The June issue of CGH was the final column under my management. I have enjoyed the opportunity to provide you with information about practice management and health care reform. I also have enjoyed working with the Clinical Gastroenterology and Hepatology board of editors, and Erin Landis and Brook Simpson from AGA headquarters. Beginning in July 2017, this section will become the responsibility of Ziad Gellad, MD, MPH, AGAF, from Duke University. I have worked with Ziad for many years, and he serves on my board of editors for GI & Hepatology News. I have great confidence in his knowledge and ability.
During the last 5 years, we have published 58 columns beginning with an article where I made several broad predictions. I have tried to present important concepts and management tools related to private and academic clinical practice, health care reform, and health economics. This article was written in early January 2017 just before the inauguration of Donald Trump. As I wrote, we did not know the full extent or the pace of “Repeal and Replace,” as Obamacare becomes Trumpcare (www.healthaffairs.org/obamacare-to-trumpcare).
The extent of current Republican control of federal and state governments is unprecedented in modern political history. Per Newt Gingrich (The Economist, Jan. 7, 2017, p. 25), this will be the third attempt, after Ronald Reagan’s election in 1980 and Gingrich’s “Contract with America” in 1994, to break free from a “Big Government” mindset initiated by Franklin Roosevelt’s New Deal. In this article, I will speculate how a right-leaning shift in American health care policy might impact the business model of gastroenterology. No matter how government regulations or funds flow change, we (physicians) will ultimately be responsible for digestive care provided to our patients. In the words of Martin Luther King Jr. (as he paraphrased Theodore Parker), “The arc of the moral universe is long, but it bends toward justice.” What is remembered by fewer people, however, are words he then added during his speeches: “but only if we march.”
John I. Allen, MD, MBA, AGAF
Editor in Chief
The first column was published in July 2012.1 I wrote about five dominant themes that would alter our gastroenterology practices in the ensuing years. They were 1) an increasing requirement for us to demonstrate value, 2) the need to think about population management in addition to individual patient care, 3) consolidation that would occur at all levels of health care delivery, 4) increasing cost pressure, and 5) how medical decisions would be linked to reimbursement (now called value-based payment). I fully expected the Patient Protection and Affordable Care Act (ACA) would shape the health care landscape for the rest of our careers. After the article’s publication, I was invited to speak about health care reform at many academic centers and private practices. My last talk before the election was in Pasadena, Calif. (Oct. 28, 2016) where I confidently spoke about the implications of President Clinton’s cementing ACA into the fabric of U.S. medicine.
Dr. John I. Allen
Donald Trump is now the 45th President of the United States. Republicans hold a 52-48 majority in the Senate and a 241-194 majority in the House. As of January 2017, one Supreme Court seat was available, and three more may open because of retirements (Justice Ginsburg is 83 years old, Justice Kennedy is 80, and Justice Breyer is 78). Republicans control all three branches of government in 25 states and dominate in 8 others. Conservative politicians control a large majority of county and city boards.
Until this year, Republicans have controlled all three branches of government only twice since 1945 (modern political history), and only once (George Bush in 2005) did the president have a Senate majority.2 With his win, Mr. Trump can lead a conservative revolution to reverse key initiatives begun when the Democratic Party held majority power. Repeal of the ACA, signed into legislation on March 23, 2010, is the Republican Party’s top priority.
Equally important, Congress can alter previously implemented federal regulations. Each year about 3,000 regulations are written by federal agencies that act with authority delegated by Congress (albeit Congress retains power to overturn them). Regulations are published in the Federal Register as preliminary rules during each year, and Final Rules are published after a public comment period and implemented shortly thereafter. Regulations carry the force of law and are codified in the Code of Federal Regulations. The Code of Federal Regulations is divided into 50 sections (Titles), with Title 42 (Public Health) and Title 45 (Public Welfare) most pertinent to us.
