ASHHRA: Learn to Live with Lower Medicare Reimbursements

Hospitals and health systems that hope to survive in the era of healthcare reform will have to learn to live with lower Medicare reimbursements, says healthcare consultant and futurist Ian Morrison.

"Do as every other industry has done and change how you deliver services," Morrison said Tuesday as the keynote speaker at the closing ceremony for the 47th Annual Convention & Exhibition of the American Society for Healthcare Human Resources Administration, in Phoenix, AZ.

"That is what we have to confront very rapidly and I don't see enough evidence that we are doing that," he urged.

Morrison says many healthcare executives operate under two flawed assumptions: That reimbursement should cover the cost of care, and that "the way we are doing it now is the right way."

He said he was recently confronted by a hospital CFO who complained that Medicare doesn't cover the cost of care. "I said 'Dude, let me rephrase that. Medicare doesn't pay the income aspirations of you and your people for doing things exactly the same way you've been doing them for 25 years. Change the way you do the things you do, like every other industry has had to do over the last 25 years,'" he recalled.

That acceptance of lower reimbursements will require "new math," Morrison says. For example, a shift towards population-based payments will encourage healthcare providers to change the way they conceive of integrated care. "People say that sounds like capitation. It is capitation," Morrison said.

The new math will also require consumers to become more engaged in their healthcare coverage and its limitations. "The high-cost fancy places are going to be called out in these high-performance networks as unaffordable and if you, the public, want to go there, you are going to have to sign up with some other plan," he explained.

Morrison says changes in the healthcare delivery model will be facilitated and accelerated by technology, and the compensation principle will shift from actions to outcomes. "Patients don't want health services, they want outcomes," he said. "We tend to give them health services rather than deliver what it is they want. We also tend not to persuade them to do less. We persuade them to do more."

He also sees – and supports – further consolidation of the healthcare industry, because larger integrated healthcare systems are simply more efficient. "A lot of these smaller institutions need to be swept up into larger networks of care," Morrison says.

"I see large hospital systems rapidly consolidating and integrating and expanding their base but they need a payment signal from CMS that that is a good thing to do," he continued. "If you are going from volume to value you are going from 'fill the hospital' to 'empty the hospital'. That is a different mindset."

Morrison says every hospital should be planning to integrate health services for accountable care – even if they have no plans to join the ACO pilot. "That means prepare to take financial risk for the patients, maybe not full capitation, but certainly bundled payment. Integrate with your medical staff and dedicate those staff to higher performance," he says. "The only way I know to be in the forefront 20 years from now is make it better, faster, cheaper. Make it cheaper care. Learn to live on Medicare. Make it better. Continuously improve performance and focus on outcome not just processes."

Even with the uncertainty and upheaval in the healthcare sector, Morrison reminded the ASHHRA crowd that it is an "exciting time in healthcare." He cited a recent Centers for Medicare & Medicaid Services estimate that healthcare spending could hit $4.6 trillion by 2020. "This is a great business to be in. Do not be depressed. Go home uplifted," he says. "You do not want to get a job in commodity textiles. This is the business you want to be in."