1.800.360.0603

GE Healthcare Camden Group Insights Blog

New Year, New Tax Code: What the New Tax Cuts and Jobs Act Means for Healthcare

Posted by Matthew Smith on Jan 11, 2018 12:57:48 PM

By David DiLoreto, M.D., MBA, Senior Vice President, and Nicholas Malenka, MHA, CRCR, Senior Consultant, GE Healthcare Partners

Worried about political divisions and the uncertainty of the United States entering World War II, Winston Churchill famously said, “You can count on the Americans do to the right thing…after they have tried all the other solutions.” With federal and state governments now paying over one-half of all U.S. healthcare costs, helping shape public policy is an increasingly important charge for the health industry. The country’s political chasms are greater than ever, and as the recent Tax Cuts and Jobs Act of 2017 (TCJA) takes effect this month we examine how the new law might impact stakeholders in the healthcare ecosystem.

Corporate and Individual Tax Reductions

The big news in TCJA is the significant reduction of corporate tax and marginal rate reduction for most individuals. For the past decade, the United States has had the highest corporate tax rates among industrial nations. Pharmaceutical and medical technology companies stand to benefit significantly from the lowering of corporate rates from 37% to 21%. To judge whether the TCJA tax cuts increase the federal deficit by $1.5 trillion over the next decade (as predicted by the CBO) or stimulate economic growth, increase jobs, and lower the deficit by $600 billion (as predicted by the Treasury Department), watch for signs that the U.S market is becoming more competitive compared to its trading partners among industrialized nations. These signs include the repatriation of foreign profits, relocation of intellectual property, and manufacturing jobs returning to the U.S. This is particularly important for the U.S. life sciences and pharmaceutical industries. Due to the size, profits, and amount of taxes paid by these companies, there is much more at stake in the near term from tax reform than for other healthcare stakeholders. For example, many large pharmaceutical companies are headquartered in the U.S. but have complex global supply chains and international affiliates and use unrelated global suppliers. Re-investment by these firms at home could create a freer flow of capital in the U.S., increasing domestic research, capital equipment purchases, and job growth.

The TCJA keeps seven tax brackets for individuals and lowers marginal rates for all but the highest two. A significant change for individuals is the near doubling of the standard deduction and elimination of the personal exemption. For people who do itemize, the threshold for deducting unreimbursed medical expenses is lowered for the next two years from 10% to 7.5% of adjusted gross income (AGI). This should minimize the impact of higher out-of-pocket costs that individuals may face with their health plan policies.

Impact on Health Plans

The most significant change for health plans is the elimination of penalties associated with the Affordable Care Act’s (ACA) individual mandate beginning in 2019. ACA required individuals who forgo health insurance to pay a penalty of 2.5% of AGI or $695. While health plans and healthcare providers would rather have retained the mandate, it proved to be a weak incentive. The many statutory exemptions, multiple additional enrollment periods, and low levels of enforcement made it less effective than the architects had hoped. Since the ACA coverage requirements and subsidies remain in place, the impact from the elimination of the penalty is difficult to project and estimates vary widely. The CBO projects 4 million additional individuals will be without coverage in 2019 and 13 million more by 2027. Standard and Poor’s model predicts far less impact with no more than 3-5 million uninsured by 2027. While the projections may vary, health plans should factor some loss of healthy individuals from risk pools for plan years starting in 2019, and healthcare providers will do well to anticipate some impact on bad debt.

A counterweight to the elimination of the individual mandate penalty for health plans is the reduction of corporate rate to 21%. The reduced taxes could mitigate the rate of premium increases for consumers since the ACA medical loss rules still require at least 80% of premiums for coverage of individual and small group medical expenses. Even more helpful would be the passage of the Murray-Alexander Bill which aims to continue funding ACA’s cost-sharing subsidies. It would have the dual effects of stabilizing coverage for Americans earning less than 250% of the federal poverty line as well as signaling a bipartisan approach to solutions for fixing current problems in the U.S. healthcare system.

Impact on Hospitals and Providers

Whether TCJA’s lower corporate tax rates, lower marginal rates for most individuals, and the immediate expensing of capital expenditures results in positive gains for the U.S. economy is of critical importance to healthcare providers. If these fail and federal deficits increase, mandatory spending cuts are more likely to impact programs including Medicare, and additional entitlement reform affecting Medicaid becomes more likely. Currently half of all healthcare spending in the U.S. ($1.5 trillion a year) is government spending. This does not consider the value of the additional $400 billion that results from the tax deduction for employer-sponsored health insurance coverage. By comparison, the entire U.S. defense budget is $800 billion a year.

