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Hospital Systems Are Finally Realizing There Are Problems With Obamacare

Posted Jul 24 2013 9:52pm
Stanley Feld M.D.,FACP, MACE

Hospital systems loved the prospect of Obamacare. Physicians would be forced into full time salaried hospital system positions. Hospital systems would own physicians’ intellectual property and surgical skills.

Physicians would be the hospital systems’ cash cow. Its brick and mortar model was failing. Surgery and recovery from surgery was improving. Length of hospital stays was decreasing.

The problem hospital systems were discovering was that physicians were not as productive when salaried as they were when they owned their own practices.

Surgery was being performed as outpatient surgery in freestanding surgery centers. Physicians own most of these surgery centers independent of hospital systems.

The healthcare insurance industry has even encouraged their use. The Obama administration doesn’t like them because they encourage patient choice and independence. This is the opposite of Obamacare's goal of government dependence and control of patient choice.

Hospital systems thought Obamacare would provide millions of newly insured patients. This would translate to higher profits for the hospital systems.

Obamacare’s supposed goal was improving access to care for low-income families and individuals. Hospital systems were led to believe that they would treat more patients with health insurance through expanded Medicaid eligibility.

With the introduction of health insurance exchanges, low-income individuals would be able to purchase healthcare insurance coverage at a subsidized rate.

The subsidy would come in the form of a tax credit. Hospital systems did not realize that low-income families do not pay taxes so they would not pay any tax to apply a tax credit. These families making up to $38,000 dollars a year could not afford the lowest insurance of $12,000 dollars a year. They would opt to not buy the health insurance exchange offerings.

The health insurance exchanges would not reduce the amount of uncompensated care provided by the nation's hospitals.

Suddenly hospital systems realized that their hospital consultants were wrong.  While it sounded good on paper, many hospital finance administrators are terrified that Obamacare will result in a hospital system taking great losses as a result of decreased reimbursement and a decrease in the promised insured population.

Tim Nguyen, corporate controller at Palomar Health, a San Diego–based system with 690 licensed acute care hospital beds and $2.5 billion in gross annual revenue , says there is a catch-22 built into the healthcare legislation that will ultimately hurt hospital systems.”

 There is another catch to Obamacare. I cannot tell if this was an unintended consequence or purposeful deception by the Obama administration.  The exchanges will have different tiers with different deductibles and copays.

California's health exchanges will have four tiers when the program goes live in January 2014, Nguyen explains: platinum (where the patient pays 10% of total healthcare expenses); gold (20%); silver (30%); and bronze (40%).”

" These patients will still be responsible to pay , and they probably don't make that much money and are likely to choose the silver or bronze tier to keep the premiums low. … That will increase our bad debt even though they have insurance."

The low- income families will believe they have good insurance coverage. If they get sick they will be responsible for the high deductibles and co-pays.

If they choose to buy the insurance they will use the hospital facilities without realizing that the insurance does not cover everything.

 After hospitalization they will be hit with a bill they cannot afford. The hospital system will pursue payment but will not be able to collect. The hospital will have to write it off.

 There is total uncertainty about the rules. However, before a hospital system should accept the program they should know the rules. Their participation can ruin them financially.

Marlene Zurack is senior vice president of finance and chief financial officer for New York City Health and Hospitals Corporation (HCC). HCC is a municipal integrated healthcare delivery system with $7.1 billion in total operating revenue when combined with HHC's MetroPlus health plan.

She is doubtful that the insurance exchanges will result in a net benefit to her organization. She insures 1.4 million people. The systems treat 475,000 uninsured patients. She has two problems with the health insurance exchanges.

She does not know how many of the uninsured will get insurance, what level of insurance will they buy and how much of a difference the insurance payment is from the Medicaid's Disproportionate Share Hospital program.

“HHC is likely to lose revenue in the end , Zurack says, due to cuts being made to Medicaid's Disproportionate Share Hospital program, which distributes payments to qualifying hospitals that serve a large number of uninsured individuals.”

In reality, Zurack says, the cuts will be extremely damaging to hospitals that serve this population.

New York City Health and Hospital Corporation is scheduled to lose $17.1 billion dollars between 2014 and 2020 due to federal cuts In the Medicaid Disproportionate Share Hospital program.

Obamacare is becoming a reality. Hospital systems such as HCC are realizing the financial impact of Obamacare.

Accountable Care Organizations are Obamacare’s signature tool to improve access to care and decrease the cost of care.

The promise to hospital systems’ is that by increasing efficiency ACOs could increase hospital systems’ profit.

Incorporated into the ACO scheme is profit sharing with the government if there are reduced costs. Included is reduction in payment if costs exceed benchmark costs.

Only 10% of hospital systems have signed up in the last two years. The Obama administration has done a lot of bragging about enrollment .

Originally there were thirty-two “Pioneer” hospital systems. The Mayo Clinic and the Cleveland Clinic rejected being Pioneer participants. The goal of ACOs is to develop integrated care delivery systems.

Last week 9 of the original 32 Pioneer ACOs withdrew from the original program. CMS gave no explanation for them leaving.

I believe they realized they couldn’t integrate their delivery system the way the government wants.

They cannot make any money participating in the Medicare Shared Savings Program.

Seven of the nine are applying to transition to the Medicare Shared Savings Program, while two are abandoning the program completely. CMS declined to identify which ACOs are leaving the Pioneer program and which are simply shifting to the MSSP.

  The nine departing ACOs are :

  • Prime Care Medical Network Inc., an IPA-based ACO serving San Bernadino and Riverside counties in California.
  • University of Michigan Health System in Ann Arbor.
  • Physician Health Partners LLC, a medical management company in Denver.
  • Seton Health Alliance, a network of providers comprised in the 11-county Austin area.
  • "Plus ACO," a partership between North Texas Specialty Physicians and Texas Health Resources
  • Healthcare Partners Nevada ACO LLC, a multispecialty medical group and IPA serving Clark and Nye counties in Nevada
  • Healthcare Partners California ACO LLC, a multispecialty medical group and IPA serving Los Angeles and Orange counties in California.
  • JSA Care Partners LLC, a primary medical group and IPA serving the Orlando, Tampa and South Florida area.
  • Presbyterian Healthcare Services, an integrated delivery system serving the Albuquerque area.

 “Plus ACO”, a partnership between Texas Health Resources and North Texas Specialty Physicians , has plans to leave the Pioneer ACO program by mid-August, but the two organizations say they are open to "remaining in the Pioneer ACO program if we can find an economically viable way to do so."

 ACO’s are doomed. Obamacare is falling apart.

President Obama immediately went on the campaign trail telling the country how great Obamacare is already.  

 

He continues to ignore problems with Obamacare’s implementation and costs. He has no regard for America’s financial stability.

Americans’ are starting to understand his attitude.

 The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone

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