What Does Healthcare Transformation Mean for Risk Managers?
At the opening session of the annual conference of the American Society for Healthcare Risk Management (ASHRM), futurist Ian Morrison described current changes in the U.S. healthcare industry and how they relate to the interests of risk managers. While the Affordable Care Act is important and the obvious driver of change, Morrison is convinced that current trends—consolidation, cost reduction, and realignment of risk—will continue, independent of the federal legislation.
Among these changes, consolidation of hospitals and physician practices into large regional health systems will expand the size and kind of enterprise that risk managers must protect. That expansion is reflected in ASHRM’s current focus on enterprise risk management and in the conference program, which includes presentations about evaluating the risk profile of newly acquired physician practices and dealing, for example, with their “tail” malpractice risk associated with their earlier practices.
The consolidation of hospitals and practices presents obvious concerns for risk managers and other dynamics will force hospitals and health systems to make other fundamental changes. With these concerns in mind, Morrison took a futurist’s high-level view and discussed key issues he sees currently facing the healthcare industry:
Implementation of the Affordable Care Act and expansion of healthcare coverage to previously uninsured individuals. Morrison sees two Americas evolving over the next few years, represented by Texas—the setting for ASHRM’s 2013 conference—and California, Morrison’s home state. California has a sophisticated, well-funded exchange that will take some time to implement fully but seems to off to a successful start. Texas on the other hand is choosing not to expand Medicaid and is generally resisting implementation of coverage through the exchange. Federal and local governments, as well as health systems and communities, will be dealing with a dramatic influx of newly covered consumers and/or large numbers of uninsured patients.
Growth of the individual consumer market. Many people—especially, at the moment, retirees of large corporations—will transition from defined benefit to defined contribution plans and suddenly find themselves in the market to purchase their own health insurance through the exchanges, with or without subsidies. In that environment, cost is key, and, to quote Scotsman Morrison, people tend to “pick cheap.” Without predicting the details, Morrison believes that individuals’ awareness of the narrow provider networks that come with “cheap” plans is a “shoe still to drop.” One thing driving this shift to defined contribution is the corporations’ lack of interest 1) in motivating retirees about their health and 2) in focusing on care coordination, which corporations would need to do if they were to assume risk for the populations under new payment models.
Realignment of risk. Accountable care is a mega-trend that results in significant realignment of risk. According to Morrison, “The real-end game here [beyond the CMS pilot programs] is for large integrated systems of care to take financial risk for a population.” He predicts that eventually—but sooner than we might think—there will be between 100 to 200 large regional systems of care across the country that assume risk on a population basis. As reflected in this year’s ASHRM program, risk managers, CFOs and others will be busy negotiating these contracts, figuring out how to deal with the complexity of covering liability for physicians as they become hospital employees in large numbers.
The changing business model for hospitals and health systems. There will be increasing scrutiny of and pressure on prices—eventually forcing hospitals to subsist on Medicare-level reimbursement—and on value-based purchasing and quality. Morrison believes this shift ultimately means that hospitals will go from being in the business of filling beds to the business of emptying beds. To state the obvious, the transition in the business model at this scale is a huge challenge. Morrison observes that having clarity of vision about population health and paying for value is one thing; getting the math to work is something else: “The CEOs have gotten very good at explaining this stuff, but their CFOs are tugging at their sleeves saying, ‘But, Boss, the math doesn’t work!’” Morrison believes the math can work but not without turmoil.
Implementing and sustaining a culture of low risk and high quality is critical, and we’re not there yet. Morrison quoted a friend who is a physician and administrator as describing his institution’s current state as having “all of the anatomy of an accountable care organization but none of the physiology.” Morrison agrees that healthcare organizations may have the component pieces required for high quality/low cost/low risk care in place, but executing on the plan is hard and, in most places, not yet accomplished. Risk managers are integral to achieving success with this transformation.
We may talk a good game, but we don’t yet behave as a high performing health system—safe, reliable, high quality, and low cost—but we’re figuring it out. And I think you in this room are right in the middle of these changes. It’s easy for me as a futurist to wander around and prognosticate. It’s a lot more difficult to do the work that you’re doing in your institutions to transform care to be safer for patients. I just want to tell you how much we, the patients, appreciate that because it’s high stakes stuff. It will make the difference between life and death, between affordability or not. I salute you for your work.”