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A Changing Business: Hospitals under the Affordable Care Act

As the Patient Protection and Affordable Care Act (PPACA), also known as “Obamacare,” continues to undergo implementation, hospitals are left with few certainties, and many uncertainties. While it is certain that the Affordable Care Act ushers in a transition from a care by volume of patients treated system to a system that values the quality of care provided to patients, it is unclear how this will affect hospitals. What will be the impact of this transition on the hospital’s bottom line, and more importantly, how is the transition going to ultimately impact patient care received at a hospital?

Hospitals are Businesses
Under the pain, discomfort and often a sense of urgency that accompanies a patient when they arrive at the hospital, it is easy to forget that hospitals are, in fact, a business. And like any business, the hospital needs to realize a profit to remain in business. With all the changes associated with the Affordable Care Act, hospitals will have to modify their business models in order to adjust.

As an initial matter, hospitals will have to retrain staff and retool their record keeping systems because the Affordable Care Act requires hospitals to use new forms, new systems and new procedures. One such procedure under the Affordable Care Act is that hospitals may form accountable care organizations, which are entities specifically tasked with overseeing the quality assessment of hospital performance. Further, Medicare funding will be tied to hospital performance. The Affordable Care Act, as it presently applies to hospitals, employs a reward/punishment system where individual hospitals can either gain or lose Medicare funding in increments of 1%. Readmittance rate of patients 30 days after being discharged for receiving treatment for common conditions such as pneumonia or heart failure, patient satisfaction with the quality of treatment received, and rates of infection in patients acquired during a hospital stay are just a few of the factors that contribute to the determination of whether a hospital is punished or rewarded.

Potential Impact on Patient Care
While uncertainties lie on the horizon for hospitals under the new Affordable Care Act, it is sensible to approach the new health care system as a circumspect consumer. The easily foreseeable impacts on patient care include the likely consolidation of health care systems as hospitals take steps to pool their resources and produce synergistic partnerships. This means fewer options when choosing a hospital, treatment center or health care provider, but it also translates to better care for patients as consolidated hospitals will benefit from pooled resources and talent.

However, there is of course, a concern that hospitals could feel financial pressure to manipulate the new system to save costs and stave off punishment for not meeting the new quality performance criteria. Perhaps there will be pressure to delay readmission of patients who return to the hospital within the 30 days of being discharged, or perhaps there will be an increase in outsourced services, which could easily be performed in-hospital, but are simply cheaper to send out. The Affordable Care Act is focused on enhancing the quality of patient care, but is also designed to promote hospital fiscal responsibility. It will be interesting to see how hospitals embrace these new challenges in order to avoid medical errors.

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