The signs of healthcare payment reform seem to be everywhere. Federal healthcare reform seems more likely than at any time since the inception of Medicare. But where should provider organizations focus their attention?
Three strategies that anticipate Washington’s work
Reform is more likely because of Democratic majorities in Congress and a popular president whose campaign platform highlighted healthcare reform. The chances of legislation passing are improved by an inclusive process.
The economic downturn also has contributed to the reform momentum. The fragile state of the economy makes all too apparent the need to change the unsustainable trajectory of healthcare costs. Earlier this month, the presidents Council of Economic Advisers stated that future economic growth required major reform of the healthcare sector.
In addition, bailouts of the financial system and automakers may have made investing in healthcare reform more palatable by comparison.
Reform is hardly limited to the federal government. Other reform actions are taking place on a smaller scale, through demonstration projects sponsored by health plans, government agencies, insurance companies, universities and even private companies.
For providers, the message should be unmistakable: Financial success will require collaboration among various providers and settings, with financial benefit shifting from higher acuity care to maintaining health.
However, payment reform legislation will not prescribe how providers achieve those lofty goals. That part is up to us. Thats a good thing for both providers and the government. If President Barack Obama is ambivalent about his role in operating a major auto company, he would be downright distraught if he tried running a hospital.
To capture how providers are positioning themselves on the cusp of federal reform legislation, the Healthcare Financial Management Association interviewed healthcare provider organizations that have participated in payment reform demonstration projects and that are otherwise on the forefront of reform. Interviewees were an industrywide sample of executives from 25 hospitals and health systems across the country. The results of this research are available in HFMAs paper Healthcare Payment Reform: A Call to Action (See hfma.org/paymentreform).
The research found an understandable caution in making major structural changes in anticipation of reform. Those changesand the process and technology needed to make them operationalare complex and expensive. Until reform takes shape, providers do not want to commit the time and money to initiatives that might miss the mark. (And many may still be nursing wounds from the integration flurry of the 1990s.)
However, even without legislation in hand, much less passed, the signs of reform are coherent enough to suggest key competencies that providers must master.
Mastering these competencies is a formidable challenge, especially in this economic environment. HFMAs recent Financial Pulse research (hfma.org/pulse) found that 54% of hospitals report a negative margin, 73% report a decrease in days cash on hand, 43% report a decline in patient revenue, and 78% report a decline in nonoperating revenue.
Yet the very economic pressure that makes the complexities of integration, risk management and pricing seem difficult to tackle, makes tackling them an imperative. These competencies can improve the financial situation by driving down costs, enhancing efficiency, growing market share and improving quality. And if that gets you ready for success under whatever specific form federal legislation takes, so much the better.
Richard Clarke is president and CEO of the Healthcare Financial Managment Association.
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