The only thing certain in the business of healthcare these days is uncertainty. It does not appear the Affordable Care Act will be repealed and/or replaced any time soon, but bits and pieces of it are being eliminated or changed.
The recent tax reform act eliminated the individual mandate, and we’ve already seen the repeal of the tax on medical devices. You can make arguments for or against these changes, but when healthcare policy moves in such piecemeal fashion, it’s hard for the various players in the healthcare industry to form strategies, or to know what to expect from the market.
What we know is that the costs to providers are increasing — a result of rising costs for everything from information and medical technology to pharmaceuticals, energy costs, labor costs and much more. Meanwhile, revenues to providers are being contained for various reasons, which is putting downward pressure on operating margins. The margin for the average hospital is down to a mere 2.7 percent.
The repeal of the individual mandate will likely exacerbate that problem, as younger, healthier individuals will forgo insurance, leaving insurance companies with higher risk, higher cost member pools. Further, with individuals lacking insurance or being underinsured, they will be hindered in their ability to pay the bills they owe to physicians’ practices or hospitals, leading to an increase in bad debt.
Consider also the costs associated with new pharmaceuticals like the recently approved treatment for Hepatitis C. That one medication has added $65 million in costs to just one insurance company operating in Florida. Insurers are seeking to control their finances by adjusting reimbursements to providers, and working with increasingly narrow provider networks, which put further pressure on margins of providers.
If all of this sounds hopeless, it doesn’t need to be. There are steps the healthcare industry can and should take, and it doesn’t even require legislation at the state or federal level.
It starts with looking at the business of healthcare as a system, rather than seeing it in bits and pieces like we tend to do today. The status quo sees a policy change here, a method change there, followed by reactions and impacts these changes bring about. It’s like squeezing a balloon on one end and watching it pop out on the other end. What’s missing is an integrated perspective that addresses the shortcomings in the system and paves the way for more efficient, higher-quality care.
A good model for this starts with something that has long been known as the Triple Aim, which focuses on bringing down the cost of care, improving the quality of the patient experience and improving the quality of outcomes. Recently a fourth imperative has been added to make this approach the Quadruple Aim — and that’s improving the well-being of the care team as well.
Who drives this? The players in the industry themselves do. Physicians, patients, hospitals, insurers, long-term care providers, home health care providers, hospices ... they can all be integrated into one system to efficiently provide healthcare to the communities they serve. It requires the reorganization of healthcare in the private marketplace. Legislation can help encourage it, but the industry itself has to do it.
Antitrust concerns would be understandable, but this has been done successfully elsewhere, so the key is to follow the lead of those who successfully navigated all the challenges and have made it work.
As difficult as the challenges are facing the healthcare industry in Florida, the industry itself has the power to address them. It requires a different way of thinking and of doing business — and the time is right for that very thing to happen.
Steven G. Ullmann, Ph.D., is professor and chair of the Department of Health Sector Management and Policy,Director of the Center for Health Management and Policy for the University of Miami Business School. He holds secondary appointments in the Department of Economics at the Miami Business School and the Miller School of Medicine.