On May 4, on Capitol Hill in Washington D.C., House Republicans passed the American Health Care Act (AHCA), legislation designed to repeal and replace some portions of the insurance-related provisions of the Affordable Care Act, and paving the way for a Republican-led effort to reform the healthcare system.
Many healthcare policy leaders have noted that there is a long road ahead before the bill might head to President Donald Trump’s desk as the bill still needs to pass the Senate. In fact, the Congressional Budget Office (CBO) is scheduled to release its analysis of the revised bill this week and, depending on the CBO’s updated analysis, there is ongoing uncertainty about how the GOP’s efforts to overturn and replace portions of the ACA will ultimately play out.
In the wake of the House vote, Healthcare Informatics Associate Editor Heather Landi spoke with Michael Abrams, co-founder and managing partner of St. Louis-based consulting firm Numerof and Associates, to discuss current federal health care reform efforts. In that discussion, Abrams shared his perspective that federal legislators need to address the fundamental issues that are challenging the U.S. health care system, rather than just solely addressing the insurance provisions within the ACA. “The underlying issue is that we’re looking at healthcare costs that are accelerating rapidly and will only go up from here; and it’s a function of the way we pay for healthcare and not a function of the insurance system,” he said.
In that interview, Abrams shared his thoughts on health care system reform, in broad terms, why value-based care programs at the federal level are too complex and what the leaders of patient care organizations should be focusing on now to effectively navigate the increased uncertainty about the direction and pace of healthcare policy change. Below are excerpts from that interview.
Why do you think the American Health Care Act, and previously the ACA, doesn’t go far enough to address the underlying issues in healthcare?
Most of what this legislation [AHCA] does results in fewer insured lives, and fewer insured lives means fewer paying customers and more unreimbursed care for hospitals. The major source of savings in the bill is the reduction in spending on Medicaid, through per capita caps or block grants and by phasing out the Medicaid expansion. Reduced spending here means less revenue for hospitals, which means more pressure on hospitals, more belt tightening by hospitals. Don’t get me wrong, I think that there’s plenty of waste and inappropriate delivery of services in hospitals; that is what has brought us to where we are today, which is, we spend twice as much as any other developed economy and we don’t even get the same quality of outcome. But paying less for every unit of service is not going to fix the problem, and effectively that’s what we’re doing here. And all the while we’re arguing about how to spread the cost, but we’re not changing the underlying issue, which is the cost itself.
What should healthcare provider organization leaders be taking away from all this?
Well, for many years now, advisors to the healthcare community have been telling healthcare delivery executives that they need to learn how to be profitable, at lower payment rates, and clearly that’s where we’re going. Let’s talk about the consequences of this: You force upon hospitals more unreimbursed care, they have shrinking bottom lines, they merge in order to try to save themselves; so smaller ones, the rural ones, close their doors. What are you left with? You’re left with fewer and larger systems that dominate healthcare delivery, trying to get by on smaller and smaller margins. But the truth of the matter is, they are still doing things the way they’ve always done it. By that I mean, there is still tremendous waste in the system, any healthcare administrator whom you talk to off the record, will acknowledge that 30 to 40 percent of the services that are delivered are unnecessary or downright harmful. And why is that? Because we have a payment system that is piecework—the more service you provide, the more money you get paid. You are incentivizing hospitals to deliver more acute care services; you can pay less and less for every unit of service, but you haven’t changed the underlying dynamic.
What is the end product? You have fewer and larger systems that dominate healthcare delivery, and they are all trying to get by on leaner and leaner margins, but many of them are not doing anything different than what they have always done. They are trying to pay their staff less, and trying to pay their physicians less, and at what point do people start leaving the field and say ‘I’m not taking Medicare and I’m not taking Medicaid, it doesn’t pay me to do it anymore.’
What do you think leaders in Washington D.C. should be focused on regarding healthcare reform?
I think we need to move toward a market-based model, which is to say we need transparency and cost and quality; we need to make sure that consumers have access to that data, and understand what’s valuable and what’s not. Secondly, we need to connect payment with outcomes by holding providers accountable for results, rather than simply incentivizing, as we do now, more procedures and more intervention. And, then, finally we have to keep consumers at the center of their care and encourage competition. I think that if people have access to information about the quality of the services that they are buying and are given the ability to choose between providers who are accountable for the cost of care, then consumers will be able to drive market-based improvements in outcomes and cost, but none of this is going to be accomplished in the way that it’s been approached either by the Obama Administration, or by this legislation. And as long as we don’t do anything about the underlying cost of healthcare itself, then arguing how you spread that cost around in terms of insurance premiums is missing the point.
What needs to happen to get leaders focused on those issues?
I think that CMS [the Centers for Medicare & Medicaid Services] made some steps in the right direction by making available what their reimbursements are to hospitals across the country for the top 100 procedures. It’s a step in the right direction. I think that there are things going on—there are entrepreneurs across the country that are looking to utilize available data to make that accessible to consumers. In the same way that you use Yelp to choose a restaurant, we’re moving towards the use of similar kinds of platforms for choosing physicians and hospitals. That’s part of the transparency idea, and taking steps to incentivize those kinds of things would be helpful in terms of giving consumers choice. An enormous conceit that was part of Obamacare was that the administration, in 45,000 pages, could lay out step-by-step what physicians and hospitals needed to do and it clearly hasn’t worked. We’ve got to make providers accountable for the results.
What should healthcare organization leaders be doing to focus on accountability, transparency, cost and quality?
There is a segment of healthcare executives, a relatively small group of hospitals across the country, working towards a more value-based care approach, in which they do seek to integrate evidence-based medicine, for example, into the care that they are giving and to introduce a systematic simplification of the way that patients are treated. Net-net, they wind up using fewer resources and get as good or better results. And, they can actually do better even in a fee-for-service world than they would otherwise have done. But it takes leadership that’s not afraid to introduce change, and honestly, that’s simply in short supply across the healthcare delivery sector.
What are your thoughts on CMS’ key value-based programs, such as MACRA and bundled payments?
I think, in principle, it is a step in the right direction, but it is probably overly complex. If I can make an analogy here—the Department of Transportation wants to see car manufacturers produce cars that average certain miles per gallon, and so what do they do? They say by such and such a date, your cars need to average this many miles per gallon, and if you miss that average, it’s going to cost you money. Do representatives of the Department of Transportation go into the car manufacturers’ factories and start telling them how they should build these new engines? No, they simply say, ‘You need to get this outcome and if you don’t, it’s going to cost you money.’ How is that being played out in healthcare? In much of Obamacare, and some of the steps that CMMI [the Center for Medicare and Medicaid Innovation] has taken is they have gone into the factory and said, ‘This is how you build the engine, you have to check off all these specifications, and if you check off all the specifications, then we’ll give you a reward.’ It’s not the same thing.
Making providers accountable for results is what will change the system, and giving consumers information and choice. These are the forces that will change the system. All the material in this legislation (AHCA), none of it is going to solve our problem. Because, as expensive as it is, somebody is going to have to pay the bill, and until we find a way to reduce the size of the bill, we’re just rearranging chairs on the deck of the Titanic.
What should patient care organization leaders be doing to prepare for the changes that might be coming?
The ones that have not gotten serious about eliminating waste and non-value-added cost in their delivery of care need to get serious about it now.