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Medical Headaches: Providers Face Challenges Under Affordable Care Act

With the implementation of the Patient Protection & Affordable Care Act well under way, health care providers are faced with an ever growing list of administrative and financial responsibilities that can take their focus and time away from the most important piece of health care: the patient.

By 2019, 32 million more Americans are expected to hold health insurance coverage. According to the Congressional Budget Office, half will be covered under government insurance programs, specifically Medicaid and the Children’s Health Insurance Plan.

Providers will be faced with not only preparing to serve more patients, but will need to address changing Medicare and Medicaid reimbursement rates for hospitals and primary care physicians as well as comprehensive reporting requirements.

Hospitals that currently serve a large number of Medicaid and uninsured patients will see their DSH (disproportionate share hospital) payments reduced to 25 percent of current amounts, beginning in 2014. The rationale for the reduction is that as more people have access to insurance, hospitals will see a significant drop-off in uninsured patients.

Over the next six years the forecasted rate that Congress uses as a benchmark for implementing Medicare rate increases, will be reduced anywhere from .2 percentage points to .75 percentage point, keeping billions of dollars in reimbursements from hospitals. Hospitals will also see payment reductions in certain instances around hospital readmissions and hospital acquired conditions (i.e. infections).

Additionally, hospitals will have new requirements to qualify as tax exempt charitable hospital organizations, including;

1.  Charge limitations: Hospitals will no longer be able to charge uninsured or underinsured payments more than its contracted commercial rates; and,

2.  Community Health Needs Assessment: Hospitals will need to conduct and publish a community health needs assessment every three years.

However, in the short term, medical groups will see increased Medicare and Medicaid rates paid to primary care physicians. In an effort to expand access and encourage doctors to become primary care physicians, Medicare rates to primary care physicians will be increased through a 10 percent physician bonus payment from 2011 through 2015. Medicaid primary care payments for services will be 100 percent of Medicare primary care payments and the federal government will pay states the difference in rates. After 2015, there is no clarity as to how providers will be paid for these services.

With so much to do to prepare for the full implementation of the PPACA, hospitals and physician groups can be overwhelmed by regulations and setting strategy to manage its requirements, while continuing to focus on the patient.

To assume that patients will not be directly impacted by reform changes to providers is simply disingenuous. The delivery of care will be slower and more costly. Some strategies for health care management leaders include:

1.  Model current and future patient scenarios to identify potential service and financial challenges. Review your current patient profile makeup (self pay, commercial insurance, Medicare, Medicaid) and use your current demographics to create scenarios around serving the newly insured with reductions in total bad debt and uncompensated care that can be compared against scenarios that include a smaller number of uninsured patients and the new Medicare reimbursement cuts.

2.  Review and update procedures around the revenue cycle to be in compliance with PPACA. From registration to billing and collections, it is going to be imperative that hospitals and medical groups are in compliance with PPACA’s financial regulations and that all revenue cycle procedures are in writing, communicated to staff, and controls in place in order to receive Medicare and Medicaid reimbursements. Reporting requirements that used to be carrots (incentives) for providers will soon be sticks (penalties) for non-compliance of reporting requirements.

3.  Review and improve current technology to efficiently track measurements and outcomes. Expanded reporting will require health care systems to answer even more questions about their patient encounters than they do now. Health care leaders will need to renew efforts to ensure their technology is able to track a patient’s visit from beginning to end with a focus on using systems that interface and integrate easily with one another to reduce inefficiencies and redundancies.

David MacDonald is CEO of Aegle Advisors (www.aegleadvisors.com), a boutique health care consulting firm that focuses on an approach of financial and operational analysis, observation, and communication. Contact him at dmacdonald@aegleadvisors.com or (617)331-7169.