A 224-page document full of regulatory jargon might not be a fun summer read. Nevertheless, the U.S. Department of Health and Human Service’s (HHS) mid-July release of proposed rules for state-run health insurance exchanges (HIE) represents a major step toward expanding an insurance pool that could grow by an estimated 24 million Americans over the next eight years.

When the exchanges arrive in 2014, the single biggest impact is likely to be a major expansion of access, with 8.9 million individuals expected to sign up in the first year alone, according to projections by the Congressional Budget Office. A new report by PwC US Health Research Institute forecasts that a stunning 97% of those expected participants will be individuals who currently lack health insurance. A major driver of the new enrollments will be sliding-scale federal subsidies for individuals who earn from 138% to 400% of the federal poverty level, helping them buy insurance through the exchanges.

Experts say the exchanges also could directly impact hospitalists by bringing big changes to hospitals’ reimbursement revenue streams, spurring efforts to improve patient satisfaction metrics and increasing the momentum toward clinical comanagement agreements.

First, though, the public will get a chance to weigh in over rules that have been alternately lauded and derided, largely following the fault lines over the broader package of healthcare reforms. At a news conference set in front of a hardware store, HHS Secretary Kathleen Sebelius said competition on a level playing field would increase the purchasing power and drive down costs for individuals and small businesses. Websites for each of the exchanges would allow consumers to comparison-shop, with HHS ensuring that plans provide minimum standards for coverage. Patient groups, consumer organizations, and some small-business associations have welcomed the HHS rules, despite some concern that the exchanges could be tilted too far in favor of insurers. Overall, many analysts say, the rules have provided a fair amount of latitude over how the HIEs will be established and governed. Some business lobbyists, however, contend that the complex requirements will increase healthcare costs instead of lowering them. A July 16 editorial in the Wall Street Journal blasted the exchange rules as poorly designed and offering too little flexibility for states.

Two state-run ex-changes already exist, in Massachusetts and Utah. As of mid-July, however, states that had enacted laws to establish their own HIEs were outnumbered by those whose legislatures or governors had specifically blocked efforts to do likewise, according to the National Conference of State Legislatures. If states cannot or will not set up an exchange, HHS will step in and do it for them.

Reversal of Fortune?

Regardless of who ultimately oversees the exchanges, studies have begun suggesting who the most likely participants might be. An analysis by the Kaiser Family Foundation suggests that the newly insured are likely to be relatively older, less educated, more racially diverse, and in poorer health than those who currently carry private insurance but have fewer diagnosed conditions (www.kff.org/health reform/8147.cfm). Just as analysts, such as PwC, say that insurers will need to change their business strategy to lure and retain consumers, hospitals might need to redouble efforts to ensure high quality and patient satisfaction among a patient demographic that might be harder to please.

Mark Williams, MD, FACP, FHM, professor and chief of the division of hospital medicine at Northwestern University’s Feinberg School of Medicine in Chicago, says the shift could represent a boon for hospitals that have been forced to maximize efficiency. “In general, those hospitals that have a poorer payor mix have tended to become very efficient, and so they make money off of Medicare patients,” Dr. Williams, a former SHM president, says. “This is fascinating because, on the one hand, there may be a lot of patients for whom hospitalists can now get paid because they’re insured. But I personally think that, simultaneously, we’re going to be seeing cutbacks in payments for other patients who have private insurance.”

For some hospitals, the net effect on revenue might not be materially different, though Dr. Williams sees a potentially sizable benefit for “safety net” hospitals that care for a large proportion of uninsured patients and excel in making the most of limited resources. Some investors apparently agree. Last December, Nashville, Tenn.-based Vanguard Health Systems finalized a deal to buy Detroit Medical Center, with a total investment of nearly $1.5 billion. Dr. Williams says the expectation is that the medical center will suddenly see many more insured patients via an HIE. The result could be a dramatic boost to its finances.

Wealthier hospitals, by contrast, have had less incentive to maximize efficiency—and now are worried by the potential financial impacts of insurance exchanges. “Your classic, highly profitable community hospital that has a good payor mix loses money on Medicare patients and tends to subsidize that with their private patients,” Dr. Williams says. “The wealthier hospitals are nervous because they’re worried that this entire health insurance exchange is going to put downward pressure on reimbursements from the private insurers.”

The wealthier hospitals are nervous because they’re worried that this entire health insurance exchange is going to put downward pressure on reimbursements from the private insurers.

—Mark Williams, MD, FACP, SFHM, chief, division of hospital medicine, Feinberg School of Medicine, Northwestern University, Chicago

Satisfaction Times Two

With Medicare’s value-based purchasing initiative on its way, hospitals are ramping up their attention to patient satisfaction scores. So how will an influx of potentially older and sicker patients insured through the exchanges affect hospitalists’ scores? No one knows, but because hospitalists already are known for their expertise in treating this very demographic, some experts expect hospitals to lean on them more for leading quality and satisfaction initiatives. This reliance could represent a major opportunity for HM, but faulty performance metrics could also bring danger (read more about this topic in next month’s The Hospitalist).

Cherilyn Murer, president and CEO of Joliet, Ill.-based Murer Consultants Inc., says the expected shift in the nature of inpatients could accelerate efforts to be more accurate about physicians’ performance measures. “Patients who may be in the ICU are at a higher level of crisis than a person who’s in and out for an appendectomy, and yet we’re using the same tool of satisfaction,” she says. Furthermore, she adds, many factors that contribute to patient satisfaction are highly subjective and have nothing to do with a specific physician. “We have to really question the tools now, moreso than only questioning the participation and the outcome,” she says. As with other aspects of healthcare reform, Murer says, the looming arrival of exchanges also should be prompting hospitalists to ask themselves: “What’s our game plan now?” One compelling answer, she contends, is a clinical comanagement agreement that takes a longer-term view of doctors’ relationships with hospitals and gives them more control over decision-making. After all, if HM is taking care of “the sickest of the sick patients,” she says, a comanagement agreement can mean more say in factors that will directly impact their jobs over the long haul. Strategic direction of product lines, space, and equipment-buying decisions are just a few examples.

Murer ultimately sees clinical comanagement as a precursor to more widespread bundling of payments to hospitals and physicians. The mix of private and public insurance reimbursements, already in flux, might be further clouded by the arrival of HIEs. But solidifying hospital-hospitalist alignment with a flexible comanagement agreement, she says, can offer some reassurance over job structure, rewards, and authority as healthcare continues hurtling toward profound change.

Bryn Nelson is a freelance medical writer based in Seattle.

Exchange Anxiety