MACRA likely to accelerate consolidation; will the regulatory framework support it?
It took 17 years and more than a dozen acts of Congress before the Medicare sustainable growth-rate formula was replaced by the Medicare Access and CHIP Reauthorization Act in April 2015.
A year later, at a Healthcare Financial Management Association Leadership Council meeting, thought leaders speculated about why we’re still trying to digest MACRA’s implications. Some believed that the “doc fix” was pigeonholed as “a physician thing.” Others suggested that “regulatory fatigue” had set in, post-Affordable Care Act.
But—as MACRA moves forward—it may bring a more profound, if slower, set of changes than the ACA did. At its core, the ACA is about covering the uninsured. Arguably, that’s not as complicated as making fundamental changes in the way providers are paid. So if we are indeed suffering from regulatory fatigue, we’d better snap out of it.
What will MACRA do, beyond bringing predictability to updates for the physician fee schedule? For one thing, MACRA encourages physicians to participate in alternative payment models, or APMs, that hold them accountable for cost and quality of care. It also encourages physicians to adopt interoperable electronic health record technology by requiring use of certified technologies to participate in a qualifying APM.
These objectives are consistent with the CMS’ larger goal of accelerating the shift from volume to value. But—whether the CMS intended it or not—MACRA will also accelerate the trend toward consolidation. Small and midsize physician practices don’t have the administrative bandwidth to comply with the reporting requirements for APM participants, let alone the financial reserves to take on downside financial risk. Many of the same stumbling blocks come into play with regard to EHRs.
The net result? Physicians will likely seek shelter with a health system or a larger physician practice, accelerating the current trend. Physician practices may start weighing affiliations based on their assessment of which health system can help them the most.
Clearly, through MACRA, the CMS is encouraging physicians to move in directions that can best be achieved through consolidation, while the antitrust agencies look at consolidation differently. For example, the judge who earlier this year ruled against the Federal Trade Commission’s effort to block a merger in Pennsylvania between Penn State Hershey Medical Center and PinnacleHealth System wrote, “We find it no small irony that the same federal government under which the FTC operates has created a climate that virtually compels institutions to seek alliances such as the hospitals intended here.”
Although EHRs, APMs and regulations like MACRA are fueling the trend toward consolidation, the jury is still out on the impact of consoli- dation on costs and prices, which makes it difficult for all stakeholders to move forward.
What will it take for stakeholders to embrace a unified framework for assessing prospective mergers and acquisitions? In a world where EHRs are a prerequisite for delivering highquality, coordinated care, and where APMs are bound to become standard rather than alternative, value is created when the purchaser experiences an improvement in the relationship between quality and the cost of care. It’s reasonable to assume that size is necessary—albeit not sufficient—for improving value.
So we need more information about which market factors correlate with a rapid transition to value. More importantly, what regulatory environment can we settle on that provides a clear path to a future state that can be measured for success? There is a significant difference between consolidation that seeks only to increase market power and one that seeks partners to help produce cost efficiencies, gains in clinical quality and safety, and access.
As we await both research and real-world outcomes, the antitrust agencies should monitor the impacts of existing antitrust law on the ability to shape a healthcare system that can better serve patient needs. Mixed messages slow progress. And improving value is not an option— it’s an imperative.
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