I spent Wednesday afternoon in a couple of informal meetings with hospital and health system CEOs and CMOs. We talked about a lot of things, and of course, some of our conversation centered around the upcoming Supreme Court decision on the Patient Protection and Affordable Care Act (or Obamacare; you decide the terminology).
Most of us assume that the decision hangs like the sword of Damocles over the heads of healthcare leaders, employers, and indeed, the entire economy. It's difficult to argue with that assessment.
Even though I expected a predictable answer in that vein, I had to ask the questions: Are they handicapping how the ruling might go? Are coming up with contingency plans? Most agree the ruling will have a big effect on the global healthcare industry, but that in their day-to-day-lives, it largely won't affect the 180-degree shift they're making in reimbursement philosophy. For most systems, those changes are taking place largely at the behest of commercial plans and local employers.
But when you ask one question, you might get an interesting answer about something else entirely. That's the way my sources for this off-the-record conversation surprised me. They agreed they are much more concerned about disruptive innovation than what nine people in black robes are going to say at an indeterminate date sometime this month.
The roundtables, set up for me by the good folks at Premier Inc., which is holding its annual "Breakthroughs" conference here in Nashville this week, revealed that these leaders fear less what the government may do in response to whatever decision the Court makes, and more what nontraditional competitors may do to their resource and capital-heavy healthcare delivery systems.
For instance, I wrote back in February about direct primary care, a concept that is helping primary care doctors go the direct-to-consumer route—that is, they don't take insurance. That in itself is not revolutionary, but in contrast to some of the few so-called "concierge clinics" that have sprung up over the past half decade or so, many of these practices are pretty affordable for the regular guy or gal, especially when considering the increasing burden many employers are placing upon their employees to fund a portion of their own healthcare costs.
In a short amount of time, those practices have made significant headway in certain markets. And now that the New York Times has noticed, it seems, it's news.
And it's unwelcome news for leaders of hospitals and health systems that are making an attempt to structure an accountable care strategy. ACOs require changes in reimbursement methodology and care protocols and those are big investments for hospitals, health systems, and others that have no choice but to continue to operate in the third-party payment system.
Those changes require huge capital investments that can only be recouped over time. In the case of disruptive innovation, by definition, time is not on the incumbent's side. One of the most intriguing disruptors evident in the direct primary care model is the ditching of the third-party payer.
One key to most accountable care strategies involves hospital-centric organizations building out primary care networks, often with employed physicians. They realize not only that revenue growth will be constrained on the hospital side, but that in addition to diversifying the revenue stream, primary care practices will help close the loop on the accountability missing from today's predominant fee-for-service payment system.
You hear CEOs talk a lot in terms of gambling metaphors these days. As in, where are they placing their bets to ensure long-term survival and success? Accountable care strategies are all different, but even if not fully formed or built out, they require huge investments in facilities, acquisitions, and manpower in realization that payers are moving quickly toward reimbursing them not on how many services the patient consumes, but how well the system keeps the patient healthy.
Yet no matter how innovative such strategies are, they depend on the third-party payment system.
If that system can be effectively circumvented on a large scale, many health systems worry they won't be able to compete. They may be right. Direct primary care is only one of many disruptive innovations that might dramatically decrease the competitiveness of hospitals and health systems. But apparently, it's of much greater worry than the decision the Supreme Court is about to make.
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Philip Betbeze is the senior leadership editor at HealthLeaders.