In our annual HealthLeaders 20, we profile individuals who are changing healthcare for the better. Some are longtime industry fixtures; others would clearly be considered outsiders. Some are revered; others would not win many popularity contests. All of them are playing a crucial role in making the healthcare industry better. This is the story of the Supreme Court.
This profile was published in the December, 2012 issue of HealthLeaders magazine.
"Reform is going to occur one way or another and we would rather have planning and thoughtful preparation to deal with it."
When, like the unseen men in the instant replay booth of the NFL, the Supreme Court decided to weigh in on healthcare reform legislation, many would like you to believe that a hush fell over the crowd as the players stood on the sidelines and waited for the decision. But the replay of healthcare reform legislation before the highest court in the land was anything but instant. Hospitals, health systems, employers, and payers had to muddle through. What kept them driving is not only the relentless march of ever-higher healthcare costs, and the persistent questions about the quality of that care, but also the hope that a confluence of technological and evidence-based treatment protocols is ready to finally deliver improvement on both fronts. Still, the justices' decision to review the Patient Protection and Affordable Care Act led to widespread uncertainty about how hospitals, health systems, and indeed, any entity associated with the business of healthcare, should alter its strategic plans. And that waiting game went on for many months. Because the ultimate decision clarified what the law is able to do—namely, to force people to obtain health insurance or pay a penalty—and what it is not able to do—namely, to force states to expand their Medicaid eligibility rules—the decision deserves a mention as the most impactful of the year, if not the decade.
Clearly, there is no unanimity of opinion on the matter—among the justices themselves or the members of the healthcare industry itself—but the fact that the decision allows reform to proceed under some certainty is why many hospital and health system leaders are grateful.
"The need for reform and the reform process had begun even before the passage of ACA," says Michael Schnieders, president and CEO of Good Samaritan Hospital in Kearney, Neb. "The ACA accelerated that rate of change. The Supreme Court came out with its ruling giving direction on the federal level, and we can continue our reform. Uncertainty remains at the state level regarding Medicaid expansion."
When the decision finally was announced in June, it gave senior leaders at least a modicum of solid ground upon which to begin making decisions about how to position their organizations strategically for the intermediate and long-term future.
"We know there's a need for radical change," Schnieders says. "It wasn't going to stop the train if they came back and ruled it unconstitutional, but it would have slowed down reform and it would have had to restart at some point in the future. Reform is going to occur one way or another and we would rather have planning and thoughtful preparation to deal with it. That said, even today, we're not really sure what the regulations are going to be, so there's still a lot of uncertainty about what will be required."
The two key decisions the Court handed down went in seemingly opposite philosophical directions. While the court affirmed the federal government's right to compel the purchase of health insurance, it said the feds were unable to force states to commensurately expand their Medicaid eligibility guidelines and set up "health insurance exchanges," that is, state-regulated, standardized health insurance plans from a variety of insurers available for purchase. While the federal government has promised to pick up 100% of the tab for the expansion for the first three years (2014–2017), it does ratchet down the feds' share to 90% by 2020 and future funding, given the national debt and deficit levels, is far from assured from future Congresses. For his part, Schnieders understands both sides of the argument regarding the Medicaid expansion. His state, Nebraska, is squarely on the fence from the legislative standpoint, but Republican Gov. Dave Heineman has vowed to oppose it, saying the state cannot afford to expand Medicaid.
"Clearly, I understand both sides on the concern with funding," says Schnieders. "Essentially, will the funding commitment remain for the long term? We all know the federal budget, so adding additional expense to that is risky. However, from our organizational philosophy, it's always better for people to have access to planned healthcare—not emergency-only. If we did expand, the most vulnerable would have access to primary care, and all things being equal, it's better care and lower costs."
Whatever Nebraska and other states decide about the expansion, the impact will likely have a pronounced effect on hospital and health system finances—but not necessarily in the way one might think.
"Last year we had about $5 million in traditional charity care," says Schnieders. "We would see that decreasing if there were an expansion, but on the other hand, Medicaid doesn't cover the cost of our care and in that same year we had unreimbursed costs of $9 million, and that would probably increase under a Medicaid expansion."
Despite all that the Court's decision makes clear however, CEOs are not fooled into thinking they can simply adapt to the law's provisions and continue to prosper. In fact, the toughest part of healthcare remains its stubbornly high cost, which continues to rise much faster than the rate of inflation or GDP growth.
"No matter what happens with the state decision on expansion, hospitals in this country, and physicians as well, all know we need to reduce our cost of business," says Schnieders. "How do we increase efficiency and improve quality? We know the financial commitments of the government, and just like in our home budgets, we've met the problem and it's us. We've got to reduce our costs. Our movement toward a new way of providing well care as opposed to sick care after the fact—that moves us to a new cost structure, not laws."
Philip Betbeze is the senior leadership editor at HealthLeaders.