Should federal deficits increase, the Pay as You Go Act (PAYGO) requires automatic spending cuts. According to the CBO projections, TCJA will require a $150 annual billion annual federal budget cut to reduce the projected impact on the federal deficit. The largest of these cuts, $25 billion, would be to Medicare. Fortunately for providers, the TCJA bill includes a one-year waiver from the automatic PAYGO cuts in 2018. But mid-term elections in 2018 will heighten the focus on economic growth, the federal deficit, the looming automatic PAYGO cuts in 2019, and may result in additional debates in Congress over additional PAYGO waivers and potential Medicare and Medicaid entitlement reform.

For 2018 there are other real and tangible TCJA impacts on healthcare providers. Some non-profit systems pay tax on unrelated business income (UBI), which the IRS defines as income from a business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization's exemption. The TCJA now requires that health systems separate these activities and determine whether there is a UBI tax on each one. Previously, these could be grouped, and a tax was paid on net profits. The result for most health systems is likely an added non-recoverable cost burden. Additional tax deductions have been eliminated on certain employee benefits such as transit passes, parking, parking shuttles, bicycle commuting reimbursement, on-site gyms, and meals.

TCJA also includes a new 21% excise tax on compensation that exceeds $1 million per year for the five highest paid employees in not-for-profit and for-profit health systems. This change is a modification from the current rule which excluded performance-based pay and exempted the principal financial officer. Employees who are healthcare providers are exempt from the excise tax. For academic health centers, the law imposes a 1.4% excise tax on university endowments.

Assessing the impact from the tax treatment of UBI, employee benefit structures, the timing of employee compensation and severance payments for top earners, and the excise tax on university endowments should be high on the to-do list in 2018.

Looking Ahead

In recent years, healthcare related public policy discussions have been ACA-centric--and while that is likely to continue in 2018, the Tax Cut and Jobs Act of 2017 introduces new variables and solutions into the quest for viable healthcare reform. As Congress reconvenes in 2018, there will be more additional and crucial health reform solutions to consider and debate including the renewal of CHIP funding, Murray-Alexander cost-sharing, accelerating the move to value-based reimbursement, introducing more competition into pharmacy pricing, and entitlement reform. Competing for political attention and funding will be an infrastructure bill as well as the automatic 2019 PAYGO federal spending cuts if the projected economic gains from TCJA fail to materialize.

Churchill was prescient in his confidence that Americans arrive at the right solutions albeit after considerable debate and experimentation. Let’s hope it works for U.S. healthcare this time around too.

 Tax Cuts and Jobs Act


Source and Background Materials

Distributional Analysis of the Tax Cuts and Jobs Act, as Ordered Reported by the Senate Committee on Finance on November 16, 2017, Excluding the Effects of Eliminating the Individual Mandate Penalty https://www.cbo.gov/publication/53349

U.S Tax Reform: Repeal of the Health Insurance Mandate Will Save Less Than Expected, And Will Not Support the Current Insurance Market https://www.capitaliq.com

Repealing the Individual Health Insurance Mandate: An Updated Estimate on November 8, 2017 https://www.cbo.gov/publication/53300

Media Inquiry

Please contact Matthew Smith at msmith@ge.com to schedule an interview with the authors.


DiLoreto.png

David DiLoreto, M.D., MBA Dr. DiLoreto, senior vice president at GE Healthcare Partners, is a physician-executive who is highly experienced in executive management, strategy and operations of healthcare delivery systems, and managed care companies. He has deep management expertise in community-based and academic health systems, large group medical practices, hospitals, and managed care organizations. His areas of specialty include clinical transformation, population health, business process improvement, leadership development, medical informatics, quality improvement and patient safety, and data management and analytics. He may be reached at david.diloreto@ge.com.

Malenka.pngNicholas Malenka, MHA, CRCR Mr. Malenka is a senior consultant with GE Healthcare Partners and has more than six years of experience helping hospitals overcome strategic challenges. He has deep expertise in the impact of consumerism on hospital operations, as well as hospital revenue cycle optimization. Previously, Mr. Malenka worked at the University of Pittsburgh Medical Center where he worked with administration on key priorities, such as a Lean cost reduction effort that included service robots, building a retail pharmacy solution, and enhancing patient throughput for an outpatient respiratory department. He may be reached at nicholas.malenka@ge.com.

Topics: David DiLoreto, Nicholas Malenka, Tax Reform

Clinical Strategies Not Producing Results? Take a Good Look at Your Operating Model

Posted by Matthew Smith on Jul 7, 2017 10:30:11 AM

By David DiLoreto, M.D., MBA, Senior Vice President, GE Healthcare Camden Group

Empowered consumers/patients; outcomes-based reimbursement; quality, safety, and cost concerns; unwarranted clinical variation; and new digital technologies have all created conditions in which health systems confront a need to re-evaluate their clinical strategies and execution skills. Successful organizations realize that effective responses include not only the creation of new strategies and the development of new execution skills but then need to challenge existing mind-sets as well.

