Next year, the healthcare system will be front and center as the Supreme Court rules on the constitutionality of health insurance exchange subsidies and changes to the Affordable Care Act (ACA) continue. In addition, the ongoing rise of healthcare costs, acceleration of provider and payer consolidation and looming 2016 elections make 2015 a pivotal year for the healthcare industry.
To help understand these challenges and underlying trends, the Navigant Center for Healthcare Research and Policy Analysis has identified six key areas to watch in 2015:
- ACA Chapter 2. Significant uncertainty continues to circle around the ACA. To date, 38 changes to the law have been made via administrative actions and amendments. More will follow. The results of Medicaid expansion efforts alongside health exchange enrollment expansion targeting individuals and small businesses will get attention. The possibility that the excise taxes on devices, drugs and health plans might change, how demonstrations and pilots like accountable care organizations (ACO) will fare and other changes will prompt the industry to closely monitor these developments. Increased transparency about business relationships resulting from the ACA’s Physician Payment Sunshine Act provisions and intensified efforts to reduce costs associated with unnecessary care and fraud will generate significant interest. And the 114th Congress will no doubt weigh in on the trajectory of the law’s implementation and funding, with repeal unlikely.
- It’s All about Costs. Healthcare costs are predicted to increase by six percent annually for the next decade per the Center for Medicare and Medicaid Services (CMS) Office of the Actuary. These higher costs mean more employers will drop insurance coverage for their employees; those keeping coverage will use higher deductible products to shift financial risk to their employees. Health insurers and employers will press for bigger discounts and shift risk to providers. Bad debt for providers will increase and margins will shrink while demand for services resulting from the newly insured and growing Medicare enrollment will exacerbate issues of access and workforce effectiveness. And sticker shock for hospital prices and specialty drugs will continue to be big issues as employers and consumers seek greater transparency. Escalating health costs present a cascade of challenges to the system.
- From Hospital to Health System. In response to shrinking operating margins and the need for capital, providers will consolidate into regional health systems providing a full range of preventive, chronic, acute and post-acute services, including, for many, sponsorship of their own health insurance plans. Clinical innovation means the convergence of allopathic and alternative health modalities, and technologic advances will drive relocation of services from beds, to clinics, to homes and personal self-monitoring capabilities. For hospitals, the integration of these capabilities, in partnership with physicians and business partners, means heightened risk, diversification of businesses and competencies, centralization of back office functions and supply chain relationships, increased access to capital, and heightened attentiveness to compliance with state and federal regulatory compliance. For most hospitals, maintaining the status quo is not an option.
- The Right Care. At the Right Time. The First Time. It is estimated that 30 percent of health spending is for tests, procedures, and diagnostics for which there is no scientific evidence of appropriateness. Some unnecessary care is understandable: where signs, symptoms, risk factors and co-morbidities are complex, the science is weak. But for many medical populations, the science for diagnosing and treating is strong: non-adherence in these cases is unjustified and costly. The Office of the Inspector General (OIG) is keen to assess and penalize providers who do more than what’s necessary for purposes of financial gain, and social media fuels the public’s appetite to know what works best, who does it well, and at what cost. In 2015, adherence to evidence-based necessary care will be the industry’s greatest challenge.
- Shifting from Volume to Value. Payers—Medicare, Medicaid, health insurers and employers—believe the key to reducing costs while enhancing safety and quality is shifting risk to providers. Bundled payments, value-based purchasing, penalties for avoidable readmissions and unnecessary care, and other programs have a single aim: to replace fee-for-service incentives with results. This volume to value shift is underway: in some markets, it’s being driven by employers, in others, by plans or the government. Clearly incentives are changing. Payers find this to their advantage but providers are threatened. Provider-sponsored risk requires expensive infrastructure and transformational change in the ways work is done. And engaging physicians, allied health professionals and post-acute providers in the transition is cumbersome, complicated and politically risky.
- The Empowered and Informed Patient. The healthcare system is prone to think in terms of patients who follow instructions without major financial consequence if they don’t. Health plans, Medicare and Medicaid think of enrollees whose access is predicated in the plan designs they choose on their behalf. But the emergent market for healthcare products and services is composed of consumers whose average household spends $16,000 annually for healthcare. It’s second only to their housing costs, and it’s increasing faster than their wages. Some of these costs show up as claims covered by their insurance program if insured; much doesn’t. And increased out of pocket costs for premiums, co-pays, deductibles, over-the-counter therapies and others are forcing consumers to ask tough questions and pay attention to traditional and non-conventional options. The impact? The retail sector, already with 1,700 retail clinics nationwide, is experiencing exponential growth, as are non-conventional alternative therapies, like yoga for pain management in lieu of medications and more. The healthcare industry is inclined to think of passive, poorly informed patients/enrollees; consumers reject this presumption and want a more direct role.
“2015 is a watershed year for the healthcare industry. The uncertainty surrounding the ongoing implementation of the Affordable Care Act, shifting payment models, accelerated national and regional consolidation of large hospital and health systems and increasing emphasis on evidenced-based necessary care will have profound implications for payers, providers and patients,” said Paul Keckley, Managing Director of the Navigant Center for Healthcare Research and Policy Analysis. “Throughout 2015, Navigant Healthcare will be closely monitoring these changes and providing actionable, evidence-based insights on how stakeholders can best prepare for these regulatory and marketplace dynamics.”
For more information about Navigant’s Center for Healthcare Research and Policy Analysis, visit NavigantHRP.com.