Living in Uncertainty: The New, New Normal

I like certainty and routine. I like my Tall Dark Roast with no room for cream at 5 am daily at Starbucks. I like the same restaurants, the same suits and ties and the same TV shows. Holidays throw me off and I get bored quickly when I have down time.

For six years, the healthcare industry in the U.S. has been adjusting to its new normal based on the regulatory framework of the Affordable Care Act (ACA). It became normal to discuss the volume to value transition, accountable care organizations, bundled payments, Medicaid expansion and Healthcare.gov. We adapted. We were certain they’d be around for years to come.

Then came the election. When 61 million elected Donald Trump to the White House and voters kept GOP majorities in both houses of Congress, it suddenly meant all bets were off in healthcare. The campaign promised to repeal and replace the ACA: its repeal appears certain; it’s replacement is uncertain for a number of reasons….

  • The mechanisms for replacing key elements of the law will require a super majority of 60 in the Senate: will the 52 GOP senators be able to garner support from 8 of the opposite party for weighty items like how Medicaid block grants could work, how consumers could buy insurance across state lines, how tax credits would work as individuals replace employers as the key insurance market and much more.
  • The tension between budget hawks in Congress who fear escalating deficits and debt and the Trump team’s promise to invest $550 billion in infrastructure including hospital improvements will require deft political craftsmanship. Increased funding for healthcare will compete against pressures to reduce federal spending pitting it against education, transportation, homeland security and defense for budget consideration.
  • Creating a new regulatory framework for private health insurance coverage will be complex, time-consuming process. It’s tricky as the ACA’s efforts toward its reform revealed: premiums reflect risks, and risks are mounting as populations age, utilization increases, drug costs escalate and employers shift responsibility to their employees via high deductible health plans. Complicating matters, 106 healthcare organizations operate as both provider and plan: these integrated systems. And what’s to become of the 21 million who gained insurance coverage through the ACA, including the 12 million who expect to get subsidies to pay their premiums (estimated at $43 billion this year).
  • What’s the future for industry consolidation? Will FTC recent constraints on health system consolidation in Pennsylvania and Chicago be sustained or revisited as appointments to key posts in the Department of Justice and FTC are made. What’s the view of the new administration toward mega-mergers like CHI-Dignity Health, Aetna-Humana and Anthem-Cigna to name a few. And will the Trump governing doctrine that’s pro-private market facilitate further consolidation to rival industry sectors like banking where five organizations control 45% of assets nationally?
  • And how will the new administration orchestrate pledged improvements in veteran’s health, lower drug prices, and protection of Medicare?

Answers to these are unknown. And they’ll not be found overnight. That’s the new, new normal.

Most healthcare organizations put their 2017 Strategic Plans to bed before the election. Capital and operating budgets are in place as by-products of their planning effort. Each is based on assumptions that carry a high level of certainty.  The election results changes things for many. There’s less certainty.

For drug and device companies, the news is mostly good. Though the killed prospects for the 12 nation Trans Pacific Partnership trade deal appears dead and the Trump campaign railed against drug prices, changes to control prices will come slowly and elimination of excise taxes and mandated discounts to states quickly. The administration will focus instead on streamlining the FDA’s approval process to create more competition which could take years. That’s the reason their stocks have gained 10% since the election.

Ditto good news for the private insurance industry. Repeal of the ACA means onerous requirements like essential health benefits and premium increase constraints go away. They’ll benefit from greater flexibility in setting premiums and benefits design. No doubt, they’ll negotiate around guaranteed issue and risk-ratings to strengthen their bargaining position. After all, the anti-Obamacare pseunami was premised on insurance premium spikes. A Trump team will find ways to slow premium increases next year just in time for the 2018 elections. All in all, good news.

For health information technology companies, the news is mixed: there’s no evidence meaningful use will not proceed at last through Stage Two since its funding is outside the ACA, but fear that hospitals and physicians might pull back investing in HIT given the mounting uncertainties in their sectors.