Bridging the gaps between strategy, execution, and culture often require evolving the clinical operating model. Our experience at GE Healthcare Camden Group proves that addressing operating model structures may be one of the smartest investments that an organization can make to achieve success.

The competitive advantage created by effectively matching strategy and operating models is well-recognized in many industries.1 Operating model assessments and re-design are important during periods when greater organizational clarity is needed, i.e. after mergers and major acquisitions, when entering new market segments, when new revenue models are introduced or during major changes in operations like digital transformation. Healthcare organizations finding themselves in these circumstances may carefully evaluate and design new operating models for non-clinical functions such as Finance, HR, and IT, but are often less likely or slower to effectively address operating models for their clinical services and clinical support services.

Clinical Operating Model.png

Too often health systems make one of two missteps. Some fail to evolve their clinical operations quickly enough to match a strategy shift. Consider the health system that entered a new market with new ambulatory service offerings including retail, urgent care, and mobile health but stifled growth by keeping clinical services highly integrated with their existing core acute care business which starved it of the resources, management focus, and flexibility needed to launch effectively.

Another misstep is to move ahead with a new organizational design that does not match how the organization will create value. A newly merged health system too quickly moved from multiple ambulatory physician groups to a more integrated model to encourage cost reduction and centralized patient scheduling. Centralizing so quickly to realize a modest opportunity underestimated how much front-line staff accountability would be lost, added complexity, slowed decision making, increased patient complaints, and distracted the organization from major growth opportunities in the individual physician groups.

So how do health systems avoid these mistakes and create stronger linkages between clinical strategy and clinical operating models? We have found that the following six steps enable an organization to articulate clear and specific design principles to serve as guardrails for the senior team as it evaluates clinical operating model options.

  1. Define What is Most Important: The first design principle is whether to assess the entire organization, a specific business unit, or an individual function specifying which clinical strategies are most important for the operating model to support. Most likely, a combination of clinical and business priorities will be identified. Often previous strategies which address the same issues may have been implemented with mixed results. It is important to discuss ways in which the organization must adapt to win. Identifying key operating model principles, sequencing priorities, and pacing their implementation depend on more than just organizational structure. All elements of the operating model—structure, governance, decision rights, behaviors, processes, and technology—will need to be considered when selecting the appropriate clinical operating model.
  2. Decide How Value Will Be Created: A U.S. health system realized that the growth of Medicare Advantage plans in its largest markets was occurring at the same time commercial insurers had successfully resisted increases in hospital reimbursement rates. It established clinical operating model design principles to "focus on the delivery of clinically effective ambulatory care for seniors" and "reduce unwarranted clinical variation in acute care" to "achieve Medicare break-even margins." The operating model it designed integrated key clinical support services, many clinical services, and its clinical leadership into regions that effectively served multiple hospitals. Increasing the span of control and standardizing key processes produced annual operating savings of 12 percent while improving key measures of clinical quality, physician satisfaction, and patient loyalty.
  3. Streamline Decision Rights: Once the key clinical strategies are identified, the right operating model should catalyze faster and more effective decisions. The design principles should point to the types of decisions that will be needed. Engaging key stakeholders and front-line leaders to pro-actively assign responsibility and accountability for key decisions as well as identifying who will serve as collaborators and who needs to be informed creates role clarity and sets performance expectations. A health system that integrated outpatient care management for its clinically integrated network and accountable care companies established a principle that "Operation decisions regarding staffing ratios and promotion decisions should be regionalized." This led to the selection of an operating model for care management that clarified the roles and responsibilities of hospital care managers, transition care managers, and key service lines as well as fostering a more collaborative environment.
  4. Establish and Communicate Boundaries: Operating models should be designed so that customer-facing best practices and capabilities-sharing processes are widely and quickly disseminated across organizational boundaries. As health systems provide more services further from their acute-care hospital core such as retail, post-acute care, mobile health and telemedicine, they need to carefully determine how clinical support services such as quality improvement, risk management, infection control, and care management will be designed and integrated into new operating models.
  5. Assess and Bolster Necessary Capabilities: Achieving growth targets requires clinical operating models that are designed using principles that must balance customer requirements, available capital, and technical capabilities. Managing commercially insured individuals, low-income persons, and seniors under risk contracts require different patient engagement, care management, and medical management processes and expertise. Operating model design principles for a clinically integrated network such as "Contracting, claims, network development, legal, and risk management will be managed globally" while "Beneficiary engagement, customer insight, care management, and medical management will be managed along insurance product-lines" points to adopting an operating model in which the hurdle for centralizing clinical support services across product lines is high, but capital investments and specialized non-clinical expertise can be leveraged across multiple patient populations.
  6. Be Clear About What Will Be Preserved: Among the clinical operating model design principles expressed by a health system that was rapidly acquiring established physician practices was "How we go to market and acquire will make it easy for our physicians to do business with us." Strong physician relations were a hallmark and competitive differentiator for the health system, and they wanted to preserve it as they deployed the new strategy. This statement guided many key elements of the new clinical operating model.

