Measures to expand healthcare access to more Americans, contained in the recently enacted health reform bill, could accelerate consolidation in the provider sector, according to healthcare law experts at McDermott Will & Emery.
“(Better healthcare) access could mean more patient volume and less bad debt,” said Daniel H. Melvin, a partner at the law firm Chicago office and an expert on federal healthcare program fraud and abuse, the Stark law and Medicare reimbursement issues. “(But) all of the costs and (provider) pay cuts are going to change the rules of the game. Health reform is likely to mean the acceleration of consolidation.”
“It’s primarily an access bill,” said Christopher M. Jedrey, a partner-in-charge of the law firm’s Boston-based health practice and national co-chairman of its academic medical centers practice. “It will extend health insurance coverage to 32 million more people and cost control will follow.”
Insurance mandates and penalties, insurance exchange reforms and Medicaid and SCHIP expansion will help generate healthcare access to more Americans. Efforts will be largely financed by $157 billion in Medicare FFS rate cuts, $136 billion in Medicare Advantage cuts and $36 billion in Medicare/Medicaid cuts.
“The healthcare provider market is currently fragmented, causing duplications of overhead and services, creating more costly and sometimes sub-optimal care,” said Jedrey.
Providers are expected to experience downward pressure on payment rates by governmental forces and private payers, said Jedrey. This will come in the form of more robust P4P programs, bundled payments (for hospital/physician services), episodic care, shared savings and capitation.
Physician groups and solo practices are less likely to be able to handle consolidation and integration with other organizations than hospitals, said Jedrey. A larger business has the ability to spread out costs for health IT and its care management infrastructure and bear any monetary risks shifted from payers.
For ancillary facilities, this could mean wholesaling to higher paid hospitals and high-volume medical practices. Changes in the provider structure could yield new business opportunities in areas such as chronic disease management and independent home care, according to Melvin. There will also be a larger focus on preventive and wellness services.
“If the Massachusetts experience is any indication of what we’ll see elsewhere, we’re going to see a lot of patients waiting in line to see the physicians,” said Melvin. “There will be quite a bit of opportunity for urgent care centers, retail clinics and physicians to expand their hours.”
“I think we’re going to see clinical integration in healthcare,” he said. “Rather than full integration.”
As many physician practices have started to explore hospital contracting, the industry has seen a surge of interest in partnerships between physicians and hospitals, said Melvin. Physicians seem to be looking for stability and predictability.