US health reform may make most health organization’s current business practices and markets irrelevant, says PricewaterhouseCoopers. PwC’s report “Health Reform: Prospering in a post-reform world” is a comprehensive analysis of health reform changes and how they will affect health organizations, including insurance companies, hospitals, physicians and other providers. Health organizations face more than 60 major regulatory deadlines over the next ten years to meet the timetable and goals of health reform, and the changes will create a profoundly different healthcare environment. Reform has opened the door for industries to work together to achieve change by thinking like a consumer, driving innovation, creating value and better understanding the needs of the new marketplace.
Kelly Barnes of PwC says,” To look at the implications of health reform only in the context of current business practices is not only futile but misses the point of the reform agenda. To prosper, health executives must reassess their businesses, find new market opportunities and sit on the same side of the table with unlikely new allies who now share common goals.”
New coverage, new fund flows and new regulators, will together create an entirely new health system that does not look like or act as it does today and will require sectors to work together on long-overdue changes to the cost, quality and outcomes of care. Much of the patchwork quilt that paid for the uninsured will largely be replaced by public or private insurance coverage. A stronger focus will be placed on paying hospitals and physicians for quality. Insurers will be highly regulated but have access to new customers through health exchanges. Individuals and businesses will face the choice of providing and paying for health coverage or paying penalties.
Hospitals
• Beginning in 2015, a 300-bed hospital with poor quality metrics could be penalized by more than $1.3 million per year. Even more important, these hospitals could suffer reputation damage as these metrics are published online, which is now the most popular place for consumers to seek health information, according to earlier PwC research.
• The number of Medicaid recipients will increase by more than 40%, from 2010 to 2019, so hospitals must learn to operate on Medicaid rates. Medicaid rates have never covered all costs, so hospitals will need to quickly address fixed costs.
• Beginning in 2015, a 300-bed hospital with poor quality metrics could be penalized by more than $1.3 million per year. Even more important, these hospitals could suffer reputation damage as these metrics are published online, which is now the most popular place for consumers to seek health information, according to earlier PwC research.
• The number of Medicaid recipients will increase by more than 40%, from 2010 to 2019, so hospitals must learn to operate on Medicaid rates. Medicaid rates have never covered all costs, so hospitals will need to quickly address fixed costs.
Insurers
• Many health insurers will have to lower administrative expenses to meet the new medical loss ratio (MLR) of 85% for the large group market and 80% for the small group and individual market. Currently, many individual and small market plans are not meeting the new required MLR, which governs the amount of premiums allocated to paying medical expenses.
• Successful insurers will have to shift their attention from group to individual plans, which are expected to triple between 2010 and 2019. Over the next 10 years, growth in the Medicaid coverage will also increase substantially.
• Health insurers will have to differentiate themselves on price, service, quality, and provider network in the insurance exchanges. With regulations requiring four standard benefit packages, essential health benefits, and limits on cost sharing, insurers will have to compete on factors other than benefit design.
• Many health insurers will have to lower administrative expenses to meet the new medical loss ratio (MLR) of 85% for the large group market and 80% for the small group and individual market. Currently, many individual and small market plans are not meeting the new required MLR, which governs the amount of premiums allocated to paying medical expenses.
• Successful insurers will have to shift their attention from group to individual plans, which are expected to triple between 2010 and 2019. Over the next 10 years, growth in the Medicaid coverage will also increase substantially.
• Health insurers will have to differentiate themselves on price, service, quality, and provider network in the insurance exchanges. With regulations requiring four standard benefit packages, essential health benefits, and limits on cost sharing, insurers will have to compete on factors other than benefit design.
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