Putting it All Together

Our experience proves that using these six design principles greatly facilitates the creation and adoption of effective and sustainable clinical operating models. They provide fact-based context and key observations that are important solvents in what can be a charged process. They are specific enough to allow leaders to recognize and make trade-offs between competing priorities and decisions such as what functions to centralize and what should remain local. Ultimately they serve as a beacon for clinicians and employees as to what choices leaders have made about implementing the strategic priorities that matter most to the organization.

1. Enterprise Architecture as Strategy: Creating a foundation for business execution. Jean W Ross, Peter Weil and David C. Robertson. 2006. Harvard University Press


DiLoreto.pngDavid DiLoreto, M.D., MBA Dr. DiLoreto, senior vice president at GE Healthcare Camden Group, is a physician-executive who is highly experienced in executive management, strategy and operations of healthcare delivery systems, and managed care companies. He has deep management expertise in community-based and academic health systems, large group medical practices, hospitals, and managed care organizations. His areas of specialty include clinical transformation, population health, business process improvement, leadership development, medical informatics, and data management and analytics. He may be reached at david.diloreto@ge.com.

Topics: David DiLoreto, Clinical Operating Model

Webinar Reminder: Building an Analytics-Based Value Model to Validate Transformation Investments

Posted by Matthew Smith on Nov 29, 2016 2:10:38 PM

Please join GE Healthcare Camden Group for a complimentary, 60-minute webinarBuilding an Analytics-Based Value Model to Validate Transformation Investments, on Thursday, December 8, 2016, at 12:00 P.M., ET.

Date:

Thursday, December 8th, 12:00 P.M., Eastern

Background:

Healthcare organizations are struggling to understand the impact of their investments in population health initiatives. To help measure performance risk and evaluate return on investment ("ROI"), organizations are building and implementing analytics-based value models as decision-making tools. Creating these value models allows healthcare organizations to quantify risks and evaluate viability. It also allows organizations to measure and track ROI in digital health technology and resources associated with various programs aimed at managing the health of the populations they serve.

GE Healthcare Camden Group's team of analysts, data scientists, and actuaries builds comprehensive analytics-based value models for organization leaders (CFO, CMO, CIO, Population Health Leaders) wanting to evaluate their ROI from investments in care management programs, look to better manage utilization, and predict outcomes.

Overview:

In this complimentary webinar, members of the GE Healthcare Camden Group team will deliver an overview of the analytics-based value model and how high-performing healthcare organizations are leveraging these to guide strategic decision making and prioritize investments in value-based care initiatives.  

Topics to be Addressed:

Held in a round-table format with GE Healthcare Camden Group senior leaders representing the roles of an organization's CFO, CMO, and CIO, the webinar will address the following questions facing today's leaders:
  • Where should organizations invest resources in order to drive the most value from their care management programs?
  • What is the impact on their programs to both acute and ambulatory utilization?
  • Which programs are driving the greatest value and how are these measured?
  • What “value levers” are important in order to drive the best outcomes?
  • What is the expected outcomes from managing certain medical conditions and/or population risk cohorts?
  • What is the typical ROI of their care management programs and population health initiatives?
  • How can this information be used to support risk-based contracting with payers and other providers?

GE Healthcare Camden Group Presenters:

Marino_Dan.jpgDaniel Marino, MBA, MHA, Executive Vice President Mr. Marino is an executive vice president with GE Healthcare Camden Group with more than 25 years of experience in the healthcare field. Mr. Marino specializes in shaping strategic initiatives for healthcare organizations and senior healthcare leaders in key areas such as population health management, clinical integration, physician alignment, and health information technology. With a comprehensive background in all aspects of practice management and hospital/physician alignment, Mr. Marino is a nationally acknowledged innovator in the development of Accountable Care Organizations and clinical integration programs.

chopra2-110511-edited-239718-edited.jpgShaillee J. Chopra, PMP, Senior Manager Ms. Chopra is a senior manager with GE Healthcare Camden Group and specializes in developing and managing innovative technology portfolios for value-based and clinically integrated healthcare networks. She is highly experienced in leading information technology and consumer experience strategy development, as well as transformations to enable clinical integration, accountable care, and population health management strategies for organizations invested in innovation and transformation of care delivery models.

