Obamacare's Effect On Our Healthcare Business
The region's top industry executives weigh in.
Consolidation among community hospitals like White Plains Hospital (now part of Montefiore Health System) has grown since Obamacare took effect.
Before it even went into effect, pundits were predicting that the Affordable Care Act—aka Obamacare—was going to be either the greatest piece of social legislation since the Great Society reforms of the 1960s or the end of American democracy as we knew it. Just as the ACA was about to drop in 2012, we convened a panel of Westchester County’s leading healthcare experts to tell us what they expected (“County Check-Up,” 914INC., Q2 2012). Now, three years later, with the ACA underway and here to stay, we went back to the county’s healthcare leaders to find out what has changed in the business of healthcare in the past three years: what’s new, what’s working, what isn’t, and whether Obamacare has been great, terrible, or somewhere in-between for the healthcare industry.
The answer is, as saner heads predicted, the latter. The ACA has not solved all the problems of the American healthcare system; neither has it ushered in a socialist state. On the whole, though, our experts believe that the ACA has been a success.
“The ACA has borne out as quieting the naysayers,” says Daren Wu, MD, chief medical officer of Open Door Family Medical Centers, a nonprofit, federally qualified community health center, with locations in Ossining, Port Chester, Brewster, Sleepy Hollow, and Mount Kisco. “As flawed as it is, many of us who work with the indigent or those with barriers to access [to healthcare] were in favor of the ACA even with its limitations. Now we are seeing it is very beneficial. The number of uninsured have come down substantially, and that is a good thing.”
“Everyone predicted Armageddon, and we haven’t seen that,” agrees Simeon Schwartz, MD, president and CEO of WESTMED Medical Group, a large provider group with six offices in Westchester and others in Connecticut. “I think it has worked out really well for medical groups and the [insurance] carriers. We are providing better access to the community regardless of the payer.”
Aiming at ‘the Triple Aim’
Our experts also agree on another point: The ACA has fundamentally changed the healthcare business model. Whether that, too, is good or bad, and for whom, is still up in the air. “Healthcare has been fairly archaic and culture-bound in many ways, and we are now adapting to a new environment that is not entirely here just yet,” says Dr. Wu. “This is exciting and necessary to improve quality and reduce costs, but we are still in the transition phase.”
Improving the quality of care and reducing costs, along with improving the health of populations most at risk for disease, constitute the so-called Triple Aim of healthcare reform and comprise the shaky bedrock under the seismic changes occurring in the industry. Healthcare is moving from its traditional fee-for-service model—you perform an x-ray; you get paid for it—to outcomes-based or value-based compensation, in which doctors, hospitals, and other healthcare providers are paid for meeting health goals. For hospitals, that includes, for example, reducing readmission rates or improving infection scores.
That should be good for the healthcare system generally, but when you drill down it presents its own specific difficulties. “The goals are very positive in focusing on quality and efficiency, but the challenges are that different pieces of the healthcare continuum are being affected at different times,” says Susan Fox, president and CEO of White Plains Hospital. “Hospitals are penalized if patients are readmitted in 30 days, and that goal is good, but while the hospital has a role in that, so do the physicians and patients. Right now, only the hospital is being penalized; not everyone is incentivized the same way.” That has required more collaboration between hospitals and community physicians, she says, to ensure that “the pieces work together so that patients get the care they need.”
Mergers and acquisitions
Consolidation among the various players in the healthcare space has never been greater. We are in the midst of a feeding frenzy, in fact, as bigger systems purchase smaller community hospitals and provider groups in dizzying numbers. White Plains Hospital, for example, recently became part of the Montefiore Health System, just one of numerous mergers bringing hospitals, small private physician practices, outpatient care facilities, and others in the healthcare industry into ever larger conglomerates. As in other industries, size helps control costs through economies of scale and elimination of redundancies. But healthcare isn’t like other industries—people’s lives are at stake. Is so much medical consolidation good for the patient?
The jury is still out, according to Schwartz. “The economics of the ACA and the current climate of medicine does not favor private practice, and that has accelerated a trend that had already started,” he says. “Hospitals are concerned about their survival and consolidating rapidly. The biggest surprise to me is the speed at which traditional, small private practices are leaving the county. There are fewer and fewer of them; most have joined larger groups or gone to hospitals.”
That could prove costly both financially and in terms of patient satisfaction, says Georganne Chapin, founder of Hudson Center for Health Equity and Quality. Because of all this consolidation, she says, “‘competition,’ which was supposed to keep costs down, is elusive. The impact of escalating prices and provider consolidation on healthcare quality is still unknown.”
But it is worrisome. “Patient perception is what keeps me up at night,” Dr. Wu says. “Patients want convenience and quality in their interactions with us, as opposed to cost scores.
And clinicians don’t want to work in this environment. They want to work for urgent care or concierge practices, somewhere without so many mandates. As the CMO, I struggle with making sure clinicians feel satisfied and supported in the model we have.”
