The New Normal in Healthcare

Recently I went to my annual checkup with a physician I had been going to for years. His practice is one of the preeminent small specialty groups in our metropolitan area. I’m not sure why I’m surprised but, his practice has become a part of the many independent health systems which are now the new normal. Because we have known each other for years, I asked him what precipitated this change.  He answered quite simply, “changes in healthcare have caused them to consider economics in order to survive.” Amazing that one of the largest and thriving clinical practices I know could be in such a position. How has this come to pass? Behind the curtain of healthcare several factors have made the practice of medicine reorient itself to health economics in order to survive.

Almost everyone is aware that OBAMACARE is a widespread bill that mandates every American shall have access to affordable health insurance and access to medical care. The formal name for OBAMACARE is the Patient Protection and Affordable Care Act, otherwise referred to as ACA. Health insurance is but just one section of the 9 titles within ACA. Why does this matter? Because other titles within the ACA allow government policy to change the way healthcare practitioners and hospitals get paid.

À La Carte Vs Prix Fixe Healthcare
Before ACA, healthcare was charged and paid by insurers on an à la carte basis. This is called fee for service (FFS) as each visit, test or procedure was considered an individual service, hence, à la carte. Now under ACA, there is a strong shift to reward healthcare providers on patient outcomes. “Fee” For Service (FFS) on isolated medical visits, tests, etc, is still relevant, but ACA now changes the game by paying providers (via Medicare) for patient outcomes which can encompass more than one service or visit. Thus, if you allow too many visits, order too many tests or allow patients to readmit to hospitals unnecessarily, you could lose your shirt. However, if you manage a patient’s outcome with less services, you could be more profitable.  If you’re confused at all by the following new terms, think of it this way – the menu is predefined and the price is fixed (prix fixe).  Here are some terms:

  • Value base payments: this payment model rewards physicians, hospitals, medical groups, and other healthcare providers for meeting certain performance measures for quality and efficiency. It penalizes caregivers for poor outcomes, medical errors, or increased costs.
  • Capitation of services (pays a physician or group of physicians a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care)
  • Accountable Care Organizations (ACO): groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to their Medicare patients

The New Normal In Healthcare
Like everything else, in order to survive we must evolve. Healthcare providers are forming new alliances that can navigate the new healthcare ecosystem.  Hospitals are merging and forming new business units outside of traditional hospital walls to stay competitive and in some cases, stay in business. Hospital administrators now need to be savvy with commercial business practices above and beyond clinical practice.

I think back to my annual visit and a personal conversation with my healthcare provider.  I now see how the business of medicine and health economics has shaken up an entire way of health practice.

Diana Schaeffer is the VP of Business Development for Health & Pharma at Consultants 2 Go.