 

DiLoreto.pngDavid DiLoreto, M.D., MBA Dr. DiLoreto, senior vice president at GE Healthcare Camden Group, is a physician-executive who is highly experienced in executive management, strategy and operations of healthcare delivery systems, and managed care companies. He has deep management expertise in community-based and academic health systems, large group medical practices, hospitals, and managed care organizations. His areas of specialty include clinical transformation, population health, business process improvement, leadership development, medical informatics, and data management and analytics.

GreenB1.pngRobert Green, MBA, FACHE, CHFP Mr. Green is a senior vice president and the practice lead for the Financial Operations and Transactions practice. He has more than 26 years of healthcare experience with 13 years of healthcare consulting experience and 13 years of provider-based financial, operational, and strategic experience among health systems, hospitals, medical groups, management services organizations, and physician hospital organizations.

 

To Register:

To register, simply click the button below, complete a short registration form, and press the "Cick to Register!" button. You will receive a confirming email. A second email will be sent the week of December 5th with webinar login/call-in instructions.

Please note: This webinar is intended for providers, provider organizations, and industry partners. Because of the proprietarty nature of the information shared during this webinar, independent consultants and consulting agencies will not be provided access to programming. GE Healthcare Camden Group reserves to the right to limit attendance at this event. 

Value Model, Webinar, Digital Health Analytics

Questions?

Please contact Matthew Smith at msmith@ge.com

Topics: Webinar, Daniel J. Marino, Shaillee Chopra, Digital Health Services and Data Analytics, Value Model, David DiLoreto, Robert Green

New Webinar: Building an Analytics-Based Value Model to Validate Transformation Investments

Posted by Matthew Smith on Nov 16, 2016 1:16:09 PM

Please join GE Healthcare Camden Group for a complimentary, 60-minute webinarBuilding an Analytics-Based Value Model to Validate Transformation Investments, on Thursday, December 8, 2016, at 12:00 P.M., ET.

Date:

Thursday, December 8th, 12:00 P.M., Eastern

Background:

Healthcare organizations are struggling to understand the impact of their investments in population health initiatives. To help measure performance risk and evaluate return on investment ("ROI"), organizations are building and implementing analytics-based value models as decision-making tools. Creating these value models allows healthcare organizations to quantify risks and evaluate viability. It also allows organizations to measure and track ROI in digital health technology and resources associated with various programs aimed at managing the health of the populations they serve.

GE Healthcare Camden Group's team of analysts, data scientists, and actuaries builds comprehensive analytics-based value models for organization leaders (CFO, CMO, CIO, Population Health Leaders) wanting to evaluate their ROI from investments in care management programs, look to better manage utilization, and predict outcomes.

Overview:

In this complimentary webinar, members of the GE Healthcare Camden Group team will deliver an overview of the analytics-based value model and how high-performing healthcare organizations are leveraging these to guide strategic decision making and prioritize investments in value-based care initiatives.  

Topics to be Addressed:

Held in a round-table format with GE Healthcare Camden Group senior leaders representing the roles of an organization's CFO, CMO, and CIO, the webinar will address the following questions facing today's leaders:
  • Where should organizations invest resources in order to drive the most value from their care management programs?
  • What is the impact on their programs to both acute and ambulatory utilization?
  • Which programs are driving the greatest value and how are these measured?
  • What “value levers” are important in order to drive the best outcomes?
  • What is the expected outcomes from managing certain medical conditions and/or population risk cohorts?
  • What is the typical ROI of their care management programs and population health initiatives?
  • How can this information be used to support risk-based contracting with payers and other providers?

GE Healthcare Camden Group Presenters:

Marino_Dan.jpgDaniel Marino, MBA, MHA, Executive Vice President Mr. Marino is an executive vice president with GE Healthcare Camden Group with more than 25 years of experience in the healthcare field. Mr. Marino specializes in shaping strategic initiatives for healthcare organizations and senior healthcare leaders in key areas such as population health management, clinical integration, physician alignment, and health information technology. With a comprehensive background in all aspects of practice management and hospital/physician alignment, Mr. Marino is a nationally acknowledged innovator in the development of Accountable Care Organizations and clinical integration programs.

chopra2-110511-edited-239718-edited.jpgShaillee J. Chopra, PMP, Senior Manager Ms. Chopra is a senior manager with GE Healthcare Camden Group and specializes in developing and managing innovative technology portfolios for value-based and clinically integrated healthcare networks. She is highly experienced in leading information technology and consumer experience strategy development, as well as transformations to enable clinical integration, accountable care, and population health management strategies for organizations invested in innovation and transformation of care delivery models.

