Tag: risk management

The Perfect Storm: Health Reform and America’s Hospitals

Jun 3, 2014• 17

By Michael Turpin

When the Cleveland Clinic announced job and expense reductions of 6% in 2013, the healthcare sector took notice.

Did the world-renowned hospital and healthcare research center, with 40,000 employees and a $6 billion budget, really believe it did not possess the heft to take on the increasingly turbulent sea changes in American healthcare? Or was this yet another stakeholder using Obamacare as cover to drive draconian change?

Both sides of the political aisle were quick to make hay of the announcement, with conservatives blaming reform for eliminating jobs while liberals questioned the timing of the cuts when the Cleveland Clinic was posting positive growth. The answer from Eileen Sheil, corporate communications director, was apolitically straightforward: “We know we are going to be reimbursed less.” Period.

The question of reimbursement reform and the unintended consequences of the Affordable Care Act are weighing on the minds of hospital executives nationwide as independent, regional and national healthcare systems grapple with a post-reform marketplace. The inevitable conclusion that the unsustainable trend in American healthcare consumption is now at its nadir seems to have finally hit home.

These days, America’s hospitals are scrambling to anticipate and organize around several unanswered questions:

How adversely will Medicaid and Medicare reimbursement cuts affect us over the next five years?
Can we continue to maintain our brand and the perception that any employer’s PPO network would be incomplete without our participation?
Can we become a risk-bearing institution?
Can we survive if we choose not to become an accountable care organization (ACO)?
Will the ACO model, by definition, cannibalize our traditional inpatient revenues?
Can we finance and service a hard turn into integrated healthcare by acquiring physician and specialty practices?

Go It Alone or Join a Convoy?

Mergers and acquisitions remain in high gear in the hospital industry—“the frothiest market we have seen in a decade,” according to one Wall Street analyst. “Doing nothing is tantamount to signing your own death certificate.”

Many insiders believe consolidation and price deflation is inevitable in healthcare. Consolidation, however, means scarcity of competition. If we operate under the assumption that scarcity drives costs higher, we may not necessarily feel good about consolidation leading to lower costs unless mergers are accompanied by expense cuts that seek to improve processes, eliminate redundancies and transform into a sleeker, more profitable version of one’s former self.

Bigger may not always be better, but bigger seems to have benefited a select group for the last decade.

Will There Be An Obamacare Death Spiral in 2015? Probably Not.

Jan 6, 2014• 106

By ROBERT LASZEWSKI

If the Obamacare health insurance exchanges are not able to get a good spread of risk––many more healthy people than sick––the long-term viability of the program will be placed in great jeopardy.

Given the early signs––far fewer people signing up than expected, enormous negative publicity about website problems, rate shock, big average deductibles, narrow provider networks, and a general growing dissatisfaction over the new health law––it is clear to me that this program is in very serious trouble.

But that trouble would not necessarily transfer to the health insurance plans participating on the state and federal health insurance exchanges.

Obamacare contains a $25 billion federal risk fund set up to benefit health insurance companies selling coverage on the state and federal health insurance exchanges as well as in the small group (less than 50 workers) market. The fund lasts only three years: 2014, 2015, and 2016.

The Health Insurance Shell Game

Jun 19, 2013• 2

By Nortin M. Hadler, MD & Janet Schwartz

The insurance industry had a rocky start a century ago. It was clear that there were untoward events that could befall any of us with catastrophic results, from the incineration of a home to the loss of the ability to maintain gainful employment from injury or death.

Insurance offers a mechanism to share this risk. The stumbling block was the possibility that the insured might burn down their home to collect. Once it was realized that “moral hazard” could be held at bay by investigating for fraud, there was little to hinder the growth of an industry designed to serve our risk adverse proclivities. Almost every adult has some experience valuing the expense of sharing risk for a variety of hazards. After all, automobile insurance is generally compulsory and most of us are familiar with notions of deductibles and riders when it comes to homeowners’ policies. The possibilities are not an abstraction; we can envision the house or its contents damaged, destroyed, or stolen leaving us bereft. What would reducing that prospect be worth to us? As is true for many value-based decisions, the answer brings a mix of reason and intuition (1)that can produce surprising outcomes (2).

Health insurance is even more complex, and has always been so. The industrial revolution saw the development of “Friendly Societies” in Britain and the Prussian “Krankenkassen”. These were trade-based institutions that allowed advantaged workers to purchase insurance to provide “sick pay” but there was little else. The sea change was the Prussian “welfare monarchy” (3),an extensive insurance scheme that encompassed universal health care and a complex approach to disability insurance (4). Modifications of the Prussian scheme spread across the industrial world. It made landfall in the United States in time for the presidential election of 1912. Only one component took root in America: Workers’ Compensation Insurance but not as a national insurance scheme. It fell to the each state to regulate an insurance scheme to compensate injured workers for lost income and medical expenses.

This set the stage for state-based regulation of employer-sponsored private health insurance schemes going forward. But forward momentum appears anything but swift or linear in a country that trusted physicians to charge “commensurate with the services rendered and the patient’s ability to pay” (AMA Code of Medical Ethics, 1957.) Health Insurance as both an industry and a product has become a frustrating web of inefficiency and confusion.

Alice in Healthcareland

Jan 4, 2013• 13

By Michael Turpin

Alice: Cheshire-Puss, would you tell me, please, which way I ought to go from here?

Cheshire Cat: That depends a good deal on where you want to get to.

Alice: I don’t much care where.

Cheshire Cat: Then it doesn’t matter which way you go.

Alice: —So long as I get somewhere.

Cheshire Cat: Oh you’re sure to do that if you only walk long enough.

Lewis Carroll, The Adventures of Alice in Wonderland

2013 has arrived and employers now find themselves on the other side of a looking glass facing the surreal world of healthcare reform and a confusion of regulations promulgated by The Accountable Care Act (ACA) and its Queen of Hearts, HHS Secretary Sebelius. Many HR professionals delayed strategic planning for reform until there was absolute certainty arising out of the SCOTUS constitutionality ruling and the subsequent 2012 Presidential election. They are now waking up in ACA Wonderland with little time remaining to digest and react to the changes being imposed. A handful of proactive employers have begun, in earnest, to conduct reform risk assessments and financial modeling to understand the impacts and opportunities presented by reform. Others remain confused on which direction to take – uncertain how coverage and affordability guidelines might impact their costs.

If reform is indeed a thousand mile journey, many remain at the bottom of the rabbit hole – wondering whether 2013 will mark the beginning of the end for employer sponsored healthcare or the dawning of an era of meaningful market based reform in the US. HR and benefit professionals face a confusion of questions from their companions — CFO’s, CEOs, shareholders and analysts.

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