ACOs

5 Key Predictions for 2014

Each year at The Godbey Group we make predictions for the coming year to help our clients and friends anticipate future opportunities and challenges. For 2014 our crystal ball says that both challenges and opportunities for providers will come from the rolling implementation of the Affordable Care Act. We predict: 1. Patient eligibility will become a major challenge. Providers face a two-pronged challenge of determining patient eligibility in 2014. In states where the expansion of Medicaid was embraced, providers will still be challenged to determine the accurate eligibility of newly enrolled Medicaid recipients. All providers will be challenged to determine the accurate enrollment of patients in the new insurance marketplace products. The accuracy of enrollments rolls provided by the insurance marketplaces to insurance companies has been a disaster so far. This risk then passes to providers, especially physicians, who will be challenged to provide services mandated by the law without adequate proof of coverage. 2. Narrow physician networks will become a major challenge. Insurance plans chose to limit their financial risk by implementing narrow networks for the new online insurance marketplace products. The consequences and challenges will become apparent in 2014. Narrow physician panels will become an apparent dissatisfier to newly enrolled patients, especially those looking for their current physician. As patient enrollment in the new plans grow it’s predictable that patients will find it difficult to gain access to their selected physician. Ultimately hospitals participating in these narrow networks will find their hopes for increased volume choked off by narrow physician networks. Access to care under the Affordable Care Act will become a growing issue for the media and the public in 2014 and beyond. 3. The 2015 launch date for Accountable Care Organizations will be a challenge and an opportunity. Hospital administrators say it’s a coin toss as to whether they will participate in ACO’s in 2015. Without a track record or clear path, hospitals are indecisive about the move towards the ACA. On one hand the Center for Medicare & Medicaid Services has already announced reductions in payments to hospitals for 2014 and beyond. And on the other hand the Affordable Care Act holds out the promise of shared savings for successful management of Medicare quality and costs under ACO agreements. So it’s a coin toss, with 48% of CEOs saying they will not participate and 52% saying they will participate in ACO’s. 4. Reimbursement will fall below Medicare levels. Health care utilization in the first 3–4 quarters of 2014 will see an unprecedented spike as new cardholders are projected to utilize healthcare resources at a rate of 120% of current insured. Utilization/volume will drive cost up, necessitating a overall price reduction in an attempt to balance the equation. 5. 30% of the fully insured will lose their insurance by the fourth quarter of 2014. With the increase in costly benefits and the elimination of underwriting ability, insurance companies are hedging their bets and escalating insurance premiums to small employers skyhigh and unaffordable. As a result expect 30-50 million people to lose their insurance coverage. We hope these observations help you think about your prospects in the coming year. To all our colleagues and friends we wish a prosperous and healthy new year. Tweet Share Neil Godbey is President of The Godbey Group, Irving, Texas. Since 1999 The Godbey Group has been helping leading hospitals and healthcare systems negotiate favorable managed care and value-based...

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Evolving from fee-for-service to capitation

A number of national health plan executives recently commented that they feel the end of fee-for-service is in sight. On that prediction we agree. But I disagree with their prediction that value-based contracting will replace fee-for-service as the dominant form of reimbursement for healthcare providers. I disagree because value-based contracting is fundamentally unfair to providers. It creates an asymmetrical relationship in which the health plans hold all the cards and can manipulate the metrics to their own benefit. We can already see the evidence of this in the 250 some commercial ACO’s that have popped up around the country. And I disagree because there is a better substitute for fee-for-service, namely prepaid health plans with capitation. The healthcare industry has an abundance of experience over many decades, some over 50 years, with how to manage care under prepaid financial circumstances. The big advantage in moving to capitated reimbursement is that it eliminates the financial incentive for over utilization. Properly designed prepaid plans encourage physician cooperation and coordination of care. The structure of financial incentives eliminates the physician incentive to duplicate tests or imaging as a source of personal income. The structure of fee-for-service, even fee-for-service value-based incentives, is to encourage providers to do more, to bill more, to earn more. If we have learned anything since the creation of Medicare in 1965 it is that fee-for-service encourages more health care spending at the personal, corporate, state, and federal level of our economy. While health care reform is still built on a fee-for-service model, albeit with quality and process measures thrown in to steer providers in certain policy directions, I believe that the only hope of success in reforming healthcare will come from a move to capitation. Reforming the compensation model for providers is an essential ingredient in the reforms that are articulated as the Triple Aim for the Affordable Care Act. Those Aims are to improve the patient experience, to improve the health of populations, and to reduce the per capita cost of healthcare. Capitation is uniquely designed to address the per capita cost of healthcare. Combined with the new tools of population health management capitation can be successful in improving the health of populations by design. In our next blog guest Rich Williams from Advanced Plan for Health will explain how populations health management tools have made capitation an even more successful way to address clinical quality and health care costs. Share Tweet Neil Godbey is President of The Godbey Group, Irving, Texas. Since 1999 The Godbey Group has been helping leading hospitals and healthcare systems negotiate favorable managed care and value-based...

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It’s an amazing comeback.

After facing extinction in the run-up to the passage of the Patient Protection And Affordable Care Act, otherwise known as Obamacare, America’s health plans have made an enormous come back with record profits on the horizon. How soon we forget that during the Democratic-controlled Congress the nation’s health plans were on the skids as legislation was put forward to create a national health plan. At first the legislation eliminated private health plans but negotiations led to a compromise that allowed a blend of private and public plans. Finally, in the grand compromise Democrats traded away the public health plan to get support from private health plans and big Pharma. Today, health plans are flourishing despite the new law’s impact on their traditional way of doing business. Among other things Obamacare caped the percent of premium that plans can spend on administrative cost and profit, it eliminated pre-existing conditions and other forms of rate setting, and even eliminated maximum lifetime expenditure caps. All of which should have neutered the plans’ profits. Yet they are announcing stunning profit forecasts. How? In the face of all the healthcare reform health plans have a three pronged strategy. First, demand lower rates from healthcare providers, especially hospitals. Two, announce galactic rate increases for small employer insured groups while setting for astronomic increases. Third, sell population health management-like services to hospitals to help them manage the risk of new value-based contracts with Medicare and Commercial ACOs–thus increasing legally allowed profits for the health plans. All entirely legal, but unanticipated side-effects of the Affordable Care Act–Obamacare. It’s too early to know what the impact of these side-effects will have on the overall success or failure of healthcare reform. But it’s not too early to put a marker down that we can look back upon in 2020 when the authorization for the Obamacare law expires and is up for Congressional re-consideration. Mark your calendar. Tweet Author Neil Godbey is President of The Godbey Group, Irving, Texas. Since 1999 The Godbey Group had been helping leading hospitals and healthcare systems negotiate favorable managed care and value-based contracts that help sustain those organization’s mission of improving the healthcare of the communities they...

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