 

DiLoreto.pngDavid DiLoreto, M.D., MBA Dr. DiLoreto, senior vice president at GE Healthcare Camden Group, is a physician-executive who is highly experienced in executive management, strategy and operations of healthcare delivery systems, and managed care companies. He has deep management expertise in community-based and academic health systems, large group medical practices, hospitals, and managed care organizations. His areas of specialty include clinical transformation, population health, business process improvement, leadership development, medical informatics, and data management and analytics.

GreenB1.pngRobert Green, MBA, FACHE, CHFP Mr. Green is a senior vice president and the practice lead for the Financial Operations and Transactions practice. He has more than 26 years of healthcare experience with 13 years of healthcare consulting experience and 13 years of provider-based financial, operational, and strategic experience among health systems, hospitals, medical groups, management services organizations, and physician hospital organizations.

 

To Register:

To register, simply click the button below, complete a short registration form, and press the "Cick to Register!" button. You will receive a confirming email. A second email will be sent the week of December 5th with webinar login/call-in instructions.

Please note: This webinar is intended for providers, provider organizations, and industry partners. Because of the proprietarty nature of the information shared during this webinar, independent consultants and consulting agencies will not be provided access to programming. GE Healthcare Camden Group reserves to the right to limit attendance at this event. 

Value Model, Webinar, Digital Health Analytics

Questions?

Please contact Matthew Smith at msmith@ge.com

Topics: Webinar, Daniel J. Marino, Shaillee Chopra, Digital Health Services and Data Analytics, Value Model, David DiLoreto, Robert Green

A View into a World without the Affordable Care Act

Posted by Matthew Smith on Nov 11, 2016 7:45:10 AM

By James Smith, MBA, FACHE, Executive Vice President, and David DiLoreto, M.D., MBA, Senior Vice President, GE Healthcare Camden Group

Healthcare changes are on the way….AGAIN. Just as providers, health plans, and consumers thought they had begun to understand the “new” rules and had developed and activated the strategies required for success in an outcomes-based world; we find ourselves facing changes once again. With a new presidency launching in January, it appears certain that The Affordable Care Act (“ACA”) (also known as “Obamacare”) will be modified, repealed, and/or replaced.

With myriad questions floating around the television networks and on social media, it’s important to not get too far out over our skis before decisions are made. But we can address some of the larger questions Americans are asking. First, let’s assume the ACA is completely repealed--and ask and propose answers to 10 of the burning questions that are top of mind.

1. What are the big changes? 

A new administration may want the mandates, taxes, and regulations to go away, and individuals to be able to go to insurers and shop based on highly transparent information about providers, physicians, networks, and health plans on quality of care, service levels, and cost. Transparency, costs, and access will become the focus both for individual and group insurance premiums and healthcare provider charges. Balancing the budget will take precedence over access to insurance and healthcare services.

2. What goes away? 

The health insurance industry and providers would be released (immediately or within a short, prescribed time period) from numerous regulations, taxes, and rules connected with the ACA. The healthcare exchanges would be dismantled, or be continued as a non-subsidized option for States to administer at their discretion. Loss of minimum medical loss ratios (“MLR”) and rate oversight could lead to even larger premium increases as insurers would seek to return to profitability from the losses in their exchange business and stranded development costs.

3. What would be the most striking game changer of the economic impacts? 

According to a report with estimates from Kaiser Health Foundation, 20 million-plus people could lose their federal subsidies and tax credits that allowed them to purchase insurance, or lose eligibility as the rules change from ACA’s expansion of Medicaid eligibility. States would instead likely be provided block grants by the federal government, ending the federal-state funding partnership. The loss of the public subsidies for private insurance and reduction in Medicaid eligibility will likely increase bad debt, slow or stop cash flow, which will stretch reserves and change decision options for providers.  

4. What is NOT likely to change?

Payment reform within Medicare designed to reduce costs and promote quality (i.e. the shift from fee-for-service to fee-for-value) is not likely to change significantly. MACRA and other regulatory changes shifting the payment models have been largely bi-partisan supported, so are not likely to be significantly impacted. What would be uncertain is the continuation of initiatives sponsored by CMMI, the CMS Innovation Center, which was funded by the ACA. CMMI has launched bundled payments, and many other pilots such as CPC+ to foster faster movement to value-based care.

5. What does this do to providers? 

It could mean credit downgrades for many since recent capital investments in new service lines were made based upon volumes and service mix far different than what may occur. More high-deductible plans with low or underfunded HSAs and a return to more uninsured could lead to sicker patients, more intensive care, and hospitalizations and service line requirements and capacity needs different than planned for under ACA. The market may see a greater use of narrow networks or high-performing networks by health plans to reduce plan cost. Picture the payer mix (lower Medicaid and higher uninsured) and volumes (generally lower) you may have had in 2013, but with payers (including Medicare) putting dollars at risk for efficiency and quality.

