At the Helm

3 reasons why the CBO score should be a wake-up call for hospitals

By Chas Roades, Chief Research Officer, and Yulan Egan, Senior Consultant

The new Congressional Budget Office (CBO) score for the House-passed American Health Care Act comes at a crucial time for lawmakers, and we'll be watching closely to see how the new analysis affects ongoing Senate discussions about health reform.

But CBO's report also comes at a critical time for hospital and health system leaders, who need to take this opportunity to assess whether they're best positioned to succeed in the next era of health care reform.

CBO on Wednesday said the House-passed AHCA would by 2026 increase the number of uninsured Americans by 23 million, reduce the federal deficit by $119 billion, reduce federal Medicaid spending by $834 billion, and reduce Medicaid enrollment by 14 million. Those projections are similar to CBO's score of a previous version of the AHCA.

This latest score also estimates that premiums and out-of-pocket costs would vary greatly for people based on their age and whether they would be among the estimated 50 percent of the U.S. population living in a state that would waive the Affordable Care Act's essential health benefits and/or community rating requirements.

The key takeaway? This report should be a wake-up call for providers, because if the House-passed AHCA becomes law:

1. You'll need to bolster your safety net strategy.

CBO projects that under the House-passed AHCA, 14 million fewer people would be insured by Medicaid in 2026—representing the majority of those projected to lose coverage under the plan. CBO also estimates that the AHCA would reduce federal funding for Medicaid by $834 billion between 2017 and 2026.

States would likely respond to a decrease in federal Medicaid funding in a variety of ways, such as by using federal waivers to experiment with consumer-driven insurance design or delivery system reforms.

That means hospitals and health systems would need to be much more proactive in developing their safety net strategy. Providers should collaborate with state Medicaid officials to help craft their states' responses, double-down on population health and care management efforts, and invest in navigation resources to help the underinsured and uninsured navigate an increasingly complex insurance landscape.

2. You'll need to double down on cost reduction.

The projected increase in the uninsured rate from the House-passed AHCA would mean a rise in uncompensated care, and the decline in actuarial values would likely lead to increased levels of bad debt.

That means health care organizations would have to redouble their efforts to bring their cost structures into line. Specifically, leaders would need to improve revenue cycle performance through a multi-stakeholder, multidisciplinary approach and craft a cost-reduction strategy that includes both near-term savings and higher-upside, longer-term cost restructuring.

3. Developing a cutting-edge consumer strategy will be more important than ever.

CBO projects that out-of-pocket costs could rise under the AHCA, particularly for individuals living in states that waive the Affordable Care Act's essential health benefits requirements.

Those increased out-of-pocket expenses would accelerate the degree to which consumers shop on price and quality.

To respond to the rise of health care consumerism, hospitals and health systems need a consumer strategy that delivers on what patients value, which means improving access and experience, offering more affordable pricing and intuitive transparency tools, and driving patient loyalty over time.

Does this mean big strategic changes? Not necessarily

But here's the thing: These are strategies you need to be working on right now, regardless of what happens with the AHCA and the Affordable Care Act.

Investing in a consumer strategy, focusing on getting your cost structures in line, and bolstering your safety net strategy are all no-regrets steps that we recommend right now, because they'll pay off no matter what happens next.

That doesn't mean the debate over the AHCA is overblown. Far from it: What Congress decides to do could have a dramatic effect on hospitals' finances, and we're watching the Senate debate closely.

Regardless, you need to be ready for what lies ahead. Here are three things you can do to get started:

  1. Download our new research report, "The Consumer Relationship Platform," to learn 10 ways to build a consumer platform strategy that encourages long-term loyalty.

  2. Download Now

  3. Register for one of our five upcoming webconferences recapping our Health Care Advisory Board National Meeting, including sessions on risk-contracting in Medicare Advantage, rethinking the physician network, and strategies to foster patient loyalty.

  4. Register Now

  5. Have a member of your executive team join our experts and their fellow executives  at a 2017 CEO Roundtable Meeting. Join us in a city near you to hear Advisory Board's latest analysis and learn about new business models and provider network strategies designed to generate returns in tomorrow's market.

  6. Secure Your Spot