The recently enacted Patient Protection and Affordable Care Act, which is intended to permanently fix the nation’s health care delivery model, is causing providers to make dramatic changes to their operations. It was enacted only after a highly contentious legislative process, and despite its passage, the debate rages on.
A great part of the discussion centers on an issue many would have found surprising when the law was first passed. This issue is, of course, how long, or even if, the Patient Protection and Affordable Care Act will survive. The law is subject to extreme legal and political uncertainties. For this reason, providers are worried, or at least should be, that passage of the health care reform law is not the end of uncertainty, but merely the beginning.
SOURCE OF UNCERTAINTY SURROUNDING HEALTH CARE REFORM
The uncertainty surrounding the health care reform law stems from several sources. The principal reason for it is the litigation regarding the constitutionality of the law. However, even if the legislation is deemed constitutional, it is by no means certain that the law will remain unchanged.
The constitutional debate largely centers on the individual health insurance mandate. The central issue is whether this is regulation of an activity having a substantial effect on interstate commerce and is therefore a constitutional use of Congress’ power. Some Federal courts have held the health care reform law constitutional, while some have held it unconstitutional. Those courts holding the law constitutional have said that the decision to forego insurance is a decision to become a “free rider” and that this substantially affects interstate commerce. Courts taking the opposite view have said that not buying insurance is, for various reasons, not interstate commerce and therefore beyond Congress’ regulatory authority. The issue will almost certainly be decided by the Supreme Court, and there is little agreement about which way it will rule.
Adding to the unease felt by many providers are the ongoing legislative efforts to repeal or modify the law as it currently stands. A measure to repeal the law passed the Republican-controlled House, but not the Democrat-controlled Senate. Meanwhile, Republicans continue to try to modify the parts of the law they most disfavor. While these efforts may have appeared quixotic in the past, they have achieved some success by doing away with some of the law’s most unpopular provisions.
The House also passed a measure to defund part of the law. Substantial cuts to Medicare and Medicaid are also a distinct possibility under the recently passed 2012 budget, but even if no changes are made, political gridlock could put more fiscal pressure on providers as a divided Congress has historically meant lower Federal spending.
Even a partial repeal could have momentous effects on providers. The law is a highly intricate structure of rules, the efficacy of one often depending on the existence of another. If one component of the law is stripped away, then the stresses created by another provision may cause the entire structure to collapse.
COPING WITH THE UNCERTAINTY—CERTAINTIES SURROUNDING HEALTH CARE
While the future of the reform law is cloudy, some developments can be predicted with a degree of certainty. Medicare and Medicaid reimbursement is falling from already low levels. Furthermore, private insurers are encouraging patients to use lower cost providers. Therefore, even without the impetus of the reform law, providers would still have to find a way to lower costs. It seems equally certain that cutting costs will have to be achieved by some manner of investment and restructuring. Consolidation is one way to achieve this. There are more options available to hospitals, for example in IT investment, if they are part of a system. Other methods of lowering cost are created by, or at least subsidized by, the reform law, for example subsidies for setting up electronic health records systems. These methods may help to lower costs even if the reform law is invalidated. As such, providers should not necessarily stop pursuing such initiatives.
POSSIBLE CHANGES TO THE LAW
Health care providers seem to be proceeding under the assumption that the reform law will remain in effect and will remain substantially unchanged. However, due to the significant investments they are making in time and money in order to adapt to the law, many providers are keeping a wary eye on developments in Congress and in the courts. They are right to do so.
Republican plans for health care reform, as they exist at this time, might embrace some of the goals of the current reform law, but they go about them in vastly different ways. As a result, these proposals would dramatically change the current law. For example, under Congressman Paul Ryan’s much discussed budget plan, Medicare and Medicaid would have changed dramatically, with premium support in the case of the former and block grants in the case of the latter. Other Republican proposals include tort reform, enabling the purchase of insurance across state lines, and the expansion of health savings accounts. Adoption of these proposals could make the current reform law, and all the work done to comply with it, largely obsolete.
WASTED TIME AND MAYBE WASTED MONEY
The incertitude surrounding the health care reform law has had undoubtedly negative effects. Uncertainty is the enemy of any business, including health care providers. In a recent survey of health care providers, more than 70% of respondents said that legal challenges to the health care reform law have led to doubts affecting the decision making at their organizations. This must inevitably lead to delays in implementing strategies. Problems go beyond mere delays, however.
Providers are spending vast sums of money to comply with provisions in the reform law that could possibly become obsolete, and the law’s complexities only drive up the price of that compliance. For example, spending on efforts to form Accountable Care Organizations (ACOs) has reached astonishing levels, with fees reaching $25,000 for a 1-day strategy session to $1 million for full implementation. The money spent on ACOs, as well as other aspects of the law, may all have been wasted, however, if the law is repealed or declared unconstitutional. ACO pilot programs exist only by virtue of the reform law, and if the law is repealed, those programs will cease to exist. It is true that these pilot programs are one element of the law with bipartisan support, but there is no guarantee that this or any other part of the health care reform as it currently stands would be included in a new and amended version of the law.
The recent health care reform law may not survive the significant legal and political challenges to which it is subject. Providers must plan for this eventuality. Of course, they cannot simply stop taking the steps necessary under current law just because that law might change, but they must be wary of pursuing them with such alacrity, especially if they involve great expense. The fate of the health care reform law will be decided sometime next year, either through a decision by the Supreme Court or through the 2012 election. Should it be repealed, invalidated, or dramatically modified, hospitals will be in a brave new world of health care reform. Even without the law, there will be change in the American health care delivery system. For this reason, providers (hospitals and physicians) must form a very clear idea of what they can and cannot do to lower costs and raise the quality of care. In doing so, they will put themselves not only in a position to shape the debate but also to survive and thrive no matter what the regulatory environment.
The train has indeed left the station. Its final destination is yet to be determined.
Cherilyn G. Murer, JD, CRA, is CEO and founder of the Murer Group, a legal based health care management consulting firm in Joliet, Ill, specializing in strategic analysis and business development. Murer may be reached at (815) 727–3355 or via her Web site at www.murer.com.