6. Will we see more consolidation of providers and physicians? 

Yes, on both counts. The mere uncertainty of the environment if funding for the uninsured remains in flux could exacerbate a trend toward consolidation. Providers must seek every avenue of cost reductions and access to cash as they make new investment decisions in capital, equipment, buildings, service mix, management talent, and other resources. Just as today, efficiency will be the priority, but even more so. Layoffs to reduce staffing costs and strategic focus on services to increase market share and use of resources will be one of the few ways for providers to react.

7. Where would people go? 

As we have seen in the past, emergency departments will be the first site of care for many without insurance. Continued focus of providers on enabling access points to the most clinically appropriate and lowest cost site of care will continue to be a priority so consumers have viable alternatives to manage their healthcare needs with convenience.

8. What will insurers do? 

As insurers lose members, they too will react by attempting to grow market share and cut costs. Consequently, insurers would have to reallocate costs throughout their company—forcing layoffs, consolidations, and ultimately bankruptcy for those who cannot change fast enough. This cascade could accelerate consolidation with greater concentration of both health plans and providers as they respond to a necessity to grow even larger and to do it faster to absorb decreasing membership across a set of fixed costs. Remember too, that insurers will remain heavily regulated as the regulatory controls flow back to the state insurance and health departments. They may be able to return to state rules which allow experience rating and denial of coverage. The possibility of easing the sale of health plan products across state lines, a concept that candidate Trump proposed, could make managing health plan payment models and policies from the provider perspective even more complex than before--but it could provide more competition for health plans with sizable market share in certain states. Health plans may have a greater ability to increase premiums and to do these things with less oversight. Many have invested in new products, and there would no longer be controls over benefits, nor would there be limits on administrative costs and caps on profits which, in turn, could send premiums as well as out-of-pocket expenses even higher.

9. Sometimes campaign rhetoric is tempered by the political and economic realities of governing. Is there a middle ground that might be reached?

Speaker Paul Ryan released the GOP’s healthcare reform plan, “A Better Way,” in June 2016. The plan contains key initiatives that, if implemented, incrementally could increase the role of the private health insurance sector while reducing costs without wholescale withdrawal of coverage. For instance, expanding the use of consumer-directed healthcare options and removing the limits that ACA placed on HSAs, FSAs and HRAs provides more insurance options without eliminating coverage. Eliminating the taxes and fees on self-insured plans, eliminating excise taxes on medical device manufacturers as well repealing the “Cadillac” tax on high-cost plans would be consistent with campaign promises. Increasing support for portability, enabling purchasing across state lines, expanding opportunities for pooling, and advocating for meaningful medical liability reform are all contained within this plan.

10. What about Medicaid expansion? 

The most popular aspect of Obamacare was the expansion of health insurance coverage and, at least politically, it may prove hard to reverse. Over 98 million Americans are now covered by Medicaid at any point in each year. One in four dollars in the average state budget is spent on Medicaid coverage, and the total state and federal support for the program exceeds $545 billion. By 2025 the GAO projects that 108 million Americans will be covered by Medicaid, the federal share exceeding $600 billion and the combined state and federal spending in program approaching $1 trillion. Limited access to physicians and inconsistent quality remain significant obstacles to improving health outcomes for Medicaid beneficiaries. The GOP may look to expand block grants to states while relaxing the federal waiver process. This would create incentives for state governments to search for solutions to the cost and consequences of the recent expansion. Fueled by the shift toward more value-based reimbursement, considerable attention and increased scrutiny and changes in supplemental payments may be opportunities for cost reduction. As the largest payer of long-term services and support, and with continued increasing demand, states will also look to rebalance or reduce costs by shifting to home and community based services.

Changes are most definitely on their way, but as we’ve done in the past, we’ll adapt and adopt these new changes together. 2017 will be a year in which the legislative changes could be made, and in some cases Trump could use an Executive Order to defund certain provisions of the ACA. 2018 will likely be the soonest any substantive changes would be effective, given the fact that open enrollment is already underway and plans are in effect for 2017. We’ll continue to provide timely updates as we learn more in the coming weeks and months.


Jim Smith.jpgMr. Smith is an executive vice president with GE Healthcare Camden Group. He is a nationally recognized strategy and business healthcare consultant, author, and speaker. Mr. Smith has more than 30 years of experience as a leader of provider-owned, for-profit, and not-for-profit health plans, hospital, and health systems, as well as a large physician group. He has extensive experience in managed care and provider network development/operations, health system planning and development, medical group formation and operations, and direct contracting. He may be reached at jsmith@ge.com.

