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ACA to Drive Cost Containment

June 29, 2012
by Jennifer Prestigiacomo
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Industry experts say now begins the hard work of population health and payer reform

After yesterday’s U.S. Supreme Court ruling to uphold the main parts of the Affordable Care Act (ACA), President Barack Obama’s signature domestic act, the hard work will continue for providers, patients, and payers to drive down the high cost of healthcare. Not only will providers have to manage their populations more effectively in the wake of the ACA, experts say, but patients will have added accountability for the cost of their own healthcare. Payers will also need to do much work to ready their products for primetime via newly developed health insurance exchanges.

“I think the big uncertainty from a legislation perspective is that the ACA was really an access piece of legislation and not a cost containment piece of legislation,” said Mark Van Kooy, M.D., director of informatics at the Pittsburgh, Pa.-based Aspen Advisors, a healthcare consultancy. “That remains a challenge that will need to be addressed, and we’re waiting to see what the next round will be.”

Mark Van Kooy, M.D.

Providers and Population Health
All those interviewed for this article agreed that the ACA had no direct effect on the trajectory of what healthcare organizations were already doing to build the IT infrastructure necessary for accountable care, but what many agreed was that the ACA would usher in a new wave of financial accountability and population health management within healthcare organizations.

“As providers are more accountable for the costs of their care, they’re going to have a significant incentive to invest in new ways to monitor patients more effectively—to make sure they’re not trending to an unnecessary admission to the hospital,” said Christopher Kerns, managing director, research and insights, The Advisory Board Company, a global research, consulting, and technology firm based in Washington, D.C.

Christopher Kerns

Kerns said that with the long-term challenges of an aging population and the rising incidence of chronic disease, managing these patients more effectively outside the hospital will be essential to maintain the provider’s own profitability, whether in the traditional fee-for-service environment of today or the emerging world of ACOs and risk-based payments.

Kerns said the fact that the Supreme Court ruled it would be unconstitutional for the federal government to withhold Medicaid funding for non-compliance with expansion provisions “only underscores the need for providers to be able to manage that population much more effectively, especially because they can no longer count on that additional reimbursement. They have to manage them at a low-cost manner that prevents a lot of expensive utilization.” He added that hospitals were going to be more “on the hook” for payment collections to drive the new reimbursement model and would be increasingly investing in point of service collection mechanisms.

Value- and evidence-based practices will be a part of these cost containment practices that healthcare organizations will be moving toward, said Van Kooy. “I wouldn’t be surprised if you saw more of a shift to more generic, lower-cost drugs,” he added. “We’re also seeing more recommendations to evaluate the effectiveness and limit ineffective therapies, [as well as] constraints around the recommendations for prostate cancer and mammography screenings based on evidence.”

Patients Engagement
The ACA will give new urgency to patients, who through the new mandate will have to buy healthcare insurance or pay a tax, to be more accountable for the costs of their care, experts say. “There will be an influx of individual purchasers of healthcare coverage who are going to want to know if they are getting value for their healthcare coverage dollar,” said Jordan Battani, managing director of the Waltham, Mass.-based Global Institute for Emerging Healthcare Practices at the Falls Church, Va.-based CSC, “and that is going to accelerate healthcare delivery organizations to be able to quantify, demonstrate, and report on the value they are providing.”

Jordan Battani

“It’s also going to give patients the incentive to look to new types of technology to be able to pay their bills, to manage their care, to track their progress,” said Advisory Board’s Kerns. “I think building out an entire infrastructure for patients to enable them to manage and pay for their care is going to be a strategic principle for providers going forward.”

Dave Roberts, vice president, government relations at the Chicago-based Healthcare Information and Management Systems Society (HIMSS) agrees that consumers will be demanding access to their information through their health systems and health plans. “This is just really the tip of the iceberg of innovations that we’re going to see in healthcare now [the ACA] has been decided,” he said.

Dave Roberts

The Payer Side
On the payer side, the ACA will be driving more transparency, quality, and efficacy, said Battani, as well as changing the operating rules for individual insurance coverage payers and small group insurance insurers. “To the extent that health plans have been planning those activities, but taking a wait-and-see attitude about implementation,” said Battani, “what this decision makes clear is time to get moving. There is an extraordinary amount of work to be done.”

The heavy lifting now will be around process change, product redesign, and enabling all the technology to support efforts that will be required for the health plans that intend to participate in these new market segments, Battani said.

“The sleeper issue in [the ACA] is the health plans and payers who intend to participate in those market segments,  and use the [health insurance] exchange as a sales channel for their product,” she said, “they have lot of work to do internally to be able interact effectively with the exchange.”

Battani likened health insurance exchanges to the travel industry, where consumers can book directly either on the airline’s site or through an aggregator like Kayak or Expedia. Battani said it will be a whole different ballgame for insurers to set up the infrastructure to offer their products through an aggregator, and they should start the preparation now.


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