Excerpt – Reform

From the Introduction to Responding to Reform:

Tidal waves are difficult to see until they crash onto the beach.  The Patient Protection and Affordable Care Act of 2010 contains a tidal wave of changes in the American healthcare system – many of which  are not yet apparent but will forever change the delivery of care in the United States.  Those leaders that assume the system will not change dramatically will struggle as the wave of changes grows in intensity.  However, successful healthcare leader will anticipate this new environment and devise effective strategies to use these changes to significantly benefit their organization.   

            This book provides a basis for creating successful strategies in the newly reformed healthcare environment. A strategy is by definition a plan of action designed to achieve a particular goal.  However this plan requires a vision for the future environment and the contours of this future will be clearly shaped by the Patient Protection and Affordability Act (now shortened to Affordable Care Act or ACA.)  Because the ACA contains over 400 unique and complex sections a straight forward reading of it is of limited use in strategy creation.  However, an understanding of the underlying theories that shaped the ACA can be very useful in understanding the future environment of American healthcare.

            The book is organized around the three fundamental theories of the ACA.  Through these theoretical viewpoints a more complete understanding of the framework for the policy changes that were eventually included in the law can be obtained.  These three sections of the book that explain the ACA policies that are based on these theories are:

  • Systems – how does each element in the system interact and affect the other elements to achieve the desired outcomes (Patient’s health)?
  • Funds Flow and Incentives – how can revenue and payment systems be designed to incent change in behaviors in the system to achieve desired outcomes (Increased quality and patient satisfaction with lowered cost)?
  • Markets – how can markets be made to operate effectively in order to allow the “invisible hand” of capitalism to achieve the desired outcomes (Provider’s market share and profit)?

Each of these sections includes chapters that focus on key sections of the bill that are in alignment with the theory.  The systems section contains addresses:

  • Chronic Disease Management and Primary Care
  • Quality and Efficiency
  • Prevention

The funds flow section reviews

  • Incentives rewarding wanted provider behavior
  • Policies discouraging unwanted provider behavior and fraud
  • Back up policies should incentives fail
  • Opportunities in the Safety Net

The markets section addresses

  • Universal coverage and Health Insurance Exchanges
  • The role of government in maintaining a competitive marketplace

Each section ends with multiple scenario analysis and strategic options for the policies that are a part of each theory.  The book concludes with a chapter about the future and the health leader’s role in shaping it.

The Groundwork is Laid

Observing the debate on health reform in 2009 and 2010 it would seem that the final product was simply a random collection of ideas from various interest groups, academics and politicians.  However, the Affordable Care Act is actually the result of many years of health policy research, demonstration project, pilots and many of the best practices being used by leading health care organizations throughout the country. 

Senator Baucus (chair of the Senate Finance committee) released a comprehensive report on November 12, 2008, just 8 days after the Presidential election.  This report – “Call to Action: Health Reform 2009”  included many of the features and architecture of the final law.  This report was very well researched and included over 290 footnotes from scholarly research publications and reports on the results of many federally funded pilot projects and demonstrations.  It outlined the key elements needed for reforming the US health system:

  • Increased access to affordable healthcare
  • Improved value by reforming the health care delivery system
  • Financing changes for a more efficient system

Although the enactment of the ACA was clearly partisan it includes many policies that have been recommended over the years by both Republicans and Democrats.  In addition many of the policies were also advanced by non partisan academics and career federal staff.  Although generalization is always dangerous the source of specific policies can be grouped as shown in Exhibit 1.1.

Source Theory
Academics, non partisan think tanks and career federal officials Systems
Liberals Funds flow and incentives
Conservatives Market


Exhibit 1.1 Source of theories contain in the ACA

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Summary of the First Chapter

The Affordable Care Act contains policies that will make the largest change in the American healthcare system since the enactment of Medicare and Medicaid.  To develop successful strategies in this new environment it is helpful to understand the three theories that underlie the numerous policies in the ACA.

            The first theory is based on a systems perspective.  This theory advances the concept that since all elements of the healthcare system are connected, strategic changes to individual elements can have widespread and positive effects.  The second theory is based on funds flow and incentives.  Medicare has had success in many of its programs with administered pricing that includes incentives to change provider behavior.  Because of this history these types of tools are also part of the ACA.  Finally American capitalism and a markets view of the healthcare industry is also a part of the ACA – most prominently on display in the Health Insurance Exchanges that will be operational in 2014.  

            Because the interactions of all of the policies contained in the ACA create an uncertain future, scenario planning is a useful tool to test strategy options.  The remainder of this book contains an explanation of elements of the ACA that are important to strategy development along with multiple scenarios for the newly reformed healthcare environment.


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