Hospital Impact: Senate must focus on value in healthcare, not just access

Signs saying healthcare reform
The next version of the American Health Care Act needs to address the real problem in our health system: it is far too costly, largely because of structures that lead to waste and incentivize more care (and more expensive care), rather than better care. (Getty/Eugenia Chaikina)
Rita Numerof
Rita Numerof

As they take over where the House’s American Health Care Act left off, Republicans in the Senate are focused on finding politically acceptable solutions that reduce spending (and taxes) while minimizing loss of coverage for millions of Americans. The details of subsidies, funding sources and eligibility are important, but they must not crowd out solutions for the fundamental problem we face: we spend far too much on healthcare and aren’t getting the returns we need. Politicians and the Trump administration must remember that the defining healthcare issue of our time is value.

Flaws within the House bill version

Even in the current hyperpartisan District of Columbia, the House bill has such obvious flaws that it has few real defenders. Republicans promised to repeal and replace the Affordable Care Act (ACA) yet instead produced an “Obamacare Lite” package that has satisfied few. Its opponents include most of the healthcare industry.

For hospitals, fewer insured lives means fewer paying customers and more unreimbursed care. For patients, it means postponing care until they qualify for other programs like Medicare (or until they end up in an emergency room). The long-term effect will be to raise the costs of our overall healthcare system, as problems that could have been inexpensively addressed early are allowed to fester into full-blown catastrophes.

On top of that, the major source of savings in the bill is a reduction in spending on Medicaid, through per capita caps or block grants to states and by phasing out the ACA’s expansion of that program. Reduced spending here also means less revenue for hospitals and as the New York Times notes a reversal of the minimal-but-real improvements found by researchers in the previously uninsured population.

While the bill will certainly see changes in the Senate–if not a wholesale rewrite–the next version needs to address the real problem in our health system: it is far too costly, largely because of structures that lead to waste and incentivize more care (and more expensive care), rather than better care.

Changing how health insurance gets priced or paid for will not change the underlying cost of our system or the value it delivers for consumers. It’s time to move beyond insurance reform and instead focus on delivery and payment reform.

The need for a market-based model

All of this work starts with a focus on moving toward a market-based model, based on three key principles:

First, we need transparency in cost and quality, ensuring access to data and helping consumers understand what’s valuable and what’s not. Only by meeting both of these requirements will greater transparency have the potential to yield better health outcomes at lower costs. 

Second, we need to connect payment with outcomes, thereby holding providers accountable for results across the continuum (in terms of quality of care and total cost). Shifting to paying for an episode of care—bundled pricing—has shown promise in constraining the cost of care and maintaining or improving outcomes. When payments are made contingent on appropriate outcome metrics, healthcare delivery gets more efficient and responsive to consumer needs. Population health models have even more promise, encouraging prevention instead of intervention by blunting incentives to perform more procedures.

Third, we need to keep consumers at the center of their care and encourage real competition. Armed with information and the ability to choose between providers that are accountable for the value of their care, consumers will be able to drive market-based improvements in outcomes and cost.

Under this model—what we might call real reform—hospitals will still face a lot of top- and bottom-line pressure. However, those providers that deliver the greatest value will be rewarded, and those that don’t will be forced out of the market. This is the only way to stop the healthcare industry from absorbing the quarter of the national budget it is projected to encompass by 2025. The status quo—even if it’s relabeled—will otherwise bankrupt the country.

Rita E. Numerof, Ph.D., is president of Numerof & Associates, a firm that helps businesses across the healthcare sector define and implement strategies for winning in dynamic markets.