Am I the only one who seriously doubts that the health laws of 2009 and 2010 will be implemented as enacted? Lots of people seem to assume that reform dollars are “money in the bank.” For example, a major bond rating agency recently suggested that financially troubled hospitals will see a major turnaround in 2014 when they get a windfall from mandatory health insurance. Another well-known organization just upgraded its industry outlook on the premise that HITECH will start pumping tens of billions of dollars into hospitals’ and doctors’ coffers next year. And anti-trust regulators are concerned that providers will increase profits by becoming accountable care organizations in accord with the Affordable Care Act.
I think the optimistic outlook is a case of counting chickens before the eggs have hatched. Republicans control of the House Ways & Means Committee for the next two years surely diminishes the likelihood that Congress will appropriate all monies authorized by the reform laws, and the emerging consensus on HITECH suggests that the number of providers qualifying as meaningful users will be far smaller than originally expected. A dismal economic outlook still raises doubts about consumers’ abilities to purchase mandated insurance in 2014, or even to pay their rapidly increasing share of health care bills in the interim. In addition, states have almost no capacity to finance the reforms that are delegated to them.
The overall situation immediately brings to mind an important concept from economics and business—expected value. It is the probability-weighted estimate of future returns, derived from a careful analysis of factors that could cause value over time to be less than expected under the ceteris paribus assumption (i.e., all other things being equal). Expected value analysis adjusts an income stream for the probabilities that actual events won’t evolve in accord with original expectations.
To me, the recent shift in political power and the economic outlook suggest that the probability of reform evolving as enacted is considerably less than 100%. I am not sure what the actual discount should be, but I am certain that providers and payers will not ultimately receive all the money that the laws would allow. To launch discussion, I’ll suggest that the expected value of reforms’ authorized infusions of cash should be discounted at least 50%. What discount would you use? I also believe that health care enterprises must immediately take steps to make up the difference by becoming efficient and effective—learning how to produce their services at an acceptable and accountable level of quality, as inexpensively as possible. (I optimistically believe it can be done!) Has anyone got a better idea?
1 comments:
another factor that may need to be considered is the increased costs of complying with the new health reform regulations -- which could outweigh even the unadjusted expected benefits.
Likely that the costs of compliance will be greater than we have been told and the benefits to providers will be less than everyone is counting -- leaving healthcare providers worse off.
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