Health Reform Is Really Hard: S&P Panelists

Amazon, Berkshire Hathaway and JP Morgan Chase might, possibly be able to reform the U.S. health care finance and delivery systems by shocking sense into people.

For everyone else, making any big, dramatic changes in the system will probably be a hard. slow process.

A health insurance executive and two hospital company executives talked about why health system change is hard, at least for everyone but "AmBerMorg," today in New York, at a health care conference organized by S&P Global Ratings.

(Related: New Jersey's Blue Cross Carrier Names a New CEO)

S&P Global brought a few hundred health care executives and money managers together to brief them on the current state of the health care sector. At one point, the conference team had participants use their cell phones to name their single favorite strategy for improving the U.S. health care system.

A few picked killing the Affordable Care Act, or an even more complete form of deregulation. A few picked improving the ACA, or shifting to a single-payer, government-run health care system.

More than half picked shifting to a "value-based" system, or arrangements that pay providers based on the quality and efficiency of the care provided, rather than a fee for each service provided.

Dr. Stephen Klasko, president of Philadelphia's Jefferson Health Hospitals health care system, said during one panel discussion that shifting to a value-based health care approach is probably a good idea, but he said one major obstacle to that transformation is a lack of realism.

"No one wants to do the difficult things," Klasko said.

For hospitals, simply getting the payer data needed to track what's really happening with care is difficult, and realigning provider reimbursement rates to turn primary care doctors into managers of medical homes is difficult, Klasko said.

Today, Klasko said, dermatologists often earn 20 times more than primary care providers.

He said a primary care doctor told him, "You want me to be a quarterback, but you pay me like a kicker."

Where do hospitals fit in?

Kevin Conlin, president of Horizon Blue Cross Blue Shield of New Jersey, said problem is that would-be reformers tend to focus mainly on spending on inpatient hospital care.

"The hospital ends up as the catcher's mitt for all of the problems," Conlin said.

Klasko and the other hospital company head on the panel — David Vandewater, the chief executive officer of Arden Health Services — agreed that hospitals need to work with other players to reduce the hospitalization rate.

"If a patient doesn't need to be in our hospital, they shouldn't be in our hospital,' Vandewater said.

But Vandewater said charity care and bad debt amounted to 28% of revenue at one hospital his company works with in Oklahoma.

Vandewater is angry about health insurer and employer efforts to move people without savings into high-deductible health plans. "Guess who doesn't get paid first," Vandewater said. "We don't."

Conlin, the Horizon Blue executive, said reformers need to look harder at the player with high profit margins, such as the pharmaceutical companies and the medical device makers, and consider going easier on the players with lower profit margins, such as health insurers and hospitals.

Conlin said Horizon Blue has succeeded at getting half of its members into value-based arrangements, and that it hopes to get all into value-based arrangements within a few years.

Conlin said making that kind of shift is hard because it takes a great deal of resources; the insurance people and the health care delivery people need to understand and trust each other; and the value-based arrangements need to affect enough patients to get the providers' attention.

What will happen to the hospitals?

Klasko and Vandewater said that one major obstacle to reform is that, even when companies that run hospitals know that some of the hospitals should close, getting permission to close hospitals is difficult.

Vandewater predicted that hospital shutdowns will accelerate in rural areas and in big cities.

In rural areas, because of a lack of the kind of radiology equipment that can make patients sticky, "we're going to see more bankruptcies," Vandewater said.

In big cities, because of factors such as duplication of effort at the big teaching hospitals, many of those teaching hospitals "are going to be brothers" Vandewater said. "They're going to have the same name."

Conlin said that, while making changes, policymakers and health care players need to be thoughtful about the consequences and take care not to wreck the health care delivery infrastructure.

What About Congress?

Sara Collins of the Commonwealth Fund suggested that, even Republicans keep control of the House, they are likely to continue chipping away at the Affordable Care Act, rather than repealing it outright, because of the challenges they faced with past ACA repeal efforts.

Collins also described congressional Democrats' efforts to propose new ACA public exchange plans based either on Medicaid or Medicare, and several "Medicare for all" proposals.

In New York said, for example, a major Medicare-for-all proposal would fund the program with a tax that would hit richer people harder than lower-income people, Collins said.

The strength of that approach is that it might be popular with lower-income people, but one possible weakness is that the richer people who would be heavily taxed to pay for the program could move out of New York state, Collins said.

— Read Underinsurance May Drive Up Hospital Costs, on ThinkAdvisor.

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