Other policies are created through executive orders, issued by the president (federal) or governors (states), without involvement of legislative or judicial branches (they were not mentioned in the Constitution, by the way). Executive orders issued by President Obama could, theoretically, be overturned by new executive orders.
Repeal and replace
Destruction of the ACA is a top priority of President Trump and Republican leaders of both houses of Congress. The ACA was a Democratic bill (passed with no Republican support), although it had many similarities to previous Republican legislative ideas dating from 1993.3
Although outright repeal could be blocked by a Democratic filibuster, the law could be drastically modified through budget reconciliation whose passage takes only a simple Senate majority. Thus, a simple budget-related bill could serve as a vehicle to defund many parts of ACA, including money for Medicaid expansion, insurance risk corridors, money to offset out-of-pocket expenses and individual premium subsidies, for example.4,5
There would be substantial problems if ACA were repealed even with a 2- or 3-year delay, a scenario proposed to provide time for a replacement bill. On Jan. 4, 2017, the House Republican Study Committee introduced the American Health Care Reform Act (AHCRA) as a replacement proposal, with the stipulation that ACA would be repealed as of Jan. 1, 2018. This initial bill hinted at Republican intent and was detailed in a Health Affairs blog.6 Importantly, there were distinct similarities between this and prior Republican proposals put forward by Representative Tom Price (nominated to head the Department of Health & Human Services under President Trump) and Speaker of the House Paul Ryan.7,8
Consistently, Republicans have advocated for expansion of health savings accounts, altering the tax code to allow individuals to deduct health insurance premiums, establishment of association risk pools, imposition of malpractice limits, protections for people with preexisting conditions, and further restrictions on abortion coverage. The AHCRA changes financial subsidies for purchasing insurance from a tax credit (which can be paid to people even if they do not pay taxes) to a tax deduction (only applicable to people who pay taxes). Analysis of a similar proposal made by President Trump during the campaign found that this plan would increase the number of uninsured people by more than 15 million.
If ACA is repealed, effects would be broader than just factors related to insurance coverage.9 ACA provides for preventive care (including colonoscopy) without copays, education of additional medical personnel, closing the donut hole for Medicare Part D (medications), approval of generic biologics, and Medicaid expansions, among other initiatives. If ACA were defunded without restoring pre-ACA support for Disproportion Share Hospital charity care, research, and graduate medical education, then safety-net hospitals and many academic medical centers (AMCs) could face enormous funding cuts.10 Defunding Medicaid expansion would adversely affect states in many ways, as pointed out by Ayanian et al.11 Medicaid expansion had broad economic impact in states that accepted federal money to expand. In Michigan for example, 30,900 jobs were added to the state in 2016 because of Medicaid expansion, with two-thirds outside of the health care industry. President Obama defined his view about the effects of ACA repeal in the New England Journal of Medicine.12
Lessons learned
Economic principles and unique characteristics of United States health care help explain why solutions to its high cost and uneven coverage are so difficult to achieve. These include higher prices for goods in the United States compared with other countries, variation in price (unrelated to quality), restraints on government price negotiations, inefficiencies due to variation in size of delivery systems, and “moral hazard” related to rich insurance coverage, which are some of the factors that doom any simple solutions. These are reviewed by Victor Fuchs13 in an excellent article in Annals of Internal Medicine. Payment methods for health care services also distort resource use and efficiencies. Understanding the eight basic payment methodologies in health care and current predictions about future health care spending will be important in shaping reimbursement policies.14,15
Disruptions in health care are unpopular and, as Uve Reinardt stated: “Our health care financing system will always remain a horrendous mess and a fountain for such dismay among the providers of health care as well as among patients.”4 Lessons to inform the next iteration of health care policy, learned from the 2009-2010 experience, might be as follows:
1. If a bill is to be passed, the president must personally lead in explaining the bill to the public in simple terms.
2. Even the threat of repeal may disrupt the current market and force insurance companies to exit quickly.
3. Coverage must be affordable to individuals, state budgets, and health care providers. Because expansion states saw positive impacts to state budgets8 and mental health and substance abuse services became part of Medicaid benefits, how will a replacement bill maintain coverage and compensate for new state moneys used now for other imperatives such as education and infrastructure?
