Outlook 2014: Obamacare, SGR repeal, ICD-10 and payment cuts top the list of challenges for healthcare players in 2014

This could be the make-or-break year for President Barack Obama's Patient Protection and Affordable Care Act, as hospitals, physicians, insurers, consumers and elected officials wonder whether it will meet its coverage expansion and cost-control goals or fall short of expectations.

This month marks the start of comprehensive health coverage for millions of uninsured, underinsured and insecurely insured Americans, either through subsidized private insurance or expanded Medicaid. Hospitals and physicians are gearing up to serve the newly insured while also facing major regulatory and payment reduction challenges. Insurers will scrutinize the claims experience in their new Obamacare plans to decide this spring where to set premiums for 2015 and try to cope with cuts in Medicare Advantage payments under the ACA. And members of Congress are watching carefully to see how the law plays out for their constituents before the November congressional elections, when Republicans hope to capture control of the Senate and scuttle the healthcare reform law. But for now, GOP leaders are trying to tone down the anti-reform rhetoric and focus on problems in the law's rollout.

Meanwhile, physicians hope 2014 will bring the repeal and replacement of Medicare's widely hated sustainable growth-rate physician payment formula, while hospitals want that legislation to include provisions extending a variety of hospital payment programs.

In addition, hospitals hope to win relief from Medicare disproportionate-share hospital cuts that are scheduled under the Affordable Care Act. That's particularly a concern for facilities in two dozen or so states that have not expanded Medicaid under the reform law to adults earning up to 138% of the federal poverty level, thus perpetuating the problem of uncompensated care that the disappearing DSH payments have helped manage.

For physicians and hospitals, one of the major information technology and financial worries this year will be shifting to the required new ICD-10 coding system Oct. 1. Providers that do not submit their bills using the new codes may face serious problems collecting payment. Some provider groups are pressing the Obama administration for a delay.

On healthcare reform, the December surge in enrollments through the state and federal insurance exchanges eased political pressures on the administration to delay provisions of the law. But the 2.1 million private-plan enrollments by the end of the year fell well short of the CMS' projection of 3.3 million enrollments, and it's less than a third of the 7 million enrollments projected by the Congressional Budget Office by March 31, the end of the open enrollment period. The administration and the state-run exchanges in 14 states and the District of Columbia will be going all-out on education and outreach to maximize signups over the next three months.

Many experts say the metric to watch is the percentage of younger and healthier versus older and sicker people who sign up. It's estimated that if about a third of enrollees this year are younger and healthier, exchange health plans will be able to keep premiums relatively stable in 2015.

If enrollment numbers lag or too high a percentage of older and sicker people enroll in 2014, there is likely to be growing bipartisan pressure in Congress to tinker with the law. Most significantly, calls to delay the individual mandate—viewed as essential to prodding a broad range of the population to purchase plans—could get louder, though observers do not expect any major changes to be enacted in 2014 given the president's veto pen. The people to watch are Democratic senators in conservative states facing re-election in November.

In addition, concerns linger over the accuracy and completeness of enrollment information the federal HealthCare.gov website has sent to insurers and state Medicaid programs. If a significant number of individuals seek to access healthcare in 2014 and find out that they are not enrolled, whether in Medicaid or in a private health plan, it could further damage public perceptions of the law and heighten political pressure to make changes.

Julius Hobson, a senior policy adviser with Polsinelli, a law firm and lobbying shop, said the president lacks political leverage to keep nervous Democrats in line, though Democratic carping has died down since the federal website was substantially repaired in early December.

On the regulatory front, states, consumer advocacy groups and insurers are eagerly anticipating a final rule from HHS laying out standards for the Affordable Care Act's Basic Health Program, which gives states the option to establish a uniform health benefits program for people with incomes between 133% and 200% of the poverty level who otherwise would be eligible to buy subsidized private coverage in the exchanges. Experts say the program would provide more stability in coverage and care for this group.

Meanwhile, business groups and other stakeholders are waiting for a final rule from the Internal Revenue Service that will lay out the requirements of the ACA's controversial employer mandate to provide health insurance for full-time employees. The administration delayed that mandate on employers with 50 or more full-time employees until Jan. 1, 2015. Whatever the IRS ultimately releases, “I don't think they can make people happy” because some employers will have to provide insurance for the first time or cover employees they haven't previously covered, said Timothy Jost, a health law professor at Washington & Lee University.

A big regulatory concern for hospitals this year is the healthcare reform law's Hospital Readmissions Reductions Program. Starting in October, the CMS will begin to withhold up to 3% of regular reimbursements for hospitals that had too many avoidable patient readmissions within 30 days of discharge after those patients were treated for heart attacks, heart failure, pneumonia, chronic lung disease or elective hip and knee replacements. Last year, the CMS withheld up to 2% of reimbursement for more than 2,000 hospitals.

It remains unclear if increasing financial penalties will bring readmission rates down, said Dr. John Birkmeyer, director of the Center for Healthcare Outcomes and Policy at the University of Michigan. But the CMS hopes the recent downward trend in readmission rates will continue in 2014.

Some experts predict that a substantial percentage of the nation's physicians will not be ready for the shift to ICD-10 coding by the Oct. 1 deadline. Because of the increase in codes, physicians likely will experience a 15% to 20% increase in time spent on nonclinical paperwork, according to the American Academy of Orthopaedic Surgeons. Many medical practices and hospitals are racing to train their coders in the complex new system, fearing major cash-flow problems if they are not ready to bill using ICD-10 on Oct. 1.

“If not extended, ICD-10 promises similar rollout issues as were experienced with www.HealthCare.gov,” said Richard Stefanacci, an associate professor of health policy at the University of the Sciences in Philadelphia. That could result in a slowdown in treatment for patients, he warned.

Physicians and hospitals also will be paying close attention to congressional negotiations over repealing and replacing Medicare's unpopular sustainable growth-rate physician payment formula. Those discussions will build on the work last year of three congressional committees. Each approved its own bipartisan bill to repeal the SGR formula and replace it with a system that pays for quality rather than volume. In its late-December budget deal, Congress provided a temporary patch, extending the current payment level through March 31. That gives lawmakers more time to hammer out their differences on a permanent fix, though many observers question whether Republicans and Democrats will be able to agree on how to fund the projected $116.5 billion cost of the reforms over 10 years.

Rick Pollack, executive vice president at the American Hospital Association, said many presume the Senate Finance Committee version is likely to be the platform for the legislation. If so, hospitals hope to see a host of other provisions tacked onto it, including the permanent extension of the Medicare-dependent hospital program, which increases payments to rural hospitals with significant Medicare populations.

Hospitals also will seek relief from Medicare DSH cuts that are scheduled under the Affordable Care Act. A bill from Rep. John Lewis (D-Ga.) would eliminate the first two years of both Medicare and Medicaid DSH cuts to allow more time for the expansion of healthcare coverage to offset the need for the DSH payments for serving low-income and uninsured patients.

As for the vows of congressional Republicans to spend 2014 working to investigate, delay, defund or repeal the Affordable Care Act, Pollack said he doesn't expect any sweeping changes this year. Smaller refinements in the law that are policy-oriented have “a bit of a shot” if they don't aim to “unravel the whole program,” he said.

Follow Jessica Zigmond on Twitter: @MHjzigmond

Follow Paul Demko on Twitter: @MHPDemko

Follow Virgil Dickson on Twitter: @MHVDickson