South Florida Hospital News
Monday August 10, 2020

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April 2010 - Volume 6 - Issue 10


Legal Update: Health Care Reform Will Accelerate Delivery Changes and Encourage Consolidation

The Push for Higher Quality at Lower Cost Will Spark New Innovations

On Tuesday, March 23, President Obama signed the historic new healthcare bill. Hidden in the huge bill (including the reconciliation package that will provide a few modifications) are potential changes in the delivery of, and payment for, health care that are revolutionary in and of themselves. These changes actually began to percolate during the Bush Administration, but will now move forward much more rapidly. The new mantra among healthcare economists and wonks is "better quality of services at a lower cost." They are convinced that these goals can be achieved broadly, throughout healthcare delivery, and thus will help to make patients healthier, at a much lower cost to consumers.

For decades, the primary method of paying physicians and other healthcare businesses for their services has been the "fee for service" method, where they are paid a certain amount for each healthcare service. Today, opinion is virtually unanimous among healthcare economists that fee for service payments are no longer appropriate. Why? Because they are inimicable to the goals of "better quality at lower costs." The economists argue, among other things, that fee for service encourages overutilization, does not reward economies of scale, and also does not reward superior service providers.

However, the fee for service payment structure is still the primary way of paying for healthcare. Providers, including Medicare and managed care plans, are experimenting with new forms of payment, including pay for Performance, or "P4P" plans, where some portion of the payment to the provider of the services is based upon achieving certain quality of care and health creation objectives.

The new law creates the Center for Medicare and Medicaid Innovation (CMI). CMI will, by 2011, begin to carry out its duties of testing innovative payment incentives and delivery models intended to lower costs and improve care coordination and quality for Medicare and Medicaid patients. One significant area of focus includes medical homes, where a primary physician-based group takes control of all health issues for a defined medical population, typically people who suffer from a specific disease, such as diabetes. CMI will also immediately consider risk-based provider contracting, care for at-risk geriatric patients, and coordination of care through accountable care organizations (such as networks of physicians, hospitals, or both).

Also, a new national pilot program will be created to study "bundled" payments for inpatient episodes at health care facilities, where a single payment is made for all medical services for a surgical procedure or procedures during a period beginning three days prior to admission, the inpatient length of stay and 30 days post-discharge.

There are many other provisions in the bill, too numerous to discuss in an article of this brevity, that attempt to focus on the "lower cost, better quality" mantra. During the past two years physicians have typically seen their payer reimbursements reduced and managed care becoming ever more difficult in approving ancillary procedures at the physicians’ offices. Most of the physicians have seen their incomes plummet.

Hospitals are again beginning to purchase physician practices, especially primary care practices, in anticipation of the new payment methods. Existing physician groups, and those still being created, must now start to seriously consider forming an accountable care organization (ACO), likely through a network created to not run afoul of anti-trust laws. The ACOs can share common IT in order to have full access to all common patient records. The organizations also can then negotiate "better quality lower cost" contracts with providers and hopefully, through the streamlining of care, do so at a profit.

There clearly are exciting and demanding healthcare developments on the horizon!

Mike Segal is a partner in the Miami office of Broad and Cassel and is chair of the statewide firm’s Health Law Practice Group. He can be reached at (305) 373-9400 or
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