Harry Nelson

Where you stand on changes in our healthcare system depends on where you sit

Discussions about our healthcare system have a tendency to sound like the parable about people groping their way around an elephant in the dark: each one grips a different part—one touching a trunk, another a tusk, and a third, the rear end—and when they compare notes, they describe radically different experiences. Similarly, everyone who provides, utilizes, pays for, or invests in healthcare services, products, and technologies has their own perspective.


For example, among patients who had reasonably good insurance coverage through their jobs before the Affordable Care Act, the period prior to the ACA is starting to look more like a “golden age.” No matter what kind of insurance coverage you have today, the value of the health insurance benefit has eroded significantly. The future (and present) are a time of underinsurance. Patients are waking up to an era ahead of greater and greater financial responsibility for care. I hear complaints constantly about how expensive the doctor’s bill was and how difficult the insurance company was in covering this or that treatment.


For patients with serious health problems and their families, the conversation is not just wistful but about a crisis as healthcare costs become unaffordable and the experience of being a patient in our system becomes more miserable. We all hear horror stories about friends and families battling life-threatening conditions who can’t get the treatment they need, and sometimes about the collection efforts that threaten to eviscerate people’s life savings for hospital bills after a hospitalization. The lack of pricing transparency, the corrupt ways that prices are set, and the outrageously high price of care are a regular part of the conversation about how broken our system is.


On the other hand, for patients who lacked employer-based coverage and are newly insured by the Affordable Care Act’s Medicaid expansion or exchange-based subsidies, the current situation is significantly better. For the first time, millions of people have insurance coverage and access to doctors (besides emergency room care). For people with preexisting conditions, for the first time, health plans can’t refuse coverage. For parents with children with developmental disabilities or on the autism spectrum, the inclusion of care in the minimum essential coverage under the ACA means access to insurance coverage for applied behavioral health. For a whole slew of folks, the last few years are a much better time.


The contrast in perspectives extends beyond patients. For small businesses and employers, the conversation is often one of dreading the next upward tick in the ever-rising cost of coverage and how healthcare expenses are eroding profitability. The talk about how many jobs will be lost continues. We hear about how health benefits for retirees are threatening the solvency of big corporations and many American cities.


Healthcare providers, the companies and people I work with most often, have a whole range of different takes. For hospitals and doctors in insurance-focused practice, the economics of declining reimbursement are mostly bad and getting progressively worse. It is a time of contraction. For primary care doctors and a growing number of subspecialties, including cardiologists and gastroenterologists, this has translated into ongoing migration to larger hospital-affiliated or managed care groups. The traditional business model for small medical groups in private practice, outside of a narrowing group of subspecialties, is no longer viable. Hospitals have taken it on the chin, with narrowed ability to admit patients, diminished reimbursement for short-stay patients, penalties for hospital-acquired conditions and re-admissions, and suppression of their utilization in favor of lower-level care settings.


For other providers dependent upon Medicare and Medicaid, such as nursing homes, home health agencies, and hospices, the challenges facing hospitals are a harbinger of what’s coming. The specter of bundled payment and operating in a value-based payment system will mean dire changes. On the whole, it is a time of pessimism about a future in which many who have been operating profitably until now are heading into an at-best break-even future.


But it’s not bad news everywhere. For behavioral health providers, such as in addiction treatment, it is a time of growth, with surging demand, and improved reimbursement opportunities thanks to the Mental Health Parity Act and the inclusion of substance abuse treatment under the ACA definition of minimum essential coverage. Similarly, for safety net providers, such as federally qualified health centers (FQHCs), the influx of new Medicaid patients is fueling strong growth.


While some growth is directly attributable to ACA-driven reforms or evolving Medicare requirements, much of the positive growth is being driven by consumer demand. Physician models that offer services that consumer will pay for out-of-pocket are growing, including telehealth, urgent care, and concierge models. The world of medspas and aesthetic care, weight loss, and wellness are all growing nicely, because they respond to popular demand.


The differences in perspective extend to payors, government regulators, and policymakers, who talk about how we need to focus on payment for performance and do more to standardize care, reduce spending on end-of-life care, and focus on preventive, wellness care in lieu of intensive and expensive technologies. We hear from these quarters about how Americans spend 17% of our gross domestic product on health care, more than any other country, but have only a middling system in comparison to many other advanced industrial countries, trailing an embarrassingly long list of other countries in infant mortality and life expectancy.


In this environment, it’s no wonder that many are pessimistic. Analysts are projecting shortages of doctors, contractions – including hospital closures – and consolidation for healthcare providers ahead. The same underlying pressures have already driven a majority of primary care physicians to migrate to large managed care organizations because the old model of small and solo private practices funded by Medicare and insurance no longer works.


Healthcare lawyers also have our own perspectives. Personally, the talk about whether the transformations underway are good or bad is beside the point. And the politics keep us from the kind of conversations that need to be taking place. Some changes were unavoidable. Our healthcare system was – and, in many ways, still is broken. I don’t love every aspect of the ACA, and its implementation has been horrendous. The real problem, though, is not the ACA, but the underlying problems that it sought to address – the unyielding upward growth curve on government healthcare spending, inefficiencies in a fragmented, fee-for-service system, and fraud, abuse, and waste, to name a few. The lack of access to care for the working poor was (and in some parts of the U.S. still is) a national embarrassment. Obamacare may not have been the right “fix” in many respects, but the problems it sought to address were and are real problems, and healthcare providers, payors, and patients alike need to be paying attention to the inevitable direction in healthcare.


The need to shift from a system of paying for outcomes and value rather than for the volume of services rendered – at least for government- and managed care-funded care – has also been a long time coming. The most interesting shift to me has been is the increase in innovation, as we see attempts to meet growing consumer demand for new services and products and increased convenience that consumers are willing to pay for. It is creating more pressure for transparency around price and quality, and creating a receptive environment for more disruption. Although I join those disquieted by the extent to which the insurance companies succeeded in enshrining their own centrality to our system (which distorts the market economy and imposes costs on all healthcare services), under-insurance may have a hidden benefit as we see more and more market-driven behavior, as patients try to manage their own health and wellness.


As a result, while it’s a difficult time for many in the American healthcare system, it is also a time of adaptation: to a world where third party reimbursement is less relevant, where providers adapt to a more value-driven environment in which they get paid less today than they did a few years ago, while needing to jump through more hoops to get paid less. Patients, in turn, are asked to pay more and more out of pocket, which will make them more selective.


Our system is in the midst of a period of transformational change and is going to look and feel progressively different over the next 5, 10, 20 years. My goal over the years has been to help healthcare providers, from individual doctors to large organizations, deal with change, to escape the pitfalls and navigate strategically, to find their own roadmaps to growth and opportunity in a complicated environment. No matter where you stand, times of rapid change translate into opportunities and challenges. I believe that opportunities are alive and well for those who understand and navigate the new environment.


In the coming weeks and months, I will try to lay out my vision of where we are and where we’re going. I also think it’s instructive to work through how we got there, and including a brief history of how the system developed, about the last major moment of transformation in our system (the 1965 enactment of Medicare and Medicaid) and the structural challenges that emerged over the subsequent half century.


I hope that this background will help explain where we’re heading, and offer a vision for patients and providers about thriving as our system evolves.

Leave a Reply

Your email address will not be published. Required fields are marked *