4. Health care is like a massive cargo ship, not a sports car, so a bill to replace the ACA may take a long time (and might never be passed).
5. Health care is intensely personal, so it will always be politically charged.
Ultimately, physicians will need to make strategic guesses and rapid adjustments to sustain financial viability and provide high-value care. Strategies differ depending on your practice situation. Keep in mind the five principles listed in the opening paragraph of this article. It is likely that the most important principle to factor into your practice strategy is continuing reduction in reimbursements. No matter what model is adopted to reform the ACA, the financial pot (Medicare, Medicaid, commercial insurance, bundled payments, fee-for-service payments) will be reduced, and the number of uninsured patients will increase. How would you change your practice if Medicare was your best payer (“manage to Medicare”)?
Independent practices
Physicians in small- to medium-size independent practices continue to struggle with reducing reimbursements, reporting burdens, increasing overhead expenses, crushing regulatory requirements, and provider burnout. Trumpcare will favor small practices more than Obamacare from a policy (not necessarily a financial) perspective. Regulations on small business and reporting burdens may ease, but the move toward value-based reimbursement as outlined in the MACRA (passed with overwhelming bipartisan support) will not end.16 Practices in small communities continue to thrive because they give excellent care with limited competition and low overhead. Some practices in suburban and urban centers struggle because payers tend to favor (with enhanced managed care rates) larger practices and health systems. Large, horizontally integrated, efficient gastroenterology practices will continue to thrive because they can develop a “must-have” position with payers. Building remote patient monitoring, teleconsulting, and capabilities around value demonstration will be strategically advantageous.
Options for independent physicians include 1) maintaining status quo, 2) retiring, or 3) exiting the independent business model through a practice sale. Traditionally, physicians who wanted to sell their practices turned to hospitals or health systems. Recently, a physician-run model funded by venture capital has emerged where reduced overhead (through centralization of services) is combined with enhanced power during payer negotiations (because of scale). This model has allowed practices to merge into a physician organization and remain free from health system employment.17
Large health systems
Physicians employed by large health systems, whether they are nonprofit, for-profit, or AMCs, will see their future tied directly to health system success. If bundled payment, alternative payment, and capitation models of health care financing continue to grow in popularity, then success will be determined by a health system’s market share and its ability to form true clinical integration. In a capitated environment, expansion of market share (especially of relatively healthy patients) will help support margins. However, financial success will come from a system’s ability to manage high-cost patients, those 5% of patients who consume 50% of health care resources.18
Hospitals with a financially challenged patient base (safety-net hospitals) will have enormous financial pressures going forward. Repeal of ACA without restoration of pre-ACA funding will affect directly the financial health of systems including AMCs. AMCs and other health systems will be forced to reduce fixed overhead, enhance productivity of faculty, and restrict nonfunded activities (teaching for example). Although most AMCs are now in an active acquisition mode, this strategy is naturally limited by the number of remaining acquisition targets. Traditional high managed care rates enjoyed by AMCs will shrink, as will federal research funding (which typically comes with high indirect financial support). Health systems and GI societies will need to dedicate much more attention to state policy makers as Trumpcare progresses.
Finally, all providers will need to manage the business implications of retail health. As people assume higher deductibles and copays and health savings accounts grow, patients will change their patterns of purchasing services. Reputation counts for less when people are facing large price differences, so attention to patient-centric amenities, price, patient engagement, and patient satisfaction will become even more important.
Conclusion
The United States has undergone a massive and rapid political transformation. The mandate felt by conservative politicians, perhaps not supported by numbers, will carry a conservative platform forward. In areas where progressive Democrats emphasized federal power and socialized regulation (religion, education, civil rights, income security, and health policy), conservatives will transfer decision power as much as possible to states, local communities, and individuals. Maintaining the concept of “health as a right” will test the conscience of all of us.
