2013 brought reform, gridlock, glitches and accountable care

Healthcare reform moved from talking point to reality in 2013, but its messy rollout provided a new stage for the American public, elected officials and all sectors of the healthcare industry to confront head-on their deep divisions over its sweeping ramifications.

Nowhere did that confrontation play out with greater drama than in the nation's capital, where the continued political gridlock brought financial pain and uncertainty to healthcare providers. While the White House, the Republican-led House, and the Democratic-led Senate reached a budget compromise after a government shutdown and near-default on the national debt, they socked hospitals with continued budget sequestration cuts.Click here for a timeline of 2013 healthcare milestonesCongressional Republicans, pressured by tea party groups financially backed by wealthy conservatives, made opposition to Obamacare the centerpiece of their agenda. They voted repeatedly to delay or defund implementation of the law without offering alternative legislation.

“Never before in the history of America have so many rich folks complained so much about helping so many (other Americans) be relieved of the fear of going without healthcare when they most need it,” said Dr. William Bria, president of the Association of Medical Directors of Information Systems.

Congress did end 2013 with solid bipartisan progress toward replacing the unworkable sustainable growth-rate formula that sets Medicare payments to physicians. House and Senate committees approved different bills that would all permanently repeal the SGR and change the Medicare physician payment system to one that pays for quality instead of volume. But surgeons objected and Republicans and Democrats are still far from agreement on how to pay the $116.5 billion 10-year cost of the repeal.

Beyond the Beltway, health systems searched for ways to adjust to weak demand for inpatient and elective care, as unemployment remained high following the Great Recession and employers imposed increased cost-sharing in their health benefit plans that further dampened demand for medical services. Two large investor-owned chains, Tenet Healthcare Corp. and Community Health Systems, responded to the growing economic pressure by cutting deals to acquire rival chains, hoping to build market share and reduce costs.

Other hospitals formed non-ownership affiliations to boost their purchasing power and their population health management skills. “Merger integration is a tough business,” said Joe Lupica, chairman of Newpoint Healthcare Advisors. “I think they can get everything they want without a merger.”

Regulators watched these consolidations with a critical eye, though critics said they haven't been tough enough. The Federal Trade Commission filed complaints to block a handful of deals, particularly involving hospitals buying physician practices.

Healthcare experts and economists marveled at the continued moderation of U.S. healthcare spending—about 4% a year—though American households may not have realized it because employers and health plans were imposing higher out-of-pocket costs on families. The percentage of Americans in a health plan with a deductible of at least $1,000 grew from 18% in 2008 to 38% in 2013, according to the Kaiser Family Foundation, renewing a long-standing debate about whether high cost-sharing discourages people from seeking needed care.

Economists' explanations for the slower spending ranged from the sluggish economy to reform's cost controls to “consumer-directed” health plans with high deductibles and coinsurance. The lingering fear is that healthcare spending growth will rebound as the economy gains steam. “There is no research that really gives a definitive answer,” said Charles Roehrig, director of the Altarum Institute's Center for Sustainable Health Spending.

Readying themselves for Obamacare, hospitals, physicians and insurers scrambled to organize new health plans and provider networks—many of them narrower than before—in time for the Oct. 1 start of open enrollment on the newly formed insurance exchanges. Rate negotiations were fierce. Blues plans jumped into the exchanges with both feet, while several big national insurers like UnitedHealth Group and Cigna Corp. participated on a more limited basis. Despite the uncertainties, publicly traded insurers reported strong profits, with solid performance from their growing Medicare Advantage business.

But over the summer the Obama administration undermined confidence in the law's implementation by pushing back several deadlines, including a major one mandating employers to provide coverage for their workers or pay a penalty. On the other hand, widespread insurer participation in the exchanges and lower-than-predicted premiums bolstered hopes that the reformed insurance marketplace would produce greater affordability and consumer choice.

Then, momentously, the federally run exchange and several state-run exchanges crashed on launch due to mismanagement and information technology problems, remaining mostly dysfunctional for the first two months. That hobbled enrollment and threw insurers into a near-panic, though state-run exchanges in California, New York and other states did better. Then hundreds of thousands of individually insured Americans received notices from carriers that their plans were being canceled for noncompliance with Obamacare requirements, stoking further anger about the Patient Protection and Affordable Care Act.

