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Health Care Reform: An Opportunity for Hospitals to Lead

Dr. Alvin I. Mushlin

Hospitals will maintain their prominent role in American medicine and remain economically viable, despite health care reform that requires them to make wide-ranging changes, according to Weill Cornell Medical College researchers.

Dr. Andrew Ryan

Their commentary, published May 20 in Annals of Internal Medicine, suggests the Patient Protection and Affordable Care Act (ACA) will take hospitals on an uncertain course during the next several years. But they will adapt to policy changes and continue to be major hubs of U.S. health care, the authors write.

"The ACA will implement important changes affecting hospitals. Placed in context, the legislation is part of a continuum of efforts over the years to cut costs and improve efficiency of hospital care," said Dr. Andrew Ryan, an associate professor of healthcare policy and research and the lead author of the article. "It's difficult to predict the impact of the ACA, but if history is a guide, there's every reason to believe hospitals will adapt and prosper, without sacrificing patient care."

Hospitals are under increasing pressure to cut costs and control spending. This reality, coupled with the struggling economy, has made many hospitals concerned about how ACA-mandated reforms will affect their bottom lines.

On the one hand, the ACA's individual coverage mandate will benefit hospitals by expanding their base of insured patients. On the other hand, financial penalties for excessive readmissions could threaten hospitals. Together, these policy changes raise fundamental questions about the future of hospitals and their role in health care delivery, according to Dr. Ryan and his co-author, Dr. Alvin Mushlin, the Nanette Laitman Distinguished Professor of Public Health and also a professor of medicine at Weill Cornell.

U.S. hospitals have proved remarkably adept at integrating new policies. For every significant health reform—from cost-growth limits in the 1970's to cuts in outpatient care costs in the 2000's—hospitals responded and adapted. Throughout those changes, their spending rates have stayed consistent.

How might hospitals respond to payment reforms under the ACA? Drs. Ryan and Mushlin believe institutions can participate in accountable care organizations (ACOs) in markets where ACOs cover a large share of patients. ACOs are provider networks—including primary care doctors, specialists, hospitals, and home health care services—that work together to better coordinate patients' care. Providers are rewarded financially if they can slow health care cost growth (for example, by reducing unnecessary duplication of services), while maintaining or improving the quality of care. Hospitals can share in these savings.

Another reform that rewards organizations for improving patient outcomes and decreasing costs is the "bundled" payment system. Physicians, hospitals, and post-acute care providers work together within a fixed budget for all care over a defined period (known as an episode). Bundled payments give hospitals new tools to manage inpatient costs, such as the ability to share financial savings with physicians, known as gainsharing. Because current opportunities for bundled payments emphasize high-cost, acute inpatient episodes, hospitals could end up controlling more financial resources.

"The ACA should strengthen, not diminish, hospitals' importance in the future," Dr. Mushlin said. "The reforms are an opportunity for hospitals to create a culture of excellence where innovation is linked to value-based patient care, providing a road map for other health care providers to follow."

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