The Affordable Care Act in 2014: What Now?

By Kerry McKean Kelly On Feb 25, 2014

In 2010, when the Affordable Care Act (ACA) became law, 2014 loomed as a pivotal year in which many of the law’s landmark changes would take effect. 2014 was the year that individuals would be mandated to have insurance coverage and employers would be mandated to offer it (or face a penalty.) 2014 was the year of expanded Medicaid eligibility and increased federal support to the states to pay for that expansion. Fiscal year 2014 (in real-time, Oct. 1, 2013) was the launch of the Health Insurance Marketplace. And 2014 was the year for further cuts to hospitals and other healthcare providers – under the assumption that all of these reforms would reduce the burden of caring for the uninsured.

But the ACA’s rollout hasn’t gone entirely according to those best-laid plans. Some of the 2014 provisions have become reality, others have been delayed. The law continues to spark debate among employers, payers, providers and patients. And so, after four years of the ACA, all sides continue to debate: What’s working and what’s worrisome?

What’s Working

Amid all the ACA’s controversies, healthcare providers are surprisingly optimistic about the overall ideal of reforming the healthcare delivery system into a coordinated, cohesive system built on quality, efficiency and value. Many providers are proactively embracing reform strategies, either under specific ACA programs or independently of the law’s specific provisions.

While much of the discussion surrounding the ACA has focused on insuring more Americans, there’s a critical parallel goal that aims to reduce healthcare spending through improved efficiency, better coordination of services and higher quality care. In those areas of innovation, healthcare providers have assumed a leadership role.

“The premise of this legislation – providing healthcare insurance to the uninsured – has resulted in the healthcare industry as whole focusing on making changes that will provide more value-based healthcare services to the people we serve,” says Joseph Devine, president and CEO of Kennedy Health System, based in Voorhees. “I think healthcare reform has industry leaders in New Jersey realizing that we need to consider working closer together to improve healthcare access and affordability. The collaborations that will result from this new mindset will impact healthcare more favorably than any federal or state legislation could have anticipated.”

Expanding integration and coordination: The ACA has spurred hospitals to forge partnerships, affiliations, acquisitions and other linkages, both with other hospitals and with physicians and post-acute providers like nursing homes and home health agencies. These partnerships allow providers to reach a larger market and deliver care that is better coordinated and, therefore, more efficient. Accountable Care Organizations are built on this strategy. As of Jan. 1, 18 Medicare Shared Savings Plan ACOs – including 12 led or co-led by hospitals – are serving Medicare beneficiaries in New Jersey. Nationwide, the ACOs’ efforts to improve care coordination and engage patients has resulted in savings to Medicare of more than $380 million to date, according to the Centers for Medicaid and Medicaid Services.

The HackensackAlliance ACO is one of those leaving its mark in New Jersey, covering more than 13,000 lives and realizing an estimated $10 million in cost savings, according to Robert Garret, president and CEO of the Hackensack University Health Network.

“Expansion and growth are focus points for health networks and providers,” Garrett says. “Reaching more patients in more convenient locations, while improving treatment and increasing efficiency, remain a top priority…Each partnership expands our reach and offers an opportunity for our medical providers to share best practices and knowledge. In-network referrals, efficient use of resources and more coordinated care have resulted in these types of affiliations.”

This new spirit of collaboration has created some unusual bedfellows, linking not just providers but also healthcare payers.

“What’s working at Cooper University Health Care is our relationship with AmeriHealth NJ (AHNJ), New Jersey’s first equity partnership between a payer and provider,” says John Sheridan, president and CEO of The Cooper Health System in Camden. “Within this framework, Cooper and AmeriHealth are collaborating on a number of fronts that include a tiered network insurance product, quality improvement initiatives and pilot programs testing new care delivery models. Since October, a number of individuals have purchased AHNJ’s Cooper Advantage Plan through New Jersey’s insurance marketplace. The plan is built around the Cooper system and provides consumers in Camden, Burlington and Gloucester counties with a competitively priced insurance option.”

Embracing new payment models: CMS announced in January that 232 acute care hospitals, skilled nursing homes, physician group practices, long-term care hospitals and home health agencies have entered into agreements to participate in the Bundled Payments for Care Improvement initiative. Bundling payment for services that patients receive across a single episode of care, such as heart bypass surgery or a hip replacement, is one way to encourage doctors, hospitals and other healthcare providers to work together to better coordinate care for patients, both when they are in the hospital and after they are discharged.

