Pricing

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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Fee-for-service must go

After speaking with CEOs and CFOs across the country I am convinced that the strategic direction of most healthcare providers is currently very murky. Yet they would agree that change is occurring all around them with healthcare organizations facing the deepest transformation the industry has ever known. I question why we are not seeing the preparation for change that one would expect in such circumstances. My hypothesis is that the Affordable Care Act has done nothing to alter the underlying methodology of reimbursement. It’s just business as usual at lower rates. Although a couple of minor trends have emerged, most organizations have taken a “why should I change as long as I receive fee-for-service and can manage my costs” attitude. A few outlier organizations have taken an aggressive approach by building networks, buying insurance licenses, and competing for dollars. But take it from someone who’s been there, this approach is filled with land mines along the way. Start by examining your financial war chest. Do you have the means to compete with behemoth insurance companies? Then ask if you have the physician structure, governance, and political relationships to be successful? Still other health care leaders are challenged to make the right choice between affiliations, mergers, acquisitions, or how fast they can get to retirement. Believing that there are not massive and disruptive changes coming to health care reimbursement is a career limiting belief. The current model in which cost is a function of price times volume times population is simply not sustainable. In healthcare we know that efforts to drive down price simply lead providers to an increase volume which then drives an increase in total cost. Under health care reform we now have two elements driving the expansion of volume–price reductions and the expansion of the population with access to healthcare through the new health insurance marketplaces. Together these two factors will continue to explode the cost side of the equasion. I believe that reimbursement methodologies must change. Successfull providers will be prepared to manage a population and manage the health behaviors of the consumer, employer, and their employees. Successful organizations are preparing for changing reimbursement by preparing for prepaid financial management of healthcare services. Until recently I would have said that these changes would take place over the next 3 to 5 years. Now I believe that change is rapidly approaching. We no longer have the luxury of a three to five-year transition. And denial is not a strategic direction. 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 contracts....

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Strategies for the future

Lately I have become keenly aware of an absence of strategic direction and a lack of awareness of current and future changes to healthcare delivery. I am perplexed by the call to action and direction that I see every day. I have come to the conclusion that while PPACA has fundamentally changed most of healthcare as we know it, reimbursement is still the same old, same old. My forecast is that as long as fee-for-service is the dominant methodology of payment, we will not see a great deal of true strategic change. I believe that the healthcare industry denial of this reality will ultimately be the downfall of many institutions and providers. Reimbursement methodologies must change because projected volumes and utilization trends will force both cost up and price down. Is your organization prepared strategically and operationally to lead during this change, or to follow and try to catch up? I believe that there are four strategic positions that every healthcare organization needs to consider, then operationalize within a significantly short time frame of 18 – 24 months. They are: The First Strategy is simple – Close the Back Door. Organizations have spent millions of dollars attempting to reduce costs and optimize service. With new reimbursement on the horizon, managing cost will remain critical. The second part of Closing the Back Door is evaluating your revenue sources to ensure that they are at levels that your organization can maintain, and margins that will weather the storms of healthcare reform. Most of the reimbursement shift of the future should be revenue neutral to prepaid services. The Second Strategy – Population Management. Develop methodologies that put the institution into the business of managing a population. In this new environment, you will be asked to manage the population’s behavior and quality of service to a lower cost. The last thing you want is a member in a bed utilizing high cost resources. Manage the population to healthier, less costly services. A tactic here would be to set up care teams that engage skilled providers for their quality using a vast array of sophisticated data analytics. The delivery system must be prepared. The Third Strategy – Consumerism. Two segments, Employers and Employee. Employers are beginning to require employees to take control of their own lifestyle decisions, and as such, writing benefit plans to motivate individuals that do not comply with Quality Standards, i.e., smoking, obesity, hypertension, and diabetes, to mention a few. The second part to Consumerism is that the employee, including spouse and dependents, must take an active role in managing their health and lifestyles making healthy decisions, and complying with management of their diseases. The Fourth Strategy – Reimbursement or the Retail Space. The reimbursement methodology will change and preparations are required for a number of tactics, but overall, you will take on the management of defined populations for a specific prepaid fee. Operationally, you will need a network of Care Teams, ability to establish a solid pre-existing cost for the historical services delivered for the defined population, and the predicted price of future care. I have outlined a number of strategic choices. As a leader ask yourself where you see healthcare going? What is your organization doing to prepare? And is your organization in denial or is it ready? 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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