The risk of reform: How US healthcare systems are responding

The US hospital industry is massive. Even with a staggering trillion dollar spend, rising costs and major shifts in risk underway from payers to providers mean hospitals face serious challenges.

US Healthcare - 2015

Lessons from the past

Over the last forty years the US has fostered a fee for service environment in hospitals; the success of an institution depended on people being sicker and staying in hospital longer. As this changes hospitals need to take an aggressive look at cost structures and embrace a new reality: one in which providers are increasingly responsible for the health of populations. As a result, risk profiles will look quite different. Instead of a hospital system you will be looking at a hospital, health insurance and health plan system all in one.

The Affordable Care Act (ACA) has made substantial changes, eg more coverage for children, no lifetime limits on amount of insurance for individuals within a particular plan, Medical Loss Ratio (effectively caps underwriting profit ratios), no pre-existing condition exclusions and no health-based underwriting. But regardless of whatever reforms might be happening at a political level, it is clear that hospitals and caregivers need to reform within their own systems to survive.

The key will be using old ways of thinking to address new problems. Ascension Health Alliance used this approach to successfully reform their professional liability programme over time, reducing costs per occupied bed by an impressive 41%.

Implications for the future

The Primary Care Incentive Program (CPC) is one example of a US response to reform risk, by requiring primary care physicians to take more responsibility for the holistic care of patients. As levels of shared risk increase, the next generation of Accountable Care Organizations (ACOs) could conceivably be both provider and insurer; by receiving a monthly fixed premium to take care of the health of an attributed population.

But are hospitals ready for transition towards more risk? They certainly face substantial headwinds, eg after accounting for penalties, only 792 out of 3000 hospitals participating in value-based purchasing programmes received net payment increases. And only a third of Alliances ACOs were actually able to control costs to get an upside or premium.

Finally, cost and quality components of MACRA will make it increasingly difficult for small providers, independent practice groups and doctors to stay in business. Collaboration within and between healthcare systems will be vital.

Summary of the Centre for Global Dialogue's Transforming Healthcare event in February 2017. Summary by David M. Taylor.