Five quick reactions to the Supreme Court hearings

Our observations on this week's events

Topics: Health Policy, Market Trends, Strategy

March 29, 2012

Chas Roades Chas Roades, Chief Research Officer

Looks like March is going out like a lion. The past three days have seen an extraordinary set of hearings on the constitutionality of the Affordable Care Act in the Supreme Court. The tough questions put by the justices to both sides in the case have created new, and perhaps unexpected uncertainty for the future of the Obama health care reforms. (Whatever your politics, I highly recommend downloading and listening to the proceedings—at a minimum, we got a front-row seat for a terrific civics lesson!)

I thought it might be useful to share our quick observations on the situation as it stands, and how we are thinking about health system strategy given this most recent turn of events. Five key take-aways, in our view:

1. Don’t over-react to the hearings themselves.
We’ll leave the punditry and analysis of the hearings to the professional court-watchers, but surely it would be a mistake to over-interpret the tone and content of the justices’ questions at this point.

One lesson of the past two years is that the political process has a logic all its own—and the Court is no exception. Best to wait until the final ruling to trigger major changes to your strategy.

2. The Supreme Court will not overturn the aging process, or the rise in chronic disease.
As we have modeled out in our Medicare Breakeven Project work, the forces that will most pervasively impact hospital economics over the next ten years are shifts in payer mix and case mix as the Boomers move into Medicare and patients continue to get sicker. In our modeling, the impact of the ACA cuts both ways—some upside from coverage expansion, offset by downside from mandated price cuts.

But the underlying demographics will still dictate our future. In the coming days, we’ll update our modeling to provide scenario-planning capabilities around various potential court rulings (no mandate, no Medicaid expansion, no ACA)—be sure to check our Medicare Breakeven Project website for more information as it becomes available.

One thing is certain: cost-cutting alone will not allow us to sustain our economics over the coming decade—we still face an imperative to transform the care model whether or not Medicare ACOs are a reality.

3. Purchasers of health care will continue to seek to budget their spending.
Medicare, Medicaid, commercial insurers, employers and individuals have all begun to approach health care purchasing with a budget-orientation, looking to limit unnecessary and costly utilization where possible. We are in the early days of a wholesale shift toward “defined-contribution” approaches to health care purchasing, and our care delivery strategies must enable us to provide care for our patients in an affordable way.

If anything, the reversal of the ACA would only hasten the political discussion around even more radical approaches to constraining growth in Medicare and Medicaid spending—a reality we must be prepared for.

4. There is no political constituency or market demand for high-cost, low-quality care.
Regardless of the outcome of the case, the shift toward value-based approaches to health care purchasing will continue. There is broad political agreement that traditional fee-for-service is broken, and both public and private payers (and employers) will continue to seek to link our payment to performance.

Even if the ACA’s value-based purchasing policies go away, the cat is out of the bag—we must continue to invest in strategies that allow us to deliver better, more reliable care in an efficient way. Quality improvement and evidence-driven care delivery will remain essential for success in the future.

5. Right strategy, regardless of the future of reform, must be driven by what’s right for the patient.
The strategies many health systems have been pursuing will continue to serve no matter what happens to the ACA: closer alignment with our physicians, tighter integration across the care continuum, greater use of clinical data and analytics in our work, relentless attention to quality and the use of the best clinical evidence, and a strong focus on delivering value to those who use our services.

These touchstones weren’t created by the ACA, and they will remain key to our success in any future world—truly "no-regrets" strategies.

It’s hard to believe that health care reform is already in its Terrible Two’s! As events continue to unfold, we will remain focused on assisting you in understanding the impact of new policy developments and changes in the marketplace. As ever, our focus will be less on momentary political shifts in direction, than on identifying right answers for you and those you serve over the longer-term. In these fascinating times, we remain truly humbled by the opportunity to stand beside you in that work.

Please don’t hesitate to reach out to me directly if I can be of assistance—you can reach me at

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