At the Helm

How C-suite leaders should think about the abandoned ACA repeal vote

by John Johnston, CPA, MHA

The Daily Briefing's Josh Zeitlin spoke with two Advisory Board experts—Chief Research Officer Chas Roades and National Partner John Johnston of Advisory Board Consulting—about how health care leaders should think about the Senate GOP's decision to abandon its planned vote to repeal the Affordable Care Act and overhaul Medicaid.

Q: Chas, let's start with Graham-Cassidy, the bill that the Senate nearly voted on this week. What would this bill have meant for hospitals if it had passed—and what are its prospects of Republicans passing a similar bill at a later date?

Chas Roades

Chas Roades: I can't predict whether Republicans will eventually pass Graham-Cassidy or another ACA repeal bill, but it does seem like they'll keep trying. Sen. Lindsay Graham (R-S.C.) on Tuesday certainly didn't sound ready to give up—he said that passing Graham-Cassidy was a matter of "not if, but when." Most experts are more dubious.

If Graham-Cassidy had passed, it would have had major ramifications for providers. Most significantly, it would have eliminated Medicaid expansion, which has been a boon to hospital margins in expansion states, and it would have instituted per capita caps that cut federal Medicaid funding over time. All told, CBO projected federal Medicaid spending would fall by $1 trillion through 2026 under Graham-Cassidy.

But here's the bottom line: No matter what happens with Graham-Cassidy—no matter what happens with ACA repeal—hospitals and health systems need to pursue four no-regrets strategies:

Q: John, you're talking to hospital leaders all the time about their strategies. What have these past few months been like with them with all the uncertainty about the ACA, and what are you urging them to focus on now?

John Johnston

John Johnston: In general, hospital executives I've spoken with have recognized there's uncertainty around the ACA and Medicaid and have been keeping an eye on what's going on in Washington—but they're facing some major challenges that will require big strategic shifts no matter what happens.

Organizations are really concerned about their cost structures, and some are talking about dramatic cuts—in the hundreds of millions of dollars. Even though most hospitals and health systems are profitable now, they're anticipating margins getting even tighter. Over the past couple years, commercial payers have cut their rates pretty dramatically, and Medicare and commercial payers are making very frequent changes in what they will pay and how they will reimburse for certain things.

When it comes to how hospitals and health systems respond to those pressures, cost reduction today is very different than when the ACA really came to be. In the past, it was more about trimming budgets. Now, because of readmissions penalties, reimbursement cuts, and more hospitals taking on risk, it's much more focused on tackling all the inefficiencies tied up in care delivery. And the Trump administration might change the pace of the shift to value-based care and what the programs look like, but it is clear shifting risk to providers is here to stay overall.

So I'd echo Chas' point: Implementing initiatives to reduce the cost of an episode of care and improve outcomes is going to bear fruit for hospitals in any scenario. You really need to be zeroing in on the five to 10 patient populations that are going to make or break performance and determining how to best partner with all their stakeholders—the medical staff, the post-acute providers, their clinically integrated networks—to see how they can create predictable, competitive costs and drive quality.

Banner Health is an organization we've worked with that has brought their medical staff to the table in a big way to get them to take on ownership of this. University of Pennsylvania recently partnered with us to really zero in on an issue like post-acute care with their patient populations. LifePoint has taken very specific steps to embed quality, financial performance, and physician engagement in their communities across the country. And I could go on.

Q: Chas, in addition to what might happen next with ACA repeal, what else should providers be paying attention to now in the policy world?

Chas Roades: On the ACA, it'll be interesting to see if there's any momentum for bipartisan legislation to strengthen the insurance exchanges, or if it'll continue to be a really partisan health care climate. There are some really important deadlines coming up for Congress—on Sept. 30, authorization for CHIP expires and $43 billion in DSH payment cuts will kick in if lawmakers don't take action before then.

On Medicare, CMS administrator Seema Verma last week in a Wall Street Journal op-ed said value-based care is here to stay but that the agency wants to "increase flexibility" and hear from health care organizations about which CMMI models should and shouldn't continue. Programs like ACOs and voluntary bundles are likely to continue, but I think it's pretty clear that that this administration is looking to reshuffle the priority list a bit—overall, we'll see more time spent on innovations in Medicare Advantage, solutions to drive forward consumerism and market-based frameworks, and efforts to decrease the administrative complexity of the Medicare program, especially for physician practices.

Finally, on Medicaid, the Trump administration has signaled a willingness to implement some state waiver ideas that were previously rejected by the Obama administration, including work requirements and more cost sharing. States can use federal waivers to experiment with consumer-driven insurance designs or to implement delivery system reforms in Medicaid. Lots of those waivers are pending now, but I think we'll continue to see reforms to Medicaid even in the absence of large-scale funding cuts.



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