The disastrous federal exchange rollout imperiled the healthcare law politically, with congressional Republicans and much of the public jeering the overhaul. Even some Democrats, nervous about the 2014 elections, called for delays and rollbacks. But President Barack Obama's repair guy, former businessman Jeffrey Zients, saved the day by leading a successful “tech surge” that made the federal website serving 36 states relatively functional by the start of December. As of year's end, the federal and state exchanges were signing up people for coverage at a rapid pace, though it appeared enrollment would fall well short of the administration's goal of 3.3 million by Dec. 31. Calls for big changes and delays quieted down for the time being.

The law's other major way of expanding insurance coverage—extending Medicaid to adults earning up to 138% of the federal poverty level—ran into tough opposition from GOP governors and legislators in nearly half the states, who took advantage of the Supreme Court's 2012 ruling making the expansion optional. Powerful hospital groups lobbied hard for expansion so that millions of uninsured patients could pay for care and billions of new federal dollars would flow their way.

But many state GOP leaders argued their states couldn't afford the expansion even though the federal government was picking up most of the tab. But Republican governors of several states, including Arizona, Ohio, Michigan, Iowa and Pennsylvania, broke ranks and supported the expansion, with some seeking federal approval for modifications that required individual cost-sharing. Ohio Gov. John Kasich explained his rationale for breaking ranks: “When you die … St. Peter (is) probably not gonna ask you much about what you did about keeping government small, but he's going to ask you what you did for the poor. Better have a good answer.”

Many health systems worked hard to streamline care delivery by participating in accountable care contracts with public and private payers. These involved hospitals, doctors and other providers partnering to improve care and reduce costs, and then sharing in any resulting savings. Medicare's Pioneer ACO initiative reported modest savings for its first year with 13 ACOs around the country earning a total of $76 million based on reducing Medicare costs. Employers such as Intel Corp. led similar shared-savings collaborations with providers. The ACO results were promising but hardly definitive. “What I take from that is not that we will be successful but that we can be,” said Michael Chernew, a Harvard University professor of healthcare policy.

Meanwhile, many hospitals and physician groups bore down on quality improvement in other ways. With Medicare leaning on them with its pay-for-performance penalties, hospitals beefed up infection-surveillance programs, implemented tools to prevent medication errors and strengthened post-discharge processes to reduce 30-day readmission rates.

These various efforts may be working. In December, the CMS released data indicating that the national all-cause readmission rate for Medicare patients remained below 18% in the first eight months of the year, consistent with a dip in the final quarter of 2012. For the previous five years, the readmission rate had held steady at 19%.

These quality and care-coordination efforts may have been helped by the growing adoption of electronic health records, spurred by nearly $17 billion in Medicare incentive payments to hospitals and physicians. By October, 86% of eligible hospitals and 62% of eligible physicians and other professionals had received payments to install EHR systems. In December, however, HHS extended the time for providers to meet Stage 2 meaningful-use requirements for digital record systems, taking into account that providers face the huge task of preparing for the switch to the ICD-10 coding system next fall. While many physicians rave about the clinical benefits of EHRs, others continue to grumble about how digital records slow them down, and big problems remain in sharing information between the systems sold by the different vendors.

The slow progress on most healthcare fronts leaves the U.S. still well behind other advanced countries in access to coverage and care. The Commonwealth Fund reported in an 11-nation survey that U.S. adults are far more likely than adults in other industrialized nations to go without healthcare because of costs. Even Obama had to admit that the nation was only “at the opening weeks of the project to build a better healthcare system for everybody, a system that will offer real financial security and peace of mind to millions of Americans.”

—With reporting by Joe Carlson, Joseph Conn, Paul Demko, Melanie Evans, Steven Ross Johnson, Beth Kutcher, Maureen McKinney and Jessica Zigmond

Follow Harris Meyer on Twitter: @MHHmeyer