Content from this column was originally published in the "Practice Management: The Road Ahead" section of Clinical Gastroenterology and Hepatology (2012;10:828-30).
"Practice Management Toolbox" provides key information and resources necessary for facing the unique challenges of today’s clinical practices.
Resources for Practical Application To view additional online resources about this topic and to access our Coding Corner, visit www.cghjournal.org/content/practice_management.
Dr. Taylor and Dr. Clinchy have given us a wake-up call concerning the future of Academic Medical Centers (AMCs) as this nation faces the dual challenges of unsustainable costs and the immediate need for health care reform. No matter what happens[with] the Patient Protection and Affordable Care Act, AMCs must change their business model or risk economic disaster. AMCs can no longer follow the traditional path that has supported them in the past decade. Sufficient money will not be available within the current business model. The Road Ahead for our teaching and research institutions demands innovation, and AMCs must be the incubator of new solutions for better health care delivery in addition to their advancing our science.
John I. Allen, M.D., MBA, AGAF,
Special Section Editor
Introduction
This article is based on concepts first outlined in a publication by the authors entitled "Impact of Health care Reform on Academic Medical Centers."1 The Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act of 20101 seek to expand health care coverage by providing affordable health care for more than 95% of all Americans while reducing health care costs. Although these two goals appear to be contradictory, there was an implicit suggestion when the PPACA was first proposed that changes in systems of care delivery and payment reform would in and of themselves also result in significant cost savings. While PPACA does provide financial incentives to explore different approaches to the delivery of care including patient-centered medical homes, accountable care organizations, disease management programs, and health care innovation zones, whether they will result in significant cost savings in either the near- or long-term is less certain. Furthermore, because PPACA has immediate reductions in payments to existing sectors of the health care system, the downstream results of changes in funding are worrisome. Specifically, we fear that academic medical centers (AMCs) may be disproportionately affected by these reductions.
PPACA’s impact on AMCs
Dr. Ian L. Taylor
It has been estimated that PPACA will add 32 million Americans to the ranks of those with health care insurance, 16 million of whom will be covered by Medicaid.1 Fee-for-service Medicaid is not a good payer for physician professional services and as a result, many physicians have felt forced to decline new Medicaid patients. Although PPACA mandates that the Medicaid payment rates to primary care physicians be no less than 100% of Medicare payment rates in 2013 and 2014, these rates will only be available for those 2 years.1 Primary care physicians will also see a 10% increase in current Medicare payments for 5 years. These increased rates will not, however, apply to subspecialty professional services and as a result referral of the increased population of Medicaid patients may become financially challenging for AMCs practice plans, which are largely built on a foundation of subspecialty care.1
Under the new legislation, Centers for Medicare and Medicaid Services (CMS) will reduce payments to hospitals by $158 billion over 10 years to help cover the cost of the newly insured.1 PPACA’s financial impact will be most profound on those centers that have safety net hospitals in their system.2 Most importantly, for these institutions, Disproportionate Share Hospital (DSH) payments by Medicare and Medicaid, will be phased out. DSH payments, which have traditionally compensated hospitals for the costs of caring for the uninsured and the indigent, have been critical to "safety net" hospitals and their associated AMCs. In theory, an increase in the number of insured patients seeking care at AMCs would help offset the loss of DSH payments. However, given inadequate Medicaid reimbursement and the 5%-10% of remaining uninsured Americans and undocumented migrant workers who will seek care at safety net hospitals, AMCs can anticipate dramatic decreases in revenues.
PPACA’s impact on Medical education
Safety net hospitals are an important component of the education of physicians and health care workers in this country. Furthermore, all teaching hospitals that train residents have been reimbursed for the costs entailed through both Direct and Indirect Medical Education payments. Federal support of resident training has not changed since 1997 when Congress capped the number of training slots supported by the CMS as part of the Balanced Budget Act, and the PPACA does not do enough to change this given the predictions of major physician shortages.1 Indeed, PPACA requires CMS to take back 35% of unused Graduate Medical Education slots and redistribute the remaining 65% to rural and underserved areas.1 Moreover, the future of all Direct and Indirect Medical Education payments is uncertain as Congress is currently discussing cuts to graduate medical education as part of its deficit reduction plans.
