Is Health Care at a Crossroads? Part 1

January 05, 2017

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In part 1 of this interview, EisnerAmper's leader of the Health Care Services Group  tells us about what impact the new administration may have on health care, how consumer choice is increasingly driving where insurance companies do business, and what financial issues are top-of-mind for physicians and hospital administrators. In part 2 of this podcast, we cover health care consolidation, patient data security and more.


Transcript

Dave Plaskow: Hello and welcome to EisnerAmper’s podcast series where we try to dig a little deeper on accounting and finance issues facing business professionals and their clients. Today’s topic is “Is Health Care at a Crossroads?” I’m your host Dave Plaskow. With us today is Michael McLafferty, an EisnerAmper Partner who is the leader of the Health Care Services Group. Michael, welcome, and thanks for being here.
Michael McLafferty: Thank you David. It’s a pleasure to be here, and certainly looking forward to sharing some feedback on the health care issues today.

DP: So obviously we’re at a changing of the guards so to speak with our leadership in Washington. What impact do you think the new administration is going to have on health care?
MM: Well, first of all David I just want to say that this question has been given to me by a number of our clients and contacts and people in the firm recently. Just to kind of give you a high level of some things that are being suggested at this point, the new administration is thinking about giving tax credits to individuals who are unable to get insurance through either a private insurer, Medicare or Medicaid - a little bit of a different spin from years ago on the voucher approach. So people would have to basically put money out on the front end to get their insurance and then on the back end when they file their returns they get a tax credit. I see comments again, which this… the Republican party in the past has had on their platform they are bringing back in a big way in their minds health savings accounts again as an opportunity. They’re very supportive of keeping employer based insurance intact, which is important because most people probably don’t realize that over 80% of people in the country have health care in the U.S. is because it’s employer based. There’s a relatively small percentage that are out there that are trying to get insurance help.
DP:Yup.
MM: They are talking about doing what they can to make sure Medicare continues going forward and doesn’t run out of funding. For Medicaid this is something they’ve had in their platform before. They’re looking at what they refer to as block grants for states, which means each state usually gets a certain amount of funding that it can use however it sees best for Medicaid. For states that currently, under the current system, get the most Medicaid dollars – California and New York come to mind – they would probably end up getting less funds under a block grant approach.
DP: Ok.
MM: And then also each state then gets to decide on a, kind of looking at the affordable care act, pre-existing conditions, where somebody in the past could be turned down for insurance, the administration is saying that they want to keep that opportunity there so no one can be turned down. They’re looking for, what they refer to as an open enrollment period to give people who don’t have insurance a chance to enroll. And I think that if, unlike the affordable care act, if we get to – which most people are used to – an annual enrollment period for their insurance, it’s probably a good thing, because one of their concerns with the current system is what are called special enrollment periods where people were enrolling and then dis-enrolling, going back and forth only if they were ill and then dropping their insurance. That was causing a lot of issues for the insurance companies. They claim that they will allow small businesses to band together. And I think the other thing that’s… has been discussed before is allowing you to buy insurance across state lines. So maybe, you know a Blue Cross Blue Shield plan in Georgia has a much better rate for the coverage you’re looking for, whereas today whatever state you’re in is where you can only buy your insurance. That’s something that’s being discussed and again that could be a good thing.
DP: Theoretically, more competition leads to lower prices on that one.
MM: Absolutely. They’re looking for more access. They were also talking about not being in a position which the ACA has also where you could suddenly be cancelled. So god forbid, you know you find out that you’re very ill and you start going through some treatment, and your insurance company turns around and cancels your policy, and that’s something that the current administration is saying they would protect against happening.
DP: Ok. What other business and financial issues are keeping physicians and hospital administrators up at night?
MM: I think right now there is a lot of movement towards trying to understand how to treat a population of people verses just patients that are coming into your hospital setting. It’s much more of a broader responsibility. So, it involves people that may never go to the hospital who are just in community settings and primary care groups, specialty groups, clinics, in addition to the hospital setting and in addition to what’s called post-acute which are situations where people are no longer in the hospital but still need additional assistance – that could be home care, physical therapy, could be a nursing home for some period of time. So when you take a look at what they now see as their responsibility they have going forward to be appropriately reimbursed for services compared to what they had in the past, this so called continuum of care they’re responsible for is becoming more of a reality.
DP: Ok.
MM: And what we find in the Northeast especially is all of these health systems have started to combine, and they’ve all become now multi-billion dollar organizations. The leadership of these organizations are realizing that to accomplish this - integration to appropriately service this population of people - is going to be very difficult. So, that’s really the key thing I think that’s keeping people up at night right now.
DP: Ok. Now you touch on a good point about consolidation and we’re seeing that in a lot of industries – our own accounting world we’re seeing a lot of consolidation. Do you think we’re going to see continued consolidation in health care?
MM: I think that the consolidation is going to continue. I think it obviously varies by market. So, for example, in the Northeast the New York City and the Philadelphia markets consolidated first. Then we saw consolidation now starting throughout New Jersey, recently with Hackensack and Meridian, also Robert Wood Johnson and Barnabas Health. We are hearing discussions about Abington, Jefferson and the Kennedy health system now. So I think, you know, those types of things will continue now in the northeast. As a result of those consolidations and the need for the continuum of care we’re also seeing a lot of physician organizations being acquired or leased by these health systems and brought in. We’re also seeing a lot of private equity money…
DP: Yeah.
MM: … coming into health care…
DP: Ok.
MM: … looking to make investments and trying to consolidate certain specialty groups, creating networks where they think they can make money. So I think it’ll continue probably I would think at the most another three to five years. But the big challenge I believe for the health systems now is to figure out how to integrate appropriately to improve quality of care but also try to be as efficient as they possibly could be cost wise.
DP: Ok.
MM: Those two goals, again, are going to be very difficult to obtain, and I think that’s where most of the discussion is right now.
DP:Ok. In part two of this podcast, Michael covers health care consolidation, patient data security and more. Visit EisnerAmper.com for more information on this, and a host of other topics.

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