting Regulations

Cheryl Clark, for HealthLeaders Media, January 13, 2011
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For hospitals and those who work within them, the Patient Protection and Affordable Care Act might be a scary tome. Its 907 pages of legislation create new task forces, agencies, and boards; new and greater accountability and efficiency; and, some would say, a whole new world order.

The phrase "secretary shall" occurs more than 1,000 times.

Especially formidable are the hundreds of new regulations the legislation requires, and how much they will change the practice of medicine. Forever. 

"What's scaring healthcare executives the most is the amount of uncertainty that's out there. People just don't yet know," says Thomas Dolan, PhD, president and CEO of the American College of Healthcare Executives. "We know we're going to get less money, but we just don't know how we're going to get less money."

Says Don May, vice president for policy for the American Hospital Association: "I don't know if scared is the right word. But I think there are a lot of different changes coming at hospitals and other providers all at the same time. There's a concern about how much is being thrown at hospitals all at once."

By 2015, "we'll have value-based purchasing readmissions penalties and hospital-acquired conditions penalties," he says. "We'll have meaningful-use requirements and penalties for non-meaningful users. You're going to have to be a high-performing hospital or you're going to have a payment reduction."

For hospitals alone, the cuts will amount to $155 billion over 10 years through disproportionate share payment reductions, financial penalties, and reduced payment updates. And if they fail to meet new standards, everyone will know because the "secretary shall" post their scores here. In time, that could affect their reputations, good or bad.

While most hospital executives say they embrace transparency, how well they score with readmission rates, value-based purchasing incentive payments, and hospital-acquired conditions will be published online for easy comparison to other hospitals near and far. Perhaps patients, philanthropists, payers, and employers don't use those charts to pick their providers now, but that will change when high performers start advertising their success.

"Whenever there's change, there's anxiety," acknowledges Gary S. Kaplan, MD, chairman and CEO of Virginia Mason Medical Center in Seattle. But with the PPACA "there's a potential to improve healthcare for patients and better align payment for what adds value. That's our hope, but that's based on our tenured journey to redesign our processes and contribute to a positive transformation of healthcare."
The legislation is far-reaching, but to keep this article under 900 pages, we will focus on the five issues identified most by healthcare executives we interviewed.

Independent Payment Advisory Board Saves $15.5 billion over 10 years

Said by some hospital executives and analysts to be the most powerful result of the PPACA, this 15-member panel of physicians, health economists, employers, third-party payers, and others to be appointed by the president for six-year terms, may have the single biggest impact on reducing Medicare spending.

The panel will be imposing serious reimbursement cuts for physicians and drug companies starting in 2015, which will impact hospitals in several ways.

Appointees are charged with writing policies that cut reimbursements if Medicare per capita costs exceed the consumer price index in a given year, starting in 2013. Those cuts will begin in 2015 at 0.5%, continue at 1% in 2016, 1.25% in 2017, and 1.5% in 2018 and thereafter. Perhaps most important, the policies of the IPAB must be instituted unless Congress enacts an alternative policy that leads to an equivalent reduction. 

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