President-elect Donald Trump has said repealing the ACA will be a priority for his administration. On Dec. 6, 2016, Senate Majority Leader Mitch McConnell (R-Ky.) announced that a measure to repeal parts of the ACA will be the first item the Senate considers when it convenes on Jan. 3, 2017.
As the old Chinese curse has it: “May you live in interesting times,” and the potential slow-walk repeal of the ACA is probably the most “interesting” event for the U.S. healthcare system in recent times. Why? Because when it was enacted in 2010, the ACA was the product of a delicate balancing act among various parts of the healthcare industry. Each essentially agreed to sacrifices in exchange for the prospect of millions of Americans gaining insurance to help cover their medical expenses. And, because health systems are typically composed of every facet of the healthcare continuum—hospitals, post-acute, physician enterprises, ambulatory, diagnostic, private label, and captive insurance companies—each distinct component will be uniquely affected by the impact of a slow repeal and replacement of the ACA.
“Public opinion seems to be shifting,” said John Rother, president of the National Coalition on Health Care, an umbrella organization that includes doctors, businesses, unions, and religious groups. “It’s not clear when people say they want to ‘repeal,’ what they mean by that. It may mean they just want to get rid of the individual mandate.”
Hospital Industry Weighs In on Healthcare Reform
President-elect Trump received dozens of “white papers” urging the administration to tailor healthcare reform to the needs of their particular constituencies. Last week, the American Hospital Association (AHA) and the Federation of American Hospitals (FAH) sent letters to Trump and congressional leaders that underscored how nuanced the word “repeal” is when applied to a particular section of the healthcare industry and raised significant concerns about efforts to “repeal” the ACA.
The groups warned that a wholesale repeal of the ACA could cost hospitals hundreds of billions of dollars and result in “an unprecedented public health crisis” if the law is not replaced.
The letter cited a study conducted by the consulting firm Dobson DaVanzo & Associates that estimated the financial effects of repealing the ACA. The study assumed Congress would move forward with a budget reconciliation bill similar to the one Congress passed earlier this year (HR 3762), which would have repealed major ACA provisions but was vetoed by President Obama. FAH President Charles Kahn said he believes the bill “will serve as a template, or at least a starting point, for congressional action in 2017.”
The study projected that hospitals could lose $165.8 billion between 2018 and 2026 if the ACA is partially repealed and not replaced. That projection assumes the restoration of reductions to Medicaid Disproportionate Share Hospital (DSH) payments, as called for under HR 3762.
According to the study, hospitals also could lose an additional:
- $289.5 billion in Medicare payment inflation updates if payment reductions included in the ACA are not restored to payment levels that were in place before the ACA’s enactment; and
- $102.9 billion if reductions to Medicare and Medicaid DSH payments included in the ACA are not restored to payment levels that were in place before the ACA’s enactment.
As one of the first sectors of the healthcare industry to speak out publicly, Kahn believes lawmakers “will take a realistic view” in addressing the ACA that would create a “soft landing” for hospitals. Still, the prospect for less-nuanced changes to the ACA leaves hospital executives pondering their next steps. For now, we think it is time to Stay the Course – Assess What You Have – Wait and See – Be Alert – And Don’t Be Silent.
In this time of uncertainty and transition, our suggestion is that healthcare systems take steps now to assess the potential impact of health policy changes, such as:
- Staying in continual contact with their associations and congressional representatives to carefully monitor the situation in Washington as specific actions emerge to address the ACA, healthcare spending and value-based initiatives.
- Reviewing existing strategic and capital spending plans in order to develop several scenarios for policy change and assess how each scenario might affect organizational strategies and revenue depending on the population served, payer mix, and other factors.
- Focusing on strategic initiatives that align with the elements of the ACA that are likely to remain intact, including Accountable Care Organizations, bundling initiatives, and programs that reward value-based outcomes.
- Doubling down on population health management and the IT infrastructure to measure clinical performance, patient outcomes, and value-based purchasing.
- Unpacking every payor agreement—both governmental and private pay—to forecast the potential impact of reimbursement changes and, conversely, to develop the business case for receiving a fair share of a Medicaid block grant if Congress moves in that direction.
For organizations with initiatives under way related to retail care, consumerism, digital interaction, and telehealth, it will be important to maintain those efforts even at this uncertain time.
The change in administration in Washington has not altered the macroeconomic forces driving healthcare change. Payers, employers, nontraditional competitors, and consumers will continue to push for changes to the industry’s payment approach, cost level, transparency, delivery model, and consumer experience. And while even a slow-walk repeal of the ACA inevitably rings some alarm bells, the prospective changes will likely continue to reward population health, value, innovation, and the ability to meet evolving consumer expectations.