I think it is a fair statement to say it’s a dynamic time to be in the healthcare industry. The Patient Protection and Affordable Care Act is already having a major impact this year, and in reality is changing much of the way hospitals deliver care.
The Supreme Court’s decision for healthcare reform will occur very shortly, but in the meantime I wanted to give a run down of how I see reform’s consequences on hospitals: for better and for worse.
3 Pros and Cons of Healthcare Reform:
- Becoming more efficient: Healthcare reform and all its provisions are already making hospitals find new ways to increase facility efficiency, better manage care and streamline costs. One item is renovating hospitals to cut down on operating expenses. Hospital executives allocated 21% of their budget to renovations compared to 16% for new construction in 2012 according to an ASHE 2012 survey. Another method is implementing new programs such as Seton Family of Hospitals did when they enacted a nurse call center which on a monthly average dropped emergency room trips by 12.1%.
- New model of care: Hospitals are moving away from the contemporary fee-for-service model, a contributing factor for our excessive healthcare spending, and are switching to value based models of care. Before, the more services hospitals performed, the more money they would make. Now, that is changing with hospitals being held accountable for their patients. Patient treatment outcomes versus cost are compared and hospitals who meet the requirements receive a bump in federal payments.
- Helps the bottom line: Though there will be substantial cuts to Medicare, should healthcare reform pass, the vast majority of uninsured costs would be covered, giving some money back for what was previously written off. This suggests more money will be available to healthcare providers and, if the theory holds, a healthier population that needs less care over time. Alhough, it also depends on the specific hospital’s surrounding community and amount of care performed for indigent patients compared to Medicare patients.
- Administrative costs: Hospitals and health systems will have more to do on their own as they take care of the influx of new patients. That is much more paper work, disease and care management, over-seeing and time dealing with Medicare for the millions of newly insured patients.
- Coverage: The sheer act of providing coverage to more people would produce a new order of challenges. If access can’t be improved then there is still a problem of providing care. Medicare and Medicaid patients already indicate it difficult to find a physician, and coupled with the high attrition rate of doctors, finding healthcare providers to treat these new patients will be in increasingly short supply.
- Cut in payments: Yes, there will be excessive decreases to Medicare reimbursements, around $112 billion in the ensuing years according to the Congressional Budget Office. There will also be a loss in tax breaks. These are viable methods the government issues to help hospitals meet their costs.
While there are downsides to healthcare reform, there is so much opportunity. We like to talk about heath reform and make note of its importance, however the healthcare system is not waiting, and is improving in real time, independent of the final outcome.
James Ellis, CEO, Health Care Realty Development Company, is a nationally recognized successful real estate investor and developer of medical office properties with a comprehensive knowledge of sophisticated real estate transactions, cost effective designs, and efficient property management.
Aaron Razavi is Associate Marketing Director at Health Care Realty Development.
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