Uncertain Prognosis: Industries Impacted by Health Care Reform
by Terri Eyden on
Health care providers
With the aging baby-boomer population and the influx of newly insured patients, demand for health care services is expected to escalate in the coming years. While the PPACA emphasizes primary care, increasing payments to the primary care doctors industry, some operators in the specialist doctors industry are concerned that insurance coverage will not guarantee patients access to specialist care. By considerably increasing the number of insured individuals, health care reform has raised the stakes for hospitals and medical schools already scrambling to train more doctors and meet demand. Financial pressures and lower reimbursement from government payers will encourage more physicians to join hospitals and large physician practices. Physicians benefit from joining hospitals because they are paid for services at the hospital systems' rates, which are generally much higher than what insurers pay independent providers.
Health care reform has already started making big waves in the hospitals industry, especially with nonprofit operators. The legislation adds new requirements for charitable hospitals that are exempt from federal taxation, including performance of periodic community needs assessments, limitations on charges, and financial assistance policy requirements for patients. These changes will trigger further consolidation between nonprofit and for-profit hospital operators, with more acquisitions of nonprofits forecast to occur in the next five years. Health care reform also encourages hospital consolidation through accountable care organizations (ACOs), which will allow hospitals to share cost savings or payments to achieve quality measures. These transitions will provide accountants the opportunity to advise hospital operators seeking to create partnerships to gain access to capital needed for expanding their operations.
The legislation also includes changes to the nursing care facilities industry, including an infusion of federal funding to help state programs provide more care at home, resulting in a shift from nursing care facilities to at-home care. Health care reform also includes modifications to criteria for qualifying for payment, bundling payments for nursing services, and imposing enrollment limitations on new providers. In response to the changes, companies are expanding other areas of business to diversify revenue streams. For instance, operators may look to offer specialized services that attract patients with workers' compensation or private insurance and moving into community-based services (e.g., home care services) with multiple funding streams.
Health care reform legislation supports the home care providers industry by encouraging Medicaid patients to receive home care, resulting in fewer paid patients for nursing care facilities. While many health care reform provisions make it easier for states to add home care services to their Medicaid programs and make new services permanent Medicaid benefits, the legislation also reduces the total reimbursement under the home health prospective payment system. Additionally, more home care providers are expected to take advantage of incentives under health care reform that provide additional payment for serving rural areas to address the shortage of health care practitioners, in turn, boosting profitability.