Orange County hospital executives say they are seeing indirect effects of healthcare reform a year after the federal legislation was signed into law.
The changes are mostly market-driven in advance of the full implementation of healthcare reform, which has most of its changes set to kick in during 2014. That includes its landmark requirement for nearly all Americans to have some sort of health insurance coverage.
Hoag Memorial Hospital Presbyterian Chief Executive Richard Afable, who oversees hospitals in Newport Beach and Irvine, calls the changes happening now “market reform.”
“Market reform is having a rather significant effect on what’s going on at Hoag and in other hospitals,” Afable said.
A key factor: The recession and bumpy recovery have employees sticking with their jobs longer.
That’s “causing employers to use that fact to their benefit,” Afable said.
That means redesigns of healthcare plans with larger deductibles and co-payments, limited access to certain pricey drugs and technology, and restriction on hospital visits and stays.
“What we’re seeing is the beginning of so-called ‘narrow networks,’ ” Afable said. “Narrow networks would mean that health plans are designing products that are potentially limiting access to certain healthcare providers, hospitals and doctors” in bids to cut costs.
“Who are the higher-cost providers in Orange County? Well, they would be those hospitals that many of us would consider as being at a higher echelon,” Afable said.
Hoag, which is historically at or near the top in net patient revenue among Orange County hospitals, has seen drop-offs in the use of some of its services, including outpatient surgery, its emergency rooms and certain inpatient services, Afable said.
For elective procedures such as colonoscopies, some businesses have bought health plans that require employees to go to an endoscopy center rather than Hoag, he said.
Hoag officials are “hearing from brokers that health plans are able to sell products to employers that exclude certain hospitals and certain doctor groups, and that was never tolerated in the past.”
As for the government reform, “there have been few, if any effects, on Hoag’s hospital operations,” Afable said. “There isn’t much that has been implemented.”
At St. Joseph Health System, “we’re not doing anything we’re doing as a result of healthcare reform, the ‘law’—we already had our own vision of healthcare reform,” said Deborah Proctor, chief executive of the Orange-based operator with four hospitals here.
“We thought there needed to be healthcare reform long before the law was passed,” she said. “Regardless of whether the law stays, is repealed, or strengthened or weakened, we’re going to continue our strategy.”
Regional Structure
For example, St. Joseph recently reorganized its management structure along regional lines in Southern California, Northern California and Texas. Longtime Chief Financial Officer Darrin Montalvo was recently named regional executive vice president to oversee Southern California.
St. Joseph also teamed up with San Francisco-based Blue Shield of California to create an “accountable care organization” that calls for the hospital and the insurer to work together with doctors to coordinate healthcare as a way to cut costs.
The accountable care organization formed by St. Joseph and Blue Shield will serve some 30,000 patients starting next year in Orange County. Proctor said the effort fulfills insurance companies’ desire to seek out partnerships with hospitals and other healthcare providers.
Working with St. Joseph is “the latest milestone in our ongoing effort to transform and pay for care to make health coverage more affordable to all Californians,” according to Juan Davila, Blue Shield’s senior vice president of network management.
Proctor said the federal law is “mostly, in my opinion, an insurance reform bill at this point in time, so we’re having to do things to prepare ourselves for what we believe will be decreased reimbursement.”
Proctor said St. Joseph’s hospitals are preparing for that “because it’s not something you can wait until 2014 for.”
EMR
St. Joseph also moved its hospitals toward being paperless with an ongoing switch to electronic medical records, a key aspect of the healthcare reform package.
Other hospitals here are bracing for the financial effects of the healthcare reform law.
“We know that there’s going to be more people that access care and that reimbursement’s going to go down,” said Marcia Manker, chief executive of MemorialCare Health System’s Orange Coast Memorial Medical Center in Fountain Valley.
Orange Coast’s preparation for reform has included electronic medical records and updating technology for imaging and cardiovascular care.
Orange Coast also has worked to provide access to care in less-expensive settings than hospitals, such as clinics in supermarkets, Manker said.
Initial Effects
Earlier this year, Mitch Morris, a healthcare practice leader with Deloitte Consulting LLC’s Costa Mesa office, said early provisions of healthcare reform weren’t affecting hospitals or doctors’ groups. Those provisions included the ability for parents to keep their dependent children on insurance policies until the age of 26, the elimination of lifetime limits for coverage, and the end of denials of coverage to children with pre-existing conditions.
“It’s more of a cost impact on health plans,” Morris said. “Having said that, they are all looking ahead with uncertainty.”
How fast reimbursement goes down and by how much has yet to be determined, “but the consensus is it will go down,” Morris said.
Pressure Point
He said increases in the number of insured patients seen at hospitals stemming from reform won’t necessarily decrease financial pressure.
“If you’re losing money on each patient, getting more patients makes your problem worse,” he said.
