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Analysis

Jefferson Health CEO Gives Insight on How to Operate As Medicare for All Looms

By Jack O'Brien  
   November 07, 2019

Dr. Stephen Klasko says health systems are 'about to go through a Category 5 disruption'

The "fragmented," "expensive," and "inequitable" American healthcare system needs fundamental changes, says Dr. Stephen Klasko, CEO of Jefferson Health, but he disagrees that the Medicare for All proposals put forward by Democratic presidential candidates can fix the industry.

Last week, Senator Elizabeth Warren (D-Mass) unveiled her long-awaited healthcare plan, which would institute a Medicare for All model, and aims to reduce the administrative costs of healthcare and cost $52 trillion over a decade.  

Health system executives are carefully watching the developments surrounding the Medicare for All debate and how such a policy proposal would affect their bottom line.

A JAMA report released in April found that implementing a Medicare for All system that extends the current fee schedule to all patients would result in net revenue losses north of $150 billion for hospitals nationwide. The report also projected that hospital profit margins would likely decline as drastically as revenues, from a current average of 7% to a projected negative 9%, while losing 1.5 million clinical and administrative jobs.

In several polls, voters have expressed a strong desire for healthcare reform but remain skeptical about implementing a Medicare for All-style proposal that would eliminate the private insurance industry.

Related: Nonprofits Unsure About Medicare-for-All, But Want Health Reform

Related: 27% Support Medicare for All, Though Most Need More Info

In an interview with HealthLeaders, Klasko says that presidential candidates should focus on putting forward healthcare policy proposals that deal with "the tough problems," faced by health systems and hospitals. He considers reducing administrative costs to be only one component of the issues facing the industry.

Klasko offers three insights into how health systems and hospitals can improve their respective business models by making changes now, continue the shift toward value-based care, and thwart the challenges posed by Medicare for All.

1. Change the way you operate

Klasko says he thinks that healthcare must move from a "sick care model" to a "health assurance model," pointing to how Philadelphia–based Jefferson Health, recently started a refugee clinic for pregnant patients.

Klasko says that being proactive in the delivery process, for example, as opposed to rejecting a mother due to a lack of insurance, assists the patient but also improves the hospital's bottom line by preventing the mother from potentially delivering the baby at a neonatal intensive care unit for $150,000.  

Related: Healthcare Remains Primary Concern for Voters, With Strong Support for 'Medicare-for-All'

2. Make change now

Klasko says that health system leaders should focus on moving care out of the most expensive venues, like hospitals, and endure the pain associated with the shift to value-based care as a way to fundamentally change how to do business. He says that the failure to create significant change will invite outside disruptors like Amazon to the hospital market or government intervention in the form of Medicare for All legislation. 

"We have to recognize that we're about to go through a Category 5 disruption and I think we have to get away from our guild mentality," Klasko says. "We have to get away from everybody protecting what we currently have. If we keep doing that, then as healthcare executives, we'll say 'Oh, we're fine, but it's pharma and health insurance.' Meanwhile, health insurers will say, 'Oh, we're fine, but it's pharma and hospitals.'" 

Klasko says that hospitals need to give up on long-held business strategies and adapt to changing times, such as sending patients to nonhospital settings for care. He adds that the provider industry should offer practical solutions to lawmakers in order to avoid "extreme" legislation, such as Medicare for All.

3. If possible, align with insurers

Klasko says that Jefferson deals with a dozen insurers in the Philadelphia market and thinks that there should be state requirements to have a request for proposal from only one to two insurers. This process, run through the state, would aim to address the fragmented nature of the insurance industry.

Klasko says that healthcare could benefit from having more health systems operating with an aligned insurer, like Kaiser Permanente, Intermountain, and UPMC.

"[The healthcare industry has] had this weird sort of antitrust view of healthcare, that we don't want organizations to get too big. And part of that was because the hub-and-spoke model [operated as]: 'I'll take over a smaller hospital and send more people to my expensive hospital.' If we start to really force prices down, and have patients start to look and say, 'Here's the cost, access, and quality,' you might want larger systems with an aligned insurer; that might be the best way to go," Klasko says.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: January 19, 2019 San Francisco / CA / USA - Participants to the Women's March event carry "Healthcare for all" sign while marching on Market street in downtown San Francisco - Image / Editorial credit: Sundry Photography / Shutterstock.com


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