Health care industry gains clarity - KMSP-TV

Health care industry gains clarity

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Source: The Wall Street Journal

One-sixth of the US economy just started breathing again.

After months of uncertainty as the federal health care overhaul faced legal challenges, the industry -- which at $2.7 trillion represents 17.9 percent of the nation's gross domestic product -- has a clearer picture of what's in store.

Though the coming election and expected budget negotiations could throw off more changes, the Supreme Court's decision Thursday to effectively uphold most of the law removes a big question mark and will add momentum to shifts that were already in progress.

The major provisions of the health care law aren't slated to go into effect until 2014. That is when insurers have to start selling coverage to adults regardless of pre-existing health conditions and to stop pegging premiums to health status.

A new mandate will require most people to obtain health coverage -- helped by an enormous expansion of Medicaid and federal subsidies to help lower-income people buy plans through new health-insurance marketplace -- or pay a tax.

The justices did find fault with part of the health care law's expansion of Medicaid, a joint federal-state insurance program for the poor, and made some changes to the Medicaid portion of the law.

The upshot for the health care industry: an influx of more than 30 million newly-covered people with the means to pay for care -- but there is also a cost. An array of cutbacks to government reimbursement, new fees and taxes, and pressure to move to new payment models that boost efficiency and quality are included.

To prepare for the overhaul, health care providers and insurers have already embarked on a wave of structural changes, consolidating to cut costs and position themselves for the overhaul's main provisions. These shifts would have been difficult to unwind had the law been shut down, and could pick up even more speed now.

Hospital systems are snapping up doctor practices, as well as buying other hospitals, hoping for economies of scale and greater leverage in negotiations with insurers. Some are tiptoeing into the insurance business themselves and talking to employers about direct deals to care for their workers. The 86 hospital-merger deals announced last year represented the biggest total since 2000, according to Irving Levin Associates, a research firm that tracks health care transactions.

Insurers are buying health care providers, or working with them on new ways to share the risks of offering health care coverage. They are beginning to move away from the traditional style of paying fees for each service, and instead starting to tie reimbursement to quality targets, as well as rewarding health care providers that rein in costs.

In a report issued this month, Leavitt Partners, a health care information firm, counted 221 "accountable-care organizations" around the US. The concept was embedded in the health care law and typically involves health care providers trying to coordinate and manage the care of a patient population and being rewarded if they manage to trim costs. That was up from 164 in September.


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