market-driven health care and the Affordable Care Act

In the Supreme Court majority decision on King v. Burwell, Chief Justice John Roberts writes, "Congress passed the Affordable Care Act (ACA) to improve health insurance markets, not to destroy them." The ACA is one of several trends that have the potential to accelerate the nation's move toward a more responsive and market-driven healthcare system.

Other market-changing factors include the transition to value-based payment, the application of big data, the increase in consolidations and affiliations, the evolving roles of physician leaders, and the consumer-orientation of patients. These factors reinforce each other and are reshaping how health care is being financed and delivered.

The Relationship Between the ACA and Market-Driven Health Care

The ACA and the actions of the Centers for Medicare & Medicaid Services (CMS)-both in implementing ACA provisions and in advancing other initiatives-have been catalysts for creating a more competitive market. Accountable care organizations (ACOs) and bundled payments represent contracting approaches that promote integration of physicians, health systems, and other providers, and that use value-based payments. These approaches stimulate the development of other contracting approaches. Meanwhile, the health insurance exchanges aggregate the demand of individuals and small businesses so they can get more competitive rates, encouraging them to consider purchasing insurance. Finally, the ACA establishes a reliable source of payment and a subsidy for a large portion of the previously uninsured patient population-increasing the size of the market, reducing some of the need for cross-subsidies, and improving the bottom lines for many providers.

The Broad Movement Toward Value-Based Contracting

Most observers recognize that the movement toward value-based contracting extends well beyond the ACA. Experiments in contracting are occurring in all segments of the insurance market, including contracts between provider networks and commercial health plans, Medicare Advantage plan contracts, and managed Medicaid programs and contracts.

Payers and providers are beginning to adjust contracting terms frequently. The rate of change is market-specific based on the capabilities and strategies of the major provider groups, payers, employers, and state government (both as a policy maker and an employer), and also on patient demographics and needs. Change is likely to occur in starts and stops, but the direction is toward more market-driven approaches.

The Potential Advantages of Fine-Tuning the ACA

A recent public opinion survey by Kaiser Family Foundation indicated that the public is evenly divided regarding the ACA.a Of those polled, 43 percent have a favorable view of the ACA, and 4,0 percent have a negative view. Still, only 29 percent want the law to be repealed.

The creators of the AGA could not have foreseen the role of individual states in implementing the legislation, the rate and path of transformation by many provider organizations, or the opportunity to create still more market-driven behavior. Any piece of legislation this complex can be expected to benefit from adjustments during the implementationprocess. In addition, many advantages- to patients, healthcare organizations, and political processes-could come from a more unified federal healthcare policy.

Here are three possible changes that would facilitate broader acceptance of the law, provide another boost for market-driven care, and create still greater synergy with the other major market trends that are occurring.

Make Medicaid expansion more attractive for nonparticipating states. About 20 states are not participating in the Medicaid part of the ACA, meaning several million individuals and lowincome families are left out. Yet to most of the healthcare provider community, the benefits to patients and providers of the Medicaid expansion have been demonstrated. The financial benefits for health systems have also been clearly documented.

The pressure for some states to accept Medicaid expansion may grow after the King v. Burwell decision. Some form of corresponding flexibility on the federal side might also encourage these states to move in that direction-for example, changes to the threshold (138 percent of the federal poverty level) that defines when individuals qualify for Medicaid in states that expand eligibility, or changes in duration of the federal commitment to cover the cost of the increase.

Rethink the reduction of payments to the Medicare Advantage program. Medicare Advantage is working. It is encouraging the formation of groups of physicians, health systems, and other providers in organizations capable of population health management (an element of the Institute for Healthcare Improvement's "Triple Aim" of an improved patient experience, improved population health, and reduced healthcare costs). At this point, the program is going further than any other federal or commercial program to provide an effective incentive structure for lowering the cost of healthcare.

The program, which reimburses participating commercial payers on a capitated basis, has been highly successful in encouraging the development of clinically integrated networks and other innovative approaches to achieving the Triple Aim. It is one of the best laboratories we have for experimenting with value -based payments.

Adjust the cost of the essential benefits package. The requirement that previously insured households give up their current plan and purchase a more expensive one appears to have been an unintended consequence of healthcare reform. The best way to eliminate the bumps in premiums that a significant group of insured households have seen under the ACA would be to trim the essential benefits package and reduce the costs by 10 percent. The effect could be to neutralize an element of resistance, and to allow for more customer-based decisions.

The ACA can be seen as part of a broader move - ment towards more responsive, market-driven health care. Continuing adjustments in the private and public sector would make a big difference right now. A few adjustments to the ACA could add to the momentum of healthcare reform.

How Provider Organizations Are Leveraging Multiple Tools in Response to Market Changes

Some health systems and physician groups are actively seeking market-related change. They are exploring several avenues at once-reengineering processes, reevaluating organizational structure, leveraging new forms of big data, looking at possible affiliations or collaborations, and/or achieving even closer integration and coordination. These and other efforts often involve identifying new scale economies, fostering a new generation of physician leaders to provide impetus and direction, and engaging the patient and family in new ways. A few examples noted in reports from HFM A's Value Project follow.a

Benefis Health System, Great Falls, Mont., has restructured its costs so that the system can sustain itself based on Medicare's fee-for-service rates, including broader areas of responsibility for key managers with respect to adding FTEs, process redesign, supply chain redesign, and a cultural shift.

Partners HealthCare, Boston, has implemented a 20-cell matrix approach to population health management including preventive services redesign, high-risk care management redesign, patient-shared decision making, expanded virtual visits, and other elements.

Providence Health and Services, the third largest not-for-profit health system in the United States, has evolved from a regional system to a single-enterprise approach to management, including a system-wide approach to physician leadership in its major service areas.

Catholic Medical Partners, Buffalo, N.Y., has developed a large clinically integrated network (CIN) and a close partnership with payers, leading to physician, hospital, and payer financial gains.

DuPage Medical Group, suburban Chicago, has developed a common infrastructure platform for itself and for physician groups and hospitals, achieving scale economies, consistency, and combined products through its CIN.

a. The Value Journey, HFM A Value Project, 2012; Strategies for Physician Engagement and Alignment, H F MA Value Project, 2014; and Strategies for Reconfiguring Cost Structure, HFMA Value Project, 2015.

a. Hamel, L, Firth, J., Brodie, M., "Kaiser Health Tracking Poll: Late June 2015-A Special Focus on the Supreme Court Decision," Kaiser Family Foundation, July 1,2015.

Keith D. Moore is CEO at McManis Consulting, Denver, and a member of HFMA's Colorado Chapter ([email protected]).

Dean C. Coddington is a senior consultant at McManis Consulting, Denver ([email protected]).