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January 20, 2017

The Trump era begins: What may change for hospitals—and what will stay the same

Daily Briefing

    By Eric Cragun, Senior Director, Health Policy; Rob Lazerow, Managing Director, Health Care Advisory Board; and Josh Zeitlin, Editor

    The beginning of the Trump administration signals a big period of uncertainty for the health care industry and for the future of the Affordable Care Act (ACA), Medicare, and Medicaid. Much could change for hospitals and other providers—but there are also aspects of the health care system that are bound to stay the same. In fact, despite all of the current uncertainty, providers' immediate path forward shouldn't depend on politics one bit.

    What might change under Trump

    So what are the biggest potential changes on the horizon for providers?

    Payment rates. The Affordable Care Act included several significant cuts to Medicare reimbursement rates—amounting to more than $700 billion over a decade, according to CBO—and also called for reduced Medicaid Disproportionate Share Hospital (DSH) Payments.

    It's possible that hospitals could see reimbursement rates and DSH payments restored if the ACA is repealed—but it's not a forgone conclusion. Legislation that passed the House last year to repeal the ACA left those Medicare rate reductions intact, and keeping those cuts would serve Republican goals of curbing Medicare spending and having funding to help pay for an ACA replacement plan.

    One part of the ACA that could cut provider rates—the Independent Payment Advisory Board (IPAB)—is highly unlikely to survive under the Trump administration and the GOP Congress.

    Meanwhile, providers may see reimbursement cuts that go even further than the ACA if Republicans pass the kinds of Medicaid reforms that have been put forward by Trump and House Speaker Paul Ryan. These reforms—whether in the form of per-capita allotments or block grants—might lead states to cut some combination of eligibility, benefits, and payment rates.

    Coverage levels, bad debt, and uncompensated care. The legislation that Congress passed last year to repeal the ACA, which President Obama vetoed, would have eliminated funding for the law's Medicaid expansion and insurance premium subsidies. On Tuesday, the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) projected that the bill—if it were to enter effect without any accompanying ACA replacement measures—would cause 18 million Americans to lose coverage in the first year.

    Uncompensated care costs could rise by $1.1T over decade under ACA repeal, analysis finds

    Any rollback of the ACA's Medicaid expansion or coverage expansion could put further pressure on hospitals' finances and increase uncompensated care and bad debt. According to Advisory Board research, all else equal, a hospital in a Medicaid expansion state has a margin about two percentage points higher than an identical facility in a non-expansion state.

    But Trump's team has said their goal is for no one to lose coverage under their potential proposals—and Trump recently pledged that "we're going to have insurance for everybody." We don't have the details yet, so it remains to be seen whether the administration's plans would achieve those goals.

    It's also worth watching what kinds of insurance "Trumpcare" might allow for. For instance, if an ACA replacement plan doesn't require health plans to cover hospitalizations, that could lead to more uncompensated care, even if the level of coverage remains largely the same or even increases relative to the status quo.  

    Mandatory value-based care models. Rep. Tom Price, Trump's nominee for HHS secretary, has said that requiring providers to participate in alternative payment models exceeds CMS' authority. So it's highly possible—although not certain—that Price if confirmed would halt the agency's current mandatory programs, such as the Comprehensive Care for Joint Replacement Model.

    What will stay the same under Trump

    While there is uncertainty about the future of mandatory models under Trump, value-based care is here to stay. There's broad bipartisan support for MACRA and payment reform, along with great interest from providers in new payment models.

    The interest in Medicare Advantage (MA) is also unlikely to wane: Both MA enrollment and provider interest in offering MA plans have been on the rise, and the Republican-controlled government could lead to an even quicker shift toward the privately-administered plans.

    And regardless of what happens in Washington, D.C., there are three no-regrets priorities for health systems to succeed under the next era of health reform: accessibility, reliability, and affordability.

    Accessibility. Being more accessible and responsive to patients' needs and desires isn't just a nice feature—it's essential in a world where patients can pop into a neighborhood pharmacy for a check-up.

    That means health systems need to develop a diverse network of access points—such as urgent care, retail clinics, and primary care—to meet varied consumer access demands. And they need to develop platforms that allow patients to search for services, estimate prices, and schedule their visits, all from one place.

    Reliability. Health systems will also have to be more reliable in order to build trust among their consumer base. They'll have to be more reliable not just on care quality but on consistently delivering an excellent service experience.

    Providers who make investments in time and energy in those areas will set themselves apart—and those who don't will fall behind.

    Affordability. Lastly, health systems will have to become more affordable to succeed in an increasingly competitive health care landscape. They'll need to be willing to partner with lower-cost providers and to get serious about revamping their fixed cost structures.

    Of course, making progress on accessibility, reliability, and affordability is easier said than done. It'll require health systems to do far more than they have in the past to reduce unwarranted clinical variation, to be intentional about their Medicare risk strategy, to increase consumer loyalty, and to build high-performing physician networks.

    But organizations that make investments in these areas will set themselves up for success, no matter what happens with the Trump administration and health care. No president can change this basic fact: The health care system is becoming more competitive and consumer-focused, and organizations need to adjust to that new reality.

    Advisory Board experts will be talking much more about how to succeed in the new era of health care at Health Care Advisory Board national meetings across the country. We hope you'll join us.

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