According to Deloitte’s recently-published 2017 Outlook on US Health Care Providers, 2017 will be “full of both struggling and opportune transformations for health providers as they begin to feel the Medicare Access and CHIP Reauthorization Act of 2015’s (MACRA’s) reverberating impact and as technological innovation in healthcare evolves from reactionary to predictive.” U.S./Global Health Care Providers Leader, Mitch Morris, M.D., said, following the release of the outlook, “[Healthcare providers] are struggling with decreasing reimbursement, increasing costs, and a weak capital outlook…And at the same time, they see things ahead of them that are exciting, great opportunities to transform their business, but require investment.”
Morris, formerly senior vice president of health systems and CIO at Houston-based MD Anderson Cancer Center, where he was also a professor in gynecologic oncology and in health services research, has more than 30 years of healthcare experience in consulting, healthcare administration, research, technology, education, and clinical care. He recently spoke with Healthcare Informatics Managing Editor Rajiv Leventhal about the Deloitte report’s biggest takeaways, the post-election healthcare landscape, and how the future of value-based care looks with the new administration at the helm. Below are excerpts of that interview.
What were some of your biggest takeaways from Deloitte’s healthcare outlook?
We started working on this prior to the election and completed it after. Some things are up in air and other things we are confident will move forward. One of the things we expect to see during this period of uncertainty, with questions regarding in which direction CMS [the Centers for Medicare & Medicaid Services] will go; the role of innovation; the [future of] the Centers for Medicare and Medicaid Innovation (CMMI); and insurance enrollment, is that If you are a health system, healthcare provider or large medical group, right now people are saying they better conserve their cash, not make major investments, and not take on debt. We do think that federal funding will diminish. We know that it will not go up, so it can only go down for Medicaid and for the subsidies on the insurance exchanges. The net impact of that can be additional slow pay, no pay, bad debt, and financial challenges for providers. I do think many health systems and others in the provider ecosystem are figuring out that they need to execute flawlessly have a cost structure that is as tight as can be while still providing high-quality care. As the Republican Congress moves forward with the repeal of the Affordable Care Act (ACA), the industry will begin to sense a direction and be successful in whatever direction that is.
Mitch Morris, M.D.
Since the post-election landscape leaves key regulatory areas facing significant uncertainty, as you mention, how do you see the future of value-based care playing out?
There are two big areas; one is MACRA legislation, which will push us in the direction of alternative payment models (APMs). And MACRA was thoroughly bipartisan. What we hear in the media is about opinions for or against the ACA, but what Congress is thinking about are the unsustainable [healthcare] costs. What can we agree on? MACRA was something we agreed on. So it should move forward. Tom Price [just-confirmed HHS Secretary] said back when he was Rep. Tom Price, that regulatory reporting is burdensome to physicians. His mindset, as publicly stated, is that nothing should come in between the doctor-patient relationship, as it’s not the role of the government. He has also come out against payment bundles for joint replacement despite studies showing that they lower cost and improve quality. Where will he stand on these issues now that he’s the guy on the line for the budget? No one really knows. If they dilute the reporting requirements for MACRA, that will also dilute the ability to stratify based on MIPS [Merit-Based Incentive Payment System] for example, and that might slow the rate of adoption of APMs. The MACRA legislation passing was transformational when you talk about how our health system functions. If the ACA is primarily about affordable access, MACRA is about measuring on quality, paying on quality and encouraging new payment models.
Regarding CMMI, we have heard differing reports about the likely trajectory of what this piece of the agency will be. Price has spoken in favor of innovation, but he has also expressed concerns about the path CMMI has taken. His comments referred to things that have come out of CMMI as being mandatory. From the Deloitte perspective, those health systems already invested in new payment models, bundles and ACOs [accountable care organizations] are still doing it, but the momentum has slowed down a little, and because people are uncertain, there is a reluctance to make new investments.
I think lots will look the same regarding the ACA’s main elements. The main message is that the feds will be spending less, and states will have a limited ability to increase revenue to cover new programs. We might see states do creative things around predictive health maintenance on their Medicaid population and potentially expanding it beyond that. This means not waiting for people to get so sick that they’re in the ICU, but let’s look at social determinants of health and other things that you like to see in population health to keep people out of the hospital and the doctor’s office. My prediction is that whatever we end up having will look similar to the ACA, but we will spend less money as a country, and more people will be uncovered as a result. And this will get pushback.
We can’t go back to plain old fee-for-service. That train has left that station. We are seeing innovation around telehealth moving the needle, monitoring folks at home and using analytics to identify high-risk people. Those things will continue because there is an entire ecosystem around it. The problem is that in the past there has been no way to pay for this. Now, large employers are getting on board. Here at Deloitte, they now offer all employees Doctor on Demand, so you have a consultation with a doctor on an iPad or iPhone for $25 out-of-pocket. I used this myself, and the whole process, including getting the prescription from [the pharmacy], took me 90 minutes. We are seeing large employers and large insurers move in this direction.
The first reporting period for the Quality Payment Program has kicked off. But as we know the first year is a “get your feet wet” transition period of sorts. Are you hearing anything about this so far in 2017?
I am not hearing anything yet. I don’t think people are doing much, and are just getting their acts together with reporting now. I’d predict that come late February or March I would have a lot more to say, but we are too early into it. Many people are not ready and some are hoping it goes away. Hospital CFOs really enjoyed living in the fee-for-service world; they did well and knew how to manage that world, but when you ask them about the big picture as human beings, they know that those incentives are not right and it’s not sustainable. But with their CFO hats on, those were good times.
So there are those that are waiting for MACRA to be delayed and it will depend on what comes out of the White House and from Price. Similar to ICD-10, you could in theory delay the implementation; there was talk of this before the election. Maybe you drive people to the brink and get them starting to collect the data, and then delay the financial impact to give people a chance to get used to doing it. That was probably unlikely under the previous administration, but under this one it wouldn’t surprise me at all.
What other trends from this report do you think are important to discuss?
We are hearing that consumer engagement is very important. Healthcare executives are recognizing this is a key factor to success, particularly in consolidation where you have fewer large health systems and more market dominance. So having relationships with patients that make them stick, particularly in a time of narrow networks, is important. We released a study a few months ago that found the better the patient experience, the better the financial margins of the health system.
Another trend is continued consolidation and convergence. On the healthcare delivery side, margins are only going to get worse. You have to execute flawlessly, have scale, and have market dominance. If you look at what happened to Community Health, one of the characteristics of that health system is that they had a rural orientation, didn’t have market dominance anywhere, and that made them vulnerable. The Dignity Health-Catholic Health Initiatives proposed merger is an example of wanting more scale and market dominance. We will continue to see both the horizontal integration of health systems buying health systems and the continued vertical integration of health systems and health plans buying other parts of the healthcare ecosystem.