 

 

DiLoreto.pngDr. DiLoreto, senior vice president at GE Healthcare Camden Group, is a physician-executive who is highly experienced in executive management, strategy and operations of healthcare delivery systems, and managed care companies. He has deep management expertise in community-based and academic health systems, large group medical practices, hospitals, and managed care organizations. His areas of specialty include clinical transformation, population health, business process improvement, leadership development, medical informatics, quality improvement and patient safety, and data management and analytics. He may be reached at david.diloreto@ge.com.

Topics: ACA, Affordable Care Act, Obamacare, David DiLoreto, James Smith

GE Healthcare Camden Group Welcomes New Senior Leaders to Team

Posted by Matthew Smith on Sep 29, 2016 10:17:00 AM

In response to client needs, particularly around population health and financial operations and transactions, GE Healthcare Camden Group is pleased to announce the addition of several new leaders to the firm:

Robert Green, MBA, FACHE, CHFP

GreenB1.pngMr. Green joins as senior vice president and the practice lead for the Financial Operations and Transactions practice and is based out of the Chicago office. He will be responsible for overseeing the practice and enabling innovative solutions to the complex financial challenges facing clients that are meaningful and impactful in the business of improving the health of individuals and of a popualtion. He has more than 26 years of healthcare experience with 13 years of healthcare consulting experience and 13 years of provider-based financial, operational, and strategic experience among health systems, hospitals, medical groups, management services organizations, and physician hospital organizations. Mr. Green most recently served as PWC’s Managing Director in its Health Industries Advisory practice. He has also held positions at Deloitte & Touche and Ernst & Young. Additionally, Mr. Green served as Senior Vice President, Strategic Financial Services at Baylor Healthcare System from 2010 to 2013 and held a variety of leadership roles with Advocate Healthcare from 1998 to 2010. He may be reached at roberet.t.green@ge.com

David DiLoreto, M.D., MBA

DiLoreto.pngDr. DiLoreto joins as senior vice president in the population health practice and is based in the Chicago office. In his new role, Dr. DiLoreto will serve health systems, accountable care organizations, and clinically integrated networks in creating strategies and solutions for sustainable improvement. He has twenty years of healthcare expertise in population health, accountable care, physician group practice, hospital operations, managed care operations, graduate medical education, quality improvement, and informatics. Prior to joining GE Healthcare Camden Group, Dr. DiLoreto was the CEO of WellPledge, a consumer health IT company. He also previously served as the Chief Clinical Officer at Presence Health and Baptist Health Care where he was responsible for key population health management strategies and the operations of ACOs, clinically integrated networks, physician alignment strategies, and the integration of clinical services across outpatient clinics, hospitals, and post-acute care. He may be reached at david.diloreto@ge.com

Mark Krivopal, M.D., MBA

Krivopal.pngDr. Krivopal joins as a vice president in the population health practice and is based in the Boston office. With more than 15 years of care delivery experience across the continuum throughout the healthcare industry, Dr. Krivopal will be responsible for developing and leading engagements that require innovative, value-based programs addressing client needs in health systems, hospitals, physician practices, and integrated networks. His experience spans not-for-profit and privately held organizations of various sizes as well as the start-up environment in the healthcare IT space.

Prior to joining GE Healthcare Camden Group, Dr. Krivopal served as Vice President of Clinical Programs at Kyruus, Inc., a leading provider of enterprise patient access solutions. He has also previously served as the Vice President and Medical Director of Clinical Integration and Hospitalist Medicine at Steward Health Care, where he implemented provider engagement strategies, clinical integration and healthcare system governance redesign, assured sustainability and operational effectiveness of hospital medicine programs, and served as the senior executive and key advocate for the network with external payers and providers. Prior to that, Dr. Krivopal was the Senior Regional Medical Director at TeamHealth in California, a publicly-held healthcare company specializing in nation-wide outsourcing for hospital medicine, emergency medicine, and anesthesia. Dr. Krivopal’s career as a physician-executive began when he co-founded and then, for many years, led Beth Israel Deaconess HealthCare Hospitalist Services based in Boston, Massachusetts. He may be reached at mark.krivopal@ge.com

In addition to the leadership above, due to its growth, GE Healthcare Camden Group has also added another 10 advisors to the consulting team since this spring. For a look at the full GE Healthcare Camden Group leadership team, please click here.

Topics: Physician Leaders, Mark Krivopal, David DiLoreto, Robert Green, Financial Operations and Transactions

Subscribe to Email Updates

Value Model, Health Analytics

Recent Posts

Posts by Topic

Follow Me