Consolidation is adding financial stress to the big players, as well. “The whole landscape of healthcare, the way we organize and deliver care, is changing before our eyes,” says Joel A. Perlman, executive vice president–finance, Montefiore Health System. “It has been breathtaking what’s happened in the last 18-24 months. In Westchester County, virtually every hospital was independent back then, and now virtually every hospital has joined a system or acquired other hospitals to become larger themselves.” With this growth come a lot of stresses, he adds, including the impacts on the treasuries of the organizations. “It is very difficult to change the system without spending money. In the case of Montefiore, we have added hospitals and doctor groups to our network, many of which were financially frail. We took six hospitals out of bankruptcy, one or more of which wouldn’t be here without us stepping in. That taxes the resources of any organization. It will take time for us to come out the other end,” Perlman explains.
Winners and losers
Consolidation is not the only surprise in the wake of ACA implementation. Other, more positive results have been noticed. “There was the view that Obamacare would be expensive and cost jobs, and that is absolutely false,” says H. Michael Dreher, MD, dean of the School of Nursing at the College of New Rochelle. “The opposite has happened. The industry has gotten larger and so has the need for workers in all sectors of healthcare. If you look at Bureau of Labor statistics, their projections show occupational therapy, physical therapy, health educators, nutritionists and dietitians, IT, and nursing as growth areas.”
Another positive: While the annual costs of healthcare continue to rise, the cost curve is decreasing, Dr. Dreher says. In addition, he points out, many prognosticators, “in their hysteria,” thought employers would drop their insurance plans and force employees into the ACA marketplace. “That has not happened. The employee-based system remains relatively intact,” he says.
Montefiore Health System has expanded its presence in Westchester over the past few years, adding several hospitals and medical groups to its network. Photo by Daniel Federowicz
Still, there have been losers—or, at least, strugglers—as well as winners in the past few years. Countywide, hospital utilization is down approximately 7 percent over the past few years. “[Hospitals] were definitely prioritized in how the legislation focuses on keeping patients out of the hospital and decreasing the most expensive care in the system,” Fox says. “We have fewer patients to cover our costs, so we have all had to deal with that in different ways.” One way for White Plains Hospital was merging with Montefiore—a trend that is happening across the healthcare spectrum, she says. “Everybody is trying to figure out what their new place is, what the future is, and what their role is in healthcare…trying to understand what partnerships are out there, to understand that there are a lot of blurred lines among providers now.”
Another way organizations like White Plains Hospital cope with fewer inpatients lies in expanding both inpatient and outpatient services. “We opened two cardiac catheterization labs to provide advanced cardiology services, and we are following up with an application to perform open-heart surgery,” Fox says. “We have also increased the level of cancer care with the recruitment of thoracic surgeons. We have turned the challenge into an opportunity to focus on providing programs and services here that traditional community hospitals hadn’t provided before. We are increasing our complexity of care and program offerings to make sure our business model improves.”
Still Not Enough?
But some experts, like Chapin, believe that the ACA has not gone far enough. “Nine million people have gotten health insurance, which is good for 9 million people,” she explains. “Private insurance companies have gained 9 million new customers, many of them paid for (at least in part) with government subsidies. But the ‘uninsured problem’ has not been solved—the nation still has at least 33 million uninsured—and the system for financing uncompensated care has not evolved to respond to the new reality.” Chapin also notes that many of the new insurance plans have punishingly high deductibles. “So [people] are ‘insured’ but actually cannot afford to get the healthcare they need,” she says. “Under-insurance, due to people purchasing lousy plans or plans with very high deductibles, is a problem that is worsening.”
Montefiore’s Perlman agrees. “Shifting costs to patients and families is fine in some respects, when the purpose is to get people engaged and knowledgeable about their own care, but when you cost-shift to people with little discretionary income who are living paycheck to paycheck, I worry about self-denial and not accessing the system in the right way. It works fine for someone like me, because I can afford it, but it doesn’t work for everybody. I think there is still work to be done on this,” he says.
If there is one agreed-upon villain in all this, it is Big Pharma. The ACA contains little if any power to regulate the pharmacy industry, and Dr. Schwartz calls skyrocketing pharmacy costs “unbelievable.”
“The fact that the ACA did not take on the pharmacy industry makes the management of value-based healthcare very difficult,” he says. “The fact that 10 to 15 years ago you could have gotten an asthma inhaler for $20, and now it costs $500 a month, should be criminal.”
So what can we expect next? “May you live in interesting times” is the oft-repeated curse that perhaps best describes the current state of the healthcare business. Our experts all think the climate will remain “interesting” for some time to come. “I suspect that five years from now we will be delivering and experiencing care in very different ways than we are today,” Perlman says. “That’s why anticipating the future and investing in the right things is critically important [for healthcare businesses]. For a successful future, you have to be out in front, and that requires some level of risk taking. With so much going on simultaneously, it taxes everybody, so getting our decisions and investments right the first time is best.”
“As a business it is a completely new paradigm,” Dr. Wu agrees. “Healthcare will always be phenomenally profitable for those who understand the new rules and build their partnerships well. The ACA is bending the cost curve, and as data is better understood and utilized to reduce excessive costs and remove waste, it will help all of America. I am a firm believer that the ACA was a positive thing. I will never say it was perfect, but it is a big, important step in the right direction.”