Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Obamacare and Strategic Response of Physician Groups
Faisal M. Rahman*
Affordable Care Act or “Obamacare” is the most far reaching healthcare law to impact
the United States since the passage of Medicare in the 1960s. Medicare provides
government funded free medical care to people over the age of 65 but the majority of
the population under 65 continue to receive healthcare services through employer
sponsored insurance plans. The bulk of the clinical services are provided by
independent physicians and physician groups.
A significant percentage of the population (estimated between 12-15 per cent) has
little or no insurance coverage and limited access to even emergency care.
The purpose of this paper is to outline the key features of Obamacare and the timeline
for its implementation based on government publications. In addition the paper will
discuss the results of a survey of key physician groups in the Chicago area on their
strategic response to Obamacare mandated directives. Finally based on published
reports, survey and the author’s two decades of experience, some broad conclusions
on the future landscape will be presented.
Healthcare sector approximately accounts for 20% of the US economy and is one of
1
the largest employers. While the United States is considered the best place to be for
any complicated illness, the costs are also the most expensive in the world. Among all
the developed countries, the United States also spends the highest percentage of its
GDP on healthcare and yet a significant percentage of its population do not either
have access or can afford to see a physician. This new legislation is designed to
address the current inequities in healthcare. It is expected to bring about far reaching
changes through its mandates aimed towards every stakeholder in the healthcare
sector.
Key provisions of the new healthcare law are focused around the following:
a. Patients’ rights and new consumer protections
b. Improving quality and lowering costs
c. Increasing access to affordable care 2
Patients’ rights and consumer protections encompass sweeping changes as described
Below:
a. Putting information for consumers online so that individuals can
compare health insurance coverage options (2010)
b. Prohibiting insurance companies from denying coverage of children
based on pre-existing conditions (2010)3
c. Prohibiting insurance companies from imposing lifetime dollar limits on
essential benefits like hospital stays (2010).
d. Prohibiting all discrimination due to pre-existing conditions or gender
(2014).
_____________________________________________________________
Faisal M. Rahman, Ph.D. Founding Dean and Professor, The Graham School of Management, Saint
Xavier University, 3825 West 103rd Street. Chicago, Illinois 60655, USA. Dr. Rahman is also the
President/CEO of the APAC group of healthcare companies. Email: rahman@sxu.edu or
fmrahman@apacgroupe.com
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
Improving quality and lowering costs are designed to bring about the following changes:
a. Provides small businesses health insurance tax credits. This affects
almost 4 million businesses with employees fewer than 50 and
provides credits up to 35% of the employer’s contribution to the
employees’ health insurance (2010).
b. All new insurance plans must cover certain preventive services such
mammograms and colonoscopies without charging a deductible, copay or coinsurance. This is aimed at early detection and savings huge
expenses when diseases are detected at a later stage (2010-2011).
c. Creation of a public fund to promote health programs that can keep
Americans healthy –from smoking cessation to combating obesity
(2010).
d. Increased funding to reduce fraud and waste in Medicare and Medicaid
(2010). This program has been in effect even before the passage of
Obamacare and has returned over $2.5 billion to the Medicare Trust
Fund in 2009.
e. Linking payments to quality outcomes through financial incentives and
measurable results in key areas like heart failure, surgical outcomes
and
patient satisfaction (2012).
f. Reducing paperwork and administrative costs through adoption of
electronic health information and implementing it through a series of
steps involving incentives and penalties (2012-2013).
g. Piloting programs for hospitals, doctors and other providers to work
together and a new payment system of “bundling” which pays a flat
rate for an episode of care rather than the current fragmented system
where each service is paid separately. The objective to create
coordination of care, improve quality and prevent duplication of
services. It is hoped that this would align incentives of those delivering
care, and any savings will be shared between providers and Medicare
programs (2013).
h. Tax credits for individuals and families with income up to 400% of the
poverty line. For example this makes a family of four with income up to
$90,000 eligible for tax credit (2014).
i. Mandates individuals to get health insurance or pay a fee to offset the
cost of taking care of uninsured Americans. This is one of the most
controversial provisions of the law (2014-2015).
j. Paying physicians based on value of services received and not volume
(2015).
Increasing access to affordable care is to be achieved through the following –
a. Young adults will be allowed to stay on their parents’ insurance plan till
they turn 26 years old (2010-2011).
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
b. Increased funding for primary care doctors and nurses to work in
underserved areas and increasing payments to rural healthcare
providers (2010-2011).
c. Broadening the scope of Medicaid by subsidizing states to cover more
low income people (2010).
d. Increased funding and options to receive home healthcare for disabled
individuals (2011).
e. Mandating business with 50+ employees to provide employer
sponsored insurance (2013).
Different provisions of the law are being phased in over a period of five
years in order to assure a smooth transition and prevent disruption of service.
