It's both daunting and a relief to see what some of the expected financial effects may be for hospitals as the industry moves toward quality-linked reimbursement and away from fee for service.
The estimates are contained in a report from the American Hospital Association that includes some of the worst-case financial scenarios for hospitals. They appear challenging, as are the recommendations for hospitals outlined in the report.
But like a zombie movie in which fear and anticipation give way to a degree of satisfaction once the zombies arrive and the enemy is known, it is reassuring to see some actual numbers that estimate where hospitals are headed financially.
Also included in the report, "Navigating the Gap Between Volume and Value," are frameworks for performing financial analyses that, as a whole, aim to make it easier, if not easy, to conceptualize what the changes to health care will mean. The report was published by the AHA-led Hospitals in Pursuit of Excellence effort and was prepared by Kaufman, Hall & Associates and the Health Research & Educational Trust.
One of the authors says the report might serve as an opportunity for financial managers to get back to the basics of hospital financial forecasting. Hospital executives may have been focused on the immediate mechanics of enacting new models of care and perhaps neglecting the broader act of re-evaluating underlying financial projections, says Jason Sussman, managing director for Kaufman Hall. "The temptation is to focus on all the changes," Sussman says. "The question is: 'How meaningful is the work if you don't have a base that truly reflects the impact of what's going on, before you make any kind of management change or intervention?'"
To create that foundation, the report outlines approaches for such things as financial-performance target setting and analyzing a hospital's capital position.
The report also includes startling estimates for how quickly the country's commercial health insurance coverage could shift to being sold on a public or private exchange. Under a worst-case scenario, 66 percent of commercial lives will be obtained through one of the two exchanges by 2018, while under a best-case scenario the estimate is 16 percent, according to the report. The baseline estimate is that 40 percent of commercially covered lives will buy their insurance on an exchange by 2018. Sussman says the probabilities for the range of outcomes in the report will vary fairly significantly from market to market.
The report also recommends an analysis of how service lines will do under the changes, given that hospitals have captured many of the gains from improved efficiency.
"Hospitals have been very good about cost-management the last five to seven years," Sussman says. Now executives might consider such things as whether all of their hospital service lines are providing value to the community or mid-level providers can do some of the work physicians currently do.
"We're working with hospitals all over the country on these types of issues," Sussman says.