Health Insurance Exchanges – Good or Bad News?

2014 may seem pretty far away.  However, it is closer than one may think, and it is the year where the “health insurance exchange” piece of the recently-enacted Health Care Reform act will come into being.

These exchanges are meant to provide a “one-stop shopping” option for people who are not able to get insurance through their employers to compare options for purchasing insurance on their own.  The exchanges would be run either at a state or a regional level, but would offer competing insurance products from insurers who are already in the health care space.  These new exchanges offer the potential to significantly alter the revenue cycle climate at hospitals throughout the country.

Insurance companies did quite well as a result of the health care reform legislation.  In exchange for some regulation over some of the more egregious insurance industry practices, insurance companies will now get an additional 24 million paying customers as a result of anticipated activity on the exchanges.  Many of these new customers will likely be reasonably healthy individuals who may otherwise have opted out of purchasing insurance and thus will probably represent a profitable new piece of business for the insurance companies.

Hospitals face good news and bad news as a result of this legislation.  The hospital industry agreed to go along with $150 billion in reimbursement cuts over the next ten years, but will realize benefits in excess of that number by virtue of having their stable of uninsured (and generally, fully uncompensated) patient base disappear.  How good the news is for hospitals can be largely driven by how well individual hospitals can use information technology (see, you KNEW I was going to get to that!) to perform effective financial modeling and analyses.

Here is some food for thought.  While the commercial insurers just gained a boatload of paying new customers, they also, by virtue of this, gained a higher percentage of a hospital’s patient mix, which means that they have a lot more leverage with hospitals in terms of contract negotiations by virtue of their ability to potentially steer their customers elsewhere.  Hospitals, for their part, need to be able to effectively model what their incremental revenue would likely be at different reimbursement points for these new patients, who under the current rules, would likely have their entire balance written off as uncompensated care.  “Decision support tools” and “contract management tools” will loom very large in helping hospitals effectively negotiate terms with commercial insurers.  In conjunction with all the modeling and trending capabilities these tools offer, they also can allow hospitals to identify on a procedure-by-procedure basis, what the most profitable procedures are and which doctors are performing procedures in the most cost-efficient manner possible.  Hospitals are also well-served to track clinical outcomes carefully, as demonstrating clinical excellence is a great negotiating point making it difficult for an insurer to walk away (in addition to being good policy!).  Clinical quality measurement tools and business intelligence tools can help with this.  Much of this is happening in varying degrees in hospitals today, but in the brave new post-health care reform world, it becomes more important than ever.

Plan ahead, get your analytic tools ready, and stay on top of what is happening in your state and region to be able to realize the opportunities this new landscape can offer.