The year listed in parentheses of each provision described above is the planned
year of implementation. In reality several implementation dates had to be
postponed because of inadequate planning and inability of the government to
develop various criteria for measurement of outcome. 3
The effect of Obamacare varies on who you are. For the patients, it
means better access at possibly lower cost. For insurance companies a larger
pool of people to sell. For small to medium sized businesses with 50+
employees, it is another government mandate which will translate into higher
costs and could result in reduction of people in the current payroll. By far the
most affected are physicians who are facing a scenario of lower reimbursements,
higher costs, and competition from hospital employed physicians. They also feel
ill equipped to meet the various reporting needs of government, insurance
companies or making a case so that they can qualify for higher payments based
on still-to-be-defined or ill- defined higher value care.
Survey and discussion with the leaders of the large physician groups in
the Chicago area indicated a sense of apprehension, loss of control but
determination to stay independent. They understand that Obamacare, when fully
implemented, will mean for them ---larger volume of patients, lower
reimbursement, more paperwork/documentation and accountability. The
physician groups’ strategic responses to Obamacare are in various stages of
implementation. They include a. Increased Use of Physician Extenders – All physician groups
understand that they will have to see more patients simply to maintain
existing revenue level.
They realize that is only possible if they use more and more physician
extenders –primarily Nurse Practitioners and Physician Assistants. A
single physicians can operationally and in most cases legally
supervise/oversee 4 to 5 (depending on the state) PAs or NPs. The
average cost of such extenders to the practice is 20 to 25% of that of a
physician but their services are reimbursed at 85% of what a physician
gets.4
b. Create Alternate Revenue Streams – Medium to large sized physician
groups are beginning to acquire ancillary businesses with high profit
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
c.
d.
e.
f.
g.
margins. These ancillary opportunities include boutique single specialty
hospitals, outpatient surgery centers, MRI centers, Labs for variety of
screenings, Physical Therapy, Psych Services and even their
pharmacies. Both costs and technology are aligned in favor of
outpatient surgery centers. With increased attention on abuse of
prescription drugs, labs for urine screening are sprouting up all around
the United States. The incomes from such ancillaries are designed to
offset the decline in reimbursement of traditional physician services.
Direct contracting between providers (particularly physician groups and
hospital networks) and large employers are beginning to get traction in
certain parts of the country whereby the insurance companies are
being bypassed. This is a unique development because historically
insurance companies have made money both from employers and
clinicians without any real risk by excluding patients with pre-existing
conditions. An ironic situation given that the basic premise for the
existence of an insurance company is payment for assuming risk.
Obamacare will put some of the risk management business back into
such entities where they belong. Direct contracting will be a key
strategy for the physician groups in the future.
Alliances with hospitals and independent physician groups are also
developing across the country to take advantage of “bundle payments”
with the intent of sharing “savings” with Medicare programs.
Accountable Care Organizations (ACOs) are beginning to develop
either led by physician groups or hospitals around the country. ACOs
will be part of Obamacare strategic response of physician groups. 5
Physician groups are also participating and taking the lead in unique
delivery systems like “doctor on demand” which matches a Board
certified physician and patients for almost instant response to the
latter’s need through “face time” over hand held mobile device or
computer.6
There also seems to be a lack of coordinated response from physician
groups to the expected takeover of “retail medicine” by in store clinics
manned by Nurse Practitioners and operated by giants like CVS,
Walgreens and Wal-Mart.
Finally overwhelming majority of physician groups is in the very first
phase of developing strategies to take advantage of payments which
tie results with reimbursements. There is currently no consensus on
any particular instrument which can objectively define value received
by patients.
Taking into account the politics of legislation, the impact of technology on
healthcare delivery and influence of various stakeholders in the healthcare
sector, we can reasonably expect the following trends –
a. Obamacare in spite of resurgence of Republicans in the United
States
Proceedings of 11th International Business and Social Science Research Conference
8 - 9 January, 2015, Crowne Plaza Hotel, Dubai, UAE. ISBN: 978-1-922069-70-2
b.
c.
d.
e.
f.
is here to stay. Albeit there will be fine tuning of the law as it has
been the case with Medicare or even Social Security.
United States will never become a single payer government run
system. Independent physician groups will adjust, adapt and
innovate and will continue to be a strong player. One or two
man physician practices will disappear.
Most areas of healthcare will move outpatient based on
technology and costs and that will favor physician groups over
acute care traditional hospitals.
Healthcare delivery system at retail level will change driven by
technology, just as online shopping is driving traditional retail
sales down.
Physician income will continue to trend down with a greater
number being employed by hospitals and even insurance
companies.
Management will dominate healthcare decision making and
operations in the foreseeable future.
References:
1. www.Forbes.com February 2, 2014
2. www.hhs.gov/healthcare/facts/timelineline-text.html. November 28, 2014
3. McIntosh, James. Affordable Care Act: Insurance Coverage Has
Improved for Young Adults. Medical News Today. September 9, 2014
4. www.physician practice.com Understanding Physician Assistant
Reimbursement, February 17,2012
5. Hertz, Beth Thomas. A Look at Physician-led ACOs: What’s driving them
and where they are headed. Medical Economics, June 12, 2013.
6. www.doctorsondemand.com