But for providers, especially hospitals, the election outcome is unsettling. As insurers gain leverage on the heals of relief from ACA requirements and employers push for lower costs, they’ll hammer physicians, hospitals and post-acute providers for steeper discounts. Medicare’s path will be an unknown for awhile: will the GOP successfully orchestrate its transition to a premium support model? Will its mandated bundled payment and value-based purchasing programs carry over as a new CMS team steps in? As Medicaid is transferred back to the states via block grants, will providers be commoditized by the private Medicaid managed care organizations that are used in 39 states to keep costs/beneficiary low? For physicians, MACRA isn’t likely to go away: the election assures that at least 90% of eligible physicians will simply opt for its lower risk MIPS payment model until the dust settles around alternative payment programs like ACOs. Thus, for all providers, uncertainty is reality.

For most hospitals, boards are meeting to revisit their 2017 plans. Uncertainty can be debilitating if not addressed forthrightly. The new, new normal is not a clear destination but a few things are clear:

The certainty of cost pressure: operating margins for hospitals will shrink faster than anticipated. That’s reality. Scale and scope need fresh attention: affiliations and partnerships make more sense now than ever. And table stakes is operating cost reduction beyond the bread and butter punch list offered by most consultants-- supply chain improvements, workforce productivity, capital costs for bricks, sticks and technology, and formulary design. The new pedigree for hospital cost reduction requires attentiveness to clinical program transformation first and foremost: the Truven analysis showed savings of $400 per admission from re-organization in cardiology, gastroenterology and other key programs—more than savings in formulary design and other staples in cost reduction. It also includes medical practice operational efficiency since one in three physicians is now a hospital employee and compliance risk mitigation to avoid penalties for safety lapses, avoidable errors and suboptimal outcomes. Add cost effectiveness in data capture necessary to quality, safety and costs, scrutiny of health information technology deployment, surgical precision in the design of health insurance benefits for hospital employees and openness to outsourcing virtually every function where efficiency and effectiveness gains can be realized—that’s the widening domain of hospital cost reduction. And much more.

The centrality of physician leadership: Physicians aren’t happy. The majority in their ranks believe the health system is deteriorating as their clinical autonomy is challenged and incomes threatened. Being an employee of a large medical group or hospital is not a desired end-game for many but remaining independent seems a pipe dream to most. And the complexity of clinical practice—adherence to evidence, measuring and monitoring outcomes and patient experiences, engaging peers in care coordination, converging behavioral, physical and alternative health disciplines in diagnostics and treatment planning, and acclimating to person-centered care that’s transparent—is daunting, even when circumstances are certain. Hospitals bear the brunt of these understandable feelings: they’re intense. Physician leadership will be imperative for hospitals, post acute providers and health insurers as the new, new normal unfolds. It requires business savvy along with clinical training: as financial pressures mount on hospitals and physicians, understanding access to creation of and access to capital, compliance risks, workforce performance, and day to day operations will be as important as understanding signs, symptoms, risk factors and co-morbidities. System-building is the future: that’s certain. And those activities, programs, investments, relationships and business interests will revolve around capable physician leadership.

The focus on person-centered performance. Individuals in every stage of health are the most important stakeholder in the new, new normal. Patient-centered care is limiting: it conveys a paternalistic demeanor toward individuals lending to widespread variability in access, costs and outcomes. It’s limited to inpatient and outpatient services delivered by providers to patients. That’s not the future. Employers are pushing away from conventional coverage forcing employees into high deductible plans. Social media and digital health are providing meaningful comparisons of providers more discriminantly and treatment options more broadly. Health is being defined more broadly around concepts of wellbeing in which social determinants and community programs matter. Alternative health, retail services, telemedicine and online services are as critical in the new, new normal as beds and clinics. But deploying capital toward person-centeredness is dicey, especially in cultures where leaders discount individuals are capable of being other than subservient and dependent.

There’s uncertainty in healthcare these days. Across our system, the unknowns outweigh the knowns.. The new, new normal is fraught with uncertainties: about that, we can be certain.