References
1. Allen, J.I. The road ahead. Clin Gastroenterol Hepatol. 2012;10:692-6.
2. Gill KE. Visual guide: the balance of power between Congress and the Presidency (1901-2016). Wired Pen. November 2016. Available from http://wiredpen.com/resources/political-commentary-and-analysis/a-visual-guide-balance-of-power-congress-presidency/. Accessed Dec. 30, 2016.
3. Mertens M. Chart: comparing health reform bills – Democrats and Republicans 2009, Republics 1993. Kaiser Health News. Feb. 24, 2010. Available from http://khn.org/022310-bill-comparison/. Accessed Jan. 8, 2017.
4. Hotchkiss M. Q&A: what a Trump presidency means for the Affordable Care Act. Nov. 16, 2016 News at Princeton. Princeton University. Available from https://www.princeton.edu/main/news/archive/S47/93/09C11/index.xml?section=topstories. Accessed Dec. 30, 2016.
5. Jost T. Taking stock of health reform: where we’ve been, where we’re going. Health Affairs Blog. Available from http://healthaffairs.org/blog/2016/12/06/taking-stock-of-health-reform-where-weve-been-where-were-going/. Accessed Dec. 30, 2016.
6. Jost T. The Republican Study Committee’s ACA replacement proposal (updated). Health Affairs Blog. Available from http://healthaffairs.org/blog/2017/01/05/the-republican-study-committees-aca-replacement-proposal/. Accessed Jan. 10, 2017.
7. Price T. Empowering patients first. Available from http://tomprice.house.gov/sites/tomprice.house.gov/files/HR%202300%20Empowering%20Patients%20First%20Act%202015.pdf. Accessed Dec. 30, 2016.
8. Ryan P. A better way. Available from https://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf. Accessed Dec. 30, 2016.
9. Oberlander, J. The end of Obamacare. N Engl J Med. 2017;376:1-3.
10. Goodnough A. Hospitals in safety net brace for health care law’s repeal. New York Times. Dec. 28, 2016. Available from http://www.nytimes.com/2016/12/28/health/hospitals-medicaid-obamacare-trump.html?smprod=nytcore-iphone&smid=nytcore-iphone-share&_r=0. Accessed Jan. 10, 2017.
11. Ayanian, J.Z., Ehrlich, G.M., Grimes, D.R., et al. Economic effects of Medicaid expansion in Michigan. N Engl J Med. 2017;376:407-10.
12. Obama, B.H. Repealing the ACA without a replacement: the risks to American health care. N Engl J Med. 2017;376:297-9.
13. Fuchs, V.R. Major concepts of health economics. Ann Intern Med. 2015;162:380-3.
14. Quinn, K. The 8 basic payment methods in health care. Ann Intern Med. 2015;163:300-6.
15. Schoenman JA. A detailed look at US health care spending: a presentation from the National Institute for Health Care Management (NIHCM). Oct. 25, 2012. Available from http://www.nihcm.org/images/stories/Health_care_spending_slides_-_MILI_-_Schoenman.pdf. Accessed Dec. 30, 2016.
16. Allen, J.I., Allen, C.C., Brill, J.V. Gastroenterology 2020: no time for WIMPs. Gastroenterology. 2016;150:295-9.
17. Sciacca R. Weekly Byte: GI roundtable and navigating uncharted waters in health care. The PMD Blog. Available from https://www.pmd.com/blog/post/weekly-byte-gi-roundtable-and-navigating-uncharted-waters-in-health-care. Accessed Jan. 10, 2017.
18. Powers, B.W., Chaguturu, S.K. ACOs and high-cost patients. N Engl J Med. 2016;374:203-5.
Dr. Allen is professor of medicine, University of Michigan School of Medicine, Institute for Health Care Policy and Innovations, and associate medical director of Network Strategy and Business Development – Michigan Medicine, Ann Arbor. He discloses no conflicts.
