Healthcare Reform: The Next Chapter Begins

As hospitals, health systems and physicians gear up for the implementation of the Affordable Care Act (ACA), the board’s radar screen has to track the growing judicial and legislative challenges that could alter or even nullify the new law.

This week featured major developments in Congress and the courts, as well as from CMS.

On Monday, in a case brought by 26 state attorneys general, U.S. District Court judge Roger Vinson ruled the entire law unconstitutional. An editorial in the Wall Street Journal details Vinson’s rationale that law exceeds the federal government’s Constitutional powers, by requiring people to buy something, i.e., health insurance, and penalizing them if they don’t. Because the bill’s backers excluded the usual “severability clause” (arguing that the law’s elements reforming the healthcare system are irrevocably intertwined), Vinson said he had no choice but to label the entire law unconstitutional. A Virginia judge previously ruled only part of the bill unconstitutional.

But the battle isn’t over. Experts expect these cases and others will work their way through the appellate courts to the Supreme Court, with a decision not expected before the end of 2011 and most likely 2012. There, the law’s defenders will mount an impassioned legal defense of the law. To read one thoughtful analysis, look at attorney Timothy Jost’s response to the Vinson opinion, published by Health Affairs.

In Congress, the Senate as expected rejected a House-passed bill to repeal the ACA, but Republicans promised to dull the law’s impact through other means, such as not funding agencies and programs created by the new law.  A story by Congressional Quarterly HealthBeat Editor John Reichard, published by The Commonwealth Fund, predicts thatworries over deficit spending are going to frame Washington’s big policy debates in the coming year. One proposal will be to change Medicare from a defined benefit to a defined contribution plan and give seniors a voucher to buy their own plans on an open market.

Meanwhile, the Centers for Medicare and Medicaid Services keep forging ahead.On Jan. 25 CMS issued a final rule implementing the ACA’s provisions to reduce fraud, waste and abuse. Rules implementing the Accountable Care Organizations payment program are expected any time.  The Fierce Healthcare newsletter reports today that in a talk, CMS interim Administrator Don Berwick signalled the rules will address such topics as:

  • What will the risk financing arrangements look like?
  • How will beneficiaries be protected from cherry picking by ACOs?
  • What be the metrics?
  • What will the privacy and data sharing rules be?
  • To raise capital, who can invest in ACO?

What are health systems to do amid the uncertainty? At a governance level, it’s important to separate strategic from operational decisions, and keep the board focused on strategy and risk. Strategically, there’s a compelling case that healthcare payment is truly shifting from piecework to value-based, and therefore, providers must be able to take accountability for cost and quality. An article in the current issue of Trustee magazine from Kaufman, Hall & Associates, Inc. argues that hospitals will need eight core competencies, including physician integration, cost management, and scale/market essentiality.

A column in Bloomberg Businessweek by Susan Devore of Premier articulates the rationale for accountable care organizations and explains why 25 health systems in the Premier alliance are testing a variety of approaches for new forms of care delivery and payment. Generally, the public doesn’t understand the revolution underway in healthcare delivery and the benefits it could offer — but this case needs to be made and Devore does a good job stating it.

The next several months promise a continuing saga in the ACA legislation.

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