Becker's Hospital Review

26 Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 Countdown to the Biggest AHA President and CEO Rich Umbdenstock Discusses Challenges, How Hospitals Will Adjust By Lindsey Dunn R ich Umbdenstock has led the American Hospital Association as its president and CEO since 2007. He assumed the role with the understanding that a major period of upheaval for the industry was likely, and he embraced the challenge and opportunity. During his tenure, he has helped guide the AHA's involvement in federal healthcare reform efforts — and the organization's support of what eventually became the Patient Protection and Affordable Care Act of 2010. Five years ago, the AHA supported healthcare reform and its efforts to expand coverage to tens of millions of uninsured Americans. The financial and societal benefits of fewer uninsured Americans was something the AHA and other national hospital associations felt strongly about — so strongly, in fact, that hospitals agreed to $155 billion in CMS payment cuts over 10 years. The economics then added up: More paying customers would make up for money lost through reimbursement cuts. Today, the math is less clear. The sequester — brought on by the Budget Control Act of 2011 and which went into effect Jan. 1, 2013 — resulted in additional 2 percent across-the-board cuts to CMS reimbursement rates that were never anticipated by the hospitals at the time they agreed to reform-related cuts. A substantial chunk of coverage was lost when the Supreme Court made Medicaid expansion optional for states in its landmark June 2012 ruling. Add on to that a one-year delay of mandated employer-sponsored coverage (for businesses with more than 50 employees), and the number of newly insured that hospitals were banking on to offset their lost revenue has gone down substantially. "After the bill was passed, as the numbers were crunched, the number of expected new enrollees went down [from what was estimated when the legislation was in draft form]," explains Mr. Umbdenstock. "As the Supreme Court made its decision, the numbers went down again. As various states decided to expand or not expand — and a significant number not expanding — the numbers went down. As the administration decided to delay the employer mandate, the numbers went down. All I know is that the cuts continue at the original rate, but the coverage estimate has been slipping." And we've seen the impact in hospitals that have struggled to adjust. Hospitals announce new layoffs almost daily, some overtly blaming them on reform- and sequestration-related cuts. Has all of this changed the AHA's support for healthcare reform? No, says Mr. Umbdenstock, at least not its fundamental element of expanded coverage. The shift toward individual responsibility, rather than leaving hospitals to deal with the financial difficulties of providing costly care to uninsured individuals who are not likely to be able to pay for it, is an important change and one the AHA will continue to support. That said, Mr. Umbdenstock is worried about the unequal pacing of hospital cuts and increased coverage. Below, Mr. Umbdenstock discusses this challenge, and other issues that will impact hospitals as they enter 2014 — the year in which the most transformative elements of the PPACA will take effect. Question: The PPACA was passed in 2010, and a lot has happened since then in terms of changes to the original legislation and rollouts of various rules to enact the law. How has the law's implementation thus far affected hospitals, in terms of the financial or operational impact? Rich Umbdenstock: The fundamental pillar of our support for the bill was that it was going to provide coverage to tens of millions of Americans, and we agreed to forgo some amount of future payments to fund a lot of that coverage. A major challenge then has been to remind policymakers of that connection between those payment reductions and that increase in coverage. Because if it's all cuts and no expansion of coverage, that's the worst possible outcome for hospitals. The relationship between the payment reductions and coverage has been one of the biggest concerns. Just on the practical side, one of the biggest challenges is just the complexity of the bill. We knew that given the scope of issues that were being addressed in this bill, we knew that the implementation and roll out would be significant. It's been a real challenge for the Association and our members to keep up with the stream of regulations for comment, the final versions, implementation dates and possible penalties under various performance programs and so on. Q: As you mentioned, the AHA supported healthcare reform prior to its passing in 2010. How, if at all, has this support changed now that more specific rules enacting the law have been released? RU: We supported the bill, and like other situations we're in all the time, original pieces of legislation are bound to be strong in some areas and lacking in others, so it's always part of the process to think about what changes need to be made going forward. Our fundamental support for healthcare reform overall has not changed. There's an awful lot of reform going on in the private sector absent the ACA. Before the ACA was passed, there was a significant amount of integration across parts of the system that was already occurring. Hospitals were already starting to take on more financial risk; lack of payments for never events was starting to happen; it was clear that readmissions would no longer be paid for in as broad a fashion as they had been; and hospitals had already been seeking ways to improve quality, to improve outcomes, to improve efficiency and to help lead the public reporting phenomenon. [The PPACA] wasn't totally new ground in that sense, so we remain supportive; we keep working down those tracks, trying to keep up with the changes that are coming out as a result of specific provisions of the Affordable Care Act. If and when people decide to open up the bill and make changes, we'll be ready with our suggestions. But, at the moment, we remain supportive of the fundamental notion that you have to cover

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