Health reform's financial implications: HFMA details the issues

The Healthcare Financial Management Association (HFMA) has identified the highlights of The Patient Protection and Affordable Care Act (H.R. 3590) from the perspective of healthcare finance leaders. While the Act is expected to bring some 31 million newly insured potential payments into the healthcare arena, it also delivers some significant financial challenges.

On the cost-cutting front, the Act cuts Medicare reimbursement by $103 billion over 10 years via market basket update adjustments for productivity starting in fiscal year (FY) 2010, as well as reducing Medicare and Medicaid disproportionate-share hospital payments by $44 billion over 10 years beginning in FY 2015, says the HFMA.

The Act also provides several delivery system-based reforms, including value-based purchasing, reduced payments for high volumes of hospital-acquired conditions and readmissions, and pilot programs to test bundled payments, accountable care organizations, and medical homes. These reforms are expected to save an additional $13.5 billion over 10 years, says the HFMA.

The Act creates an independent payment advisory board, similar to the existing Medicare Payment Advisory Commission (MedPAC), says the HFMA. This commission, which will launch in 2015, will have Medicare rate-setting authority. Hospitals will not be under the commission's authority until 2019. This reform is expected to save $23.4 billion over 10 years.

The Act expands Medicaid coverage to 133 percent of the federal poverty limit, which should add some 15 million new enrollees.

The Act also creates four new criteria that providers must fulfill to keep their not-for profit status. Not-for-profits will have to "conduct [a] community needs assessment and execute against it; develop, implement and communicate a charity care policy; use aggressive collection efforts only after attempts to determine charity care status and other collection activities have been exhausted; and bill patients who qualify for assistance no more than amount billed to insured patients," states the HFMA.

These reforms could change slightly depending on whether the U.S. Senate passes the Health Care and Education Reconciliation Act of 2010 (H.R.4872), which has been passed by the House.

To learn more about financial issues involved in health reform:
- read the HFMA summary

To read the specific language of the new law of the land:
- read the Patient Protection and Affordable Care Act

To read the specific language of still-pending reforms:
- here's the Health Care and Education Reconciliation Act