Twenty New Jersey hospitals are taking part in Model 1 of the bundled payment initiative, modeled after NJHA’s Gainsharing initiative. Traditional Medicare protocols pay hospitals and physicians in different ways. Hospitals receive a set rate for each patient case, regardless of how long a patient is hospitalized, while physicians are paid “a la carte” for each test, procedure or patient day in the hospital. Under NJHA’s gainsharing demonstration project, those payments were aligned to ensure that hospitals and physicians would work together. Hospitals and physicians that successfully reduced costs while meeting strict federal quality standards were allowed to share the savings.

There’s no federal data available yet to show savings from the national bundled patient initiative, but the 1,300 physicians who partnered with 12 participating hospitals in NJHA’s demonstration project achieved more than $89,000 in savings, an average of $767 per admission.

Improving quality and efficiency: A key part of the ACA’s value equation is high-quality healthcare. New Jersey hospitals have embraced a commitment to improving both the quality of care as well as the efficiency of their operations. Every acute care hospital in the state has joined one of 26 “hospital engagement networks,” or HENs, designated across the nation by CMS as part of the ACA’s quality improvement strategy. CMS chose NJHA’s Institute for Quality and Patient Safety to lead New Jersey’s HEN, and NJHA has been joined by 62 of its member hospitals in this three-year initiative launched in December 2011.

The initiative focuses on 10 preventable healthcare-associated conditions such as post-surgical infections, pressure ulcers or preventable readmission to the hospital. HEN hospitals engage in education, analysis and sharing of best practices that have been proven effective in reducing these conditions. They also regularly report data to measure their progress and identify areas that are improving or need more focused effort.

The results following the first two years of the initiative have been impressive. NJHA’s HEN hospitals have achieved double-digit declines in the rate of healthcare-associated infections, adverse drug events, pressure ulcers, patient falls that result in harm and more. Those improvements in healthcare quality and patient safety have the potential to avert more than 6,300 adverse patient events and save roughly $63 million in added healthcare costs.

As part of its HEN initiative, NJHA also invited hospitals to partner with the Boston-based Institute for Healthcare Optimization to examine patient flow through their facilities. The operational and “smoothing” strategies that hospitals learned and applied yielded measurable results in improved quality, reduced expenses, increased capacity and shorter wait times for patients.

“Perhaps the most tangible change in the new healthcare environment is the initial movement to a more rational model of care, through which providers are rewarded for being innovative in delivering quality care rather than simply for providing services,” says David Tilton, president and CEO of AtlantiCare. “As the model has evolved, most payers, as well as employers, have taken note of, and have become more mindful of, the opportunities to really enhance outcomes and reduce costs. While there have been a few rather public problems with the implementation of exchanges, the broader ambitions of the legislation remain both sound and the healthcare industry is embracing them. From the perspective of AtlantiCare, it’s essential to move forward, increase our pace, and meet the needs of our patients and our payer partners.

What’s Worrisome

The glitch-ridden debut of the Health Insurance Marketplace, delays in some provisions and continued vitriol among lawmakers are among the well-publicized problems still swirling four years after the ACA was enacted. But healthcare providers, with their inside view of the law’s implementation and impact, are worried about some less obvious issues that could have serious impact on healthcare consumers.

Enrollment: The ACA counts on a critical mass of insured individuals. Especially important are the 18- to 34-year age group – the “young invincibles” – whose premiums will help sustain the larger pool of older, sicker insured individuals. While enrollment numbers have steadily increased since the Marketplace’s troubled debut, they remain far below targets, especially in that key demographic. According to enrollment numbers released by the US Department of Health and Human Services in February, about 54,800 New Jersey residents have enrolled in coverage under the ACA and about 3.3 million nationwide. The Obama Administration previously has said the target is 7 million nationwide enrollees. March 31 is the deadline for open enrollment for 2014.

The Administration also set a benchmark of 40 percent of new enrollees coming from the “young invincibles,” but through February that demographic had constituted just 24 percent of the newly insured.

Ironically, after years of continued national debate over the ACA, one of the biggest obstacles to enrolling more individuals is a simple lack of awareness. According to a January poll from the Kaiser Family Foundation, only 68 percent of respondents knew the online Marketplace was available, and about half of uninsured respondents did not know the law provided financial help in purchasing insurance for those of low and moderate incomes.

“What’s worrisome is the monumental task of educating consumers to the new world of healthcare,” says Cooper’s Sheridan.

Many organizations including NJHA are using navigators or certified application counselors to help individuals enroll in insurance. NJHA secured grant funds from the Robert Wood Johnson Foundation’s New Jersey Health Initiatives to hire up to 25 US veterans to be trained as application counselors and deployed across the state in a series of enrollment events.

