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Reform Readiness

HealthLeaders magazine, December 13, 2011

BRUMLEVE: The biggest fear from a strategic and a margin perspective is that the entire category, not to mention our organization, does become commoditized. Insurance is already a commodity. So when providers become part of insurance entities, it's still an insurance entity. And I think it'd be tragic from my personal point of view to see providers, physicians, hospitals, and everything else included become so commoditized that the only point of differentiation is price. So I think even with quality metrics and everything else, as marketers and as stewards of the brand for the next generation in these organizations we run, the question is, how do you best position and differentiate yourself if the consuming public is really just looking at price?

MANNING: I've been observing the acquisitions of practices by insurance companies. I think this will be a short-lived phenomenon. The direction we need to go is pushing care down to mid-level providers, doing things with telemedicine, using technologies, engaging patients through benefit design and self-management and education.

WALKER: I understand the model, but I'm not sure it will work in this circumstance. Particularly, will physician providers find it satisfying to be under the insurance umbrella, as opposed to the provider umbrella?

HEALTHLEADERS: Back more generally to reform, our survey shows that many would like to repeal parts of PPACA. But at this point, with many large organizations trying to change based on the guidelines in this law, is planning already too far along?

WALKER: This law was a catalyst that set into motion irreversible trends in the market that are not going to reverse, no matter what the government does. It could be repealed today, and this train isn't going to stop. There are aspects of our healthcare system that need to be refined and improved. For instance, the financing mechanism is pretty frail at best. Regarding the individual mandate, there's really very little incentive to have or maintain insurance. But we should be focusing on how to make it work, not how to repeal it, because the present system is undeniably ripe for change.

MANNING: The things that are going to really make it work and drive out the excess utilization will be coming out of the [Center for Medicare and Medicaid Innovation]. We're just starting to see that now, so it's almost premature to comment on that definitively.

BRUMLEVE: I concur. I think the train has left the station. As I said earlier, I think even if this thing were to be repealed in its entirety, the private market forces are already working on it. However, there are clearly aspects that should be significantly changed, refined, or repealed that I think they're worthy of note. One that's already been identified is that the financial penalties for employers or individuals who opt out of insurance are clearly not weighted correctly. Another is the independent payment advisory board. As a 501(c)(3), we could not take—and did not take—a position on repeal or passage of this act, but clearly we think the independent payment advisory board is fundamentally flawed.

WALKER: The large influx of new patients on a broken system is concerning because it's doubtful whether the infrastructure can support this influx without having fixed utilization, outcomes, and value equations. The potential exists to exacerbate the situation by driving up costs further because we haven't got those elements in place yet.

MANNING: To underscore that last point, the law is very heavily consumer-focused, and there is little in it about benefit design change or patient responsibility because that's a political third rail. That's really the missing piece. And it's still basically an open checkbook to get whatever service you want on demand wherever you want it.

WALKER: Yes. There's not enough skin in the game. I've always thought that HMOs did a great disservice to this country by making everybody think every service should be $10. People developed a mentality of entitlement that grew under HMOs. There are still not clear incentives for keeping yourself healthy. Everybody just gets an across-the-board higher premium. Employers are starting to provide some personal incentives, which is positive, but we still have a long way to go.

BRUMLEVE: There's another huge issue that needs to be addressed. As an academic medical center, we have the same three-part mission as any academic medical center: to provide outstanding clinical care, research, and education. The lack of real attention in the act to bringing along the next generation of doctors and other providers is simply stunning. Even if we could find 30% waste in the U.S. healthcare system, the baby boom is coming on like a freight train. We are not dealing with physician or other provider supply in an effective fashion in this act. A reduction in [Indirect Medical Education] funding through Medicare to an organization where more than half the residency slots are already fully funded by us will be extremely challenging.

WALKER: Healthcare has looming human resource issues. The students want to get into the universities to train, but the programs don't have capacity. Those in school aren't being trained to meet the needs of the future. And at the hospitals, we aren't being efficient enough to maximize the capacity of our personnel right now. Compound this situation with the problem of clinical work force age demographics, and it's a perfect storm.

BRUMLEVE: Our take on it as we watch our most senior physicians retire is that it takes 1.5 to 1.6 new physicians to fill in that void just from a work habit perspective.

MANNING: The other issue is that there are a lot of small private practices. While the employed groups are growing, a lot of the smaller practices are just not backfilling—creating their successors. They're just going to go away.

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