The president and CEO of the American Hospital Association shares a bit about the challenges facing the nation's hospitals in 2019, and where he believes political headway can be made in a divided Washington.
The next 12 months will provide plenty of challenges for the nation's hospitals.
On the business side, hospitals are reconfiguring to meet the changing demands of their patients, as they contend with competition from nontraditional players who are edging into the provider space with the potential to upend care delivery.
On the regulatory side, meanwhile, the federal government has a to-do list with a number of consequential issues, including drug pricing and Stark Law reforms, as the future of the Affordable Care Act is being argued in federal courts. All of this comes amid a partial government shutdown, the second-longest shutdown in the past four decades.
American Hospital Association President and CEO Rick Pollack spoke with HealthLeaders about the challenges and opportunities facing hospitals in 2019. The following transcript has been edited for length and clarity.
HLM: What are the big issues for hospitals in 2019?
Pollack: There are going to be some distractions and controversies that play out in the political environment. Depending upon where we end up with government funding, that could be the first order of business in one form or another, and that could take up time at the beginning.
Politically, it's the future of the Affordable Care Act. There are a couple of issues that we still want to pursue, but they could be difficult to pursue, given the uncertainty that's out there. For instance, we think that we ought to move forward on the bipartisan efforts to bring some marketplace stabilization to the exchanges. We think that some of the states that have expanded Medicaid, where they not only had referenda to expand but now have a different political dynamic, that we ought to see the Medicaid expansion move forward.
That has implications for dealing with opioid abuse. Medicaid expansions are effective in dealing with people suffering from opioid problems.
HLM: Are there bipartisan issues where we could see progress?
Pollack: First is on drug costs. We thank the president for providing leadership on that issue. We have some concerns with his proposal, but we think that there are opportunities there both legislatively and through the president's leadership to deal with drug costs.
The second area of potential is around infrastructure. People talk about an infrastructure bill, but there could be health aspects to an infrastructure bill as well.
Third, perhaps the flagship of regulatory modernization is the issue of the Stark Law, which creates a real obstacle for us to move from fee-for-service to value-based payments, because it prevents organizations from rewarding the kinds of behaviors that are necessary to make value-based payments work.
The fourth area is delivery system reform. One of the ideas that we are very supportive of addresses new delivery system options for rural communities. There's the Rural Emergency Medical Center Act that enjoys bipartisan support. It gives rural communities the opportunity to reconfigure the best access points in their community.
One other issue we're dealing with next year is the Medicaid DSH cuts. They would kick in on October 1, and of course we're against seeing those cuts kick in.
The other regulatory action that we have a real concern over is the public charge rule that would result in over 13 million people potentially losing coverage.
HLM: What would you like to see in an infrastructure bill?
Pollack: We all want to be really focused on making sure that the availability of broad band in rural areas to make sure that they have access to the digital world. It also as implications for bringing telehealth to rural areas.
Another thing that ought to be part of an infrastructure bill is strengthening our capacity and capability to respond to emergency readiness. While we fortunately have not had any incidents in a while, recall what happened when we all had to gear up for Ebola. There are enormous resources that are associated with caring for those types of situations.
And we need assistance for hospitals in right sizing and reconfiguring themselves for the future. A lot of them are in rural areas, but also in urban areas, where a lot of care as it can be done outside the building.
Eighty-six percent of all healthcare spending is on people that have multiple chronic conditions, and a lot of those multiple chronic conditions can be cared for in sites that are outside our traditional buildings, some of it even at home. The notion of having hospitals at home to take care of certain people, all of that involves right sizing.
And for hospitals that are in vulnerable communities, particularly in rural areas, they just simply don't have the resources to reconfigure themselves for these changing dynamics.
HLM: Who is responsible for rising medical costs?
Pollack: Everybody's responsible for that. There's no question that we all have a role in dealing with reducing costs, and we think that delivery system changes that provide the right incentives to reduce costs and improve quality is the way to go.
But, I wouldn't be honest if I didn't say that drug costs are the biggest part of the of our budgets that are growing at the fastest rate.
HLM: Is hospital consolidation driving costs?
Pollack: We've tried to demonstrate in our research that consolidation achieves efficiencies that reduce revenue per admission. The AMA did a great study on this that shows there's so many areas where it's not provide consolidation, it's insurance consolidation that's overwhelming in some communities.
The real reason that we're doing mergers and consolidations is to increase scale, because you need to increase scale to take on risk. To do value-based payment you need to scale to undertake quality initiatives that are standardized clinical processes and that eliminate variation.
We find that consolidation provides more access to care to more service sites. We find that consolidation creates an ability for hospitals to get capital, because they're part of larger organizations that they would never be able to access to modernize and reconfigure the ability to do purchasing outside of GPOs, important reason for merger and consolidation.
A lot of the mergers and consolidations are rescue operations for hospitals that would go bankrupt if they weren't a part of a larger system. They're watchdogs out there that are pretty aggressive, particularly the FTC, and it's not as if people can do anything they want when they do it. There's an accountability there.
HLM: What are your expectations for price transparency in 2019?
Pollack: There's been a lot of moves on this past year around price transparency, and the administration is put forth its final rule that will require hospitals to disclose their prices, beginning January in a machine-readable format.
Another area that they might take aim at is surprise billing. We definitely want to work with Congress to protect patients from surprise bills, particularly those emergency situations when they go to an in-network hospital and receive care from doctors who out-of-network. We've got to protect the patient in those situations, and the insurers needs to do a better job of making sure that their networks are adequate.
On transparency, what we really need to focus on making sure patients know what their out of pocket exposure is. Over half of the revenue stream for hospitals and health systems are rate set, Medicare, and Medicaid and accounts on a sliding scale for on the commercial side. There's a need for transparency.
What people really want to know is their out-of-pocket exposure. Working with insurers, we need to do a better job of making sure that they know what that is.
HLM: Are these vertical mergers, such as the CVS-Aetna deal, a threat to hospitals?
Pollack: I can see how some people might view them as threats, but I prefer to see that there could be opportunities.
A lot of hospitals are working with these entities in various joint ventures. A lot of systems are in agreements or in arrangements and running clinics in CVS, and in Walmart, and in Walgreens so that there are potential opportunities there.
We aren't going to see babies delivered in the drugstore, and we aren't going to see people run to the CVS for an emergency, and we're not going to see sophisticated diagnostics and therapeutics and surgeries being done in strip malls. Everybody has their role in the delivery system.
“A lot of the mergers and consolidations are rescue operations for hospitals that would go bankrupt if they weren't a part of a larger system.”
Rick Pollack, CEO and President of the American Hospital Association
John Commins is a senior editor at HealthLeaders.
Drug pricing, surprise billing, healthcare infrastructure, and Stark Law reforms could be issues with bipartisan support.
Pollack says hospital consolidation is needed to increase scale for the transition to value-based payments.
Infrastructure funding could help hospitals reconfigure as more services shift to outpatient care venues.