For hospitals and other healthcare providers, less-than-anticipated enrollment raises serious financial concerns. Providers are conceding billions of dollars in Medicare and Medicaid reimbursement cuts, under that law’s premise that they will benefit from a greater number of patients with insurance. But if those newly insured don’t materialize and the cuts remain in place, healthcare facilities will be left confronting a deep hole in revenue. For New Jersey hospitals, which operate on an average margin of about 2.9 percent, about 2 percentage points shy of the national average, that raises significant operational and sustainability issues.

“There are several concerns with the Affordable Care Act. We’ll have to see how they pan out,” said John Lloyd, president of Meridian Health. “We are seeing significant reductions in reimbursement to hospitals and physicians…And there is a massive consolidation of hospitals because of the Affordable Care Act, which could impact local communities.”

Plan Design: The launch of the Health Insurance Marketplace in October gave consumers and providers their first glimpse of the new insurance coverage options under the ACA. Under the law, all plans are required to cover certain minimum essential benefits; beyond those requirements the plans were categorized in metal tiers: Platinum for the broadest (and most expensive coverage) through gold, silver and bronze for descending levels of coverage and premium costs. But while premiums are the most obvious way to compare plans’ costs, many of the products offered through the Marketplace carry significant out-of-pocket costs through high co-pays and deductibles. In addition, many of the insurance products have very narrow networks that limit consumers’ access to physicians and specialty services.

Healthcare professionals worry about the impact on consumers who purchase a plan based only on premium prices.

“Insurance companies know that people will purchase the insurance based on price,” says Amy Mansue, president and CEO of Children’s Specialized Hospital. “But healthcare consumers also need to look deeper into the true costs of the plan, including their out-of-pocket costs. Also, if they have existing physician relationships, they need to look to make sure their doctors and hospitals are in those plans. In other parts of the country, insurance companies have not contracted with these providers to save money, and people who have specialized care needs are forced to change physicians.”

For providers, high out-of-pocket costs for consumers lead to increased bad debt costs.

“I believe that the Affordable Care Act will eventually result in more people with insurance, and will help both patients and providers by covering important items such as behavioral health claims and pre-existing conditions,” says Gary Horan, president and CEO of Trinitas Regional Medical Center. “Hospitals, however, will see more bad debt resulting from the very high co-pays and deductibles that many will simply be unable to afford.”

Access to Care: The ACA’s emphasis on prevention, access and better coordination of healthcare services is expected to increase the demand for primary care services, prompting concerns that the nation’s primary care infrastructure, including primary care physician practices and federally qualified health centers, is inadequate. The worries about physician supply are exacerbated in the Medicaid arena, especially in the Garden State. Medicaid is a known “poor payer,” with reimbursement rates that fall far below the actual costs of the services provided. For hospitals, Medicaid reimbursement currently stands at about 70 percent of hospitals’ costs. The reimbursement rate is even worse for physicians caring for Medicaid patients. As a result, it can be difficult for Medicaid beneficiaries to find a doctor, which in turn drives more individuals to hospital emergency departments. It’s an identified problem in the current marketplace and is expected to worsen under expanded Medicaid.

Several other areas of the law raise worries about consumers’ access to healthcare services.

“I am also concerned that issues like electronic health record requirements and low reimbursement for physicians will cause a shortage of doctors, particularly specialists, in ACOs.  And, further difficulty in getting people enrolled will place more stress on clinics and emergency rooms,” Horan says.

Clearly, the ACA still elicits a wide array of opinions. But among the healthcare community, there is general consensus that the healthcare system on its previous course of a high number of uninsured with care delivered inefficiently and in the wrong setting would drive healthcare costs to the point that the system would be unsustainable.

“This is a transition period,” says Barry H. Ostrowsky, president and CEO of Barnabas Health. “I believe that some of the principles in the Affordable Care Act are valuable but various mechanics will have to be refined. New Jersey has had great access to healthcare coverage compared to other states nationwide due to our state’s commitment to care for the uninsured through charity care.  Moreover, as a state which opted to participate in Medicaid expansion, we anticipate the coverage of many more people by Medicaid.  This is certainly a great deal better than having no insurance, but not the perfect remedy for providers.”

Through it all, healthcare providers have embraced their important role in the grand plan to reform healthcare for future generations.

“I believe that when future generations look back on healthcare’s history, 2014 will stand as a pivotal year as we continue to redesign our system of healthcare to preserve it for years to come, and also promote health, wellness and access,” says Stephen Jones, president and CEO of Robert Wood Johnson Health System.