High Stakes

Q&A: Experts Offer Lifelines and Timelines for Repeal & Replace

As the national conversation on “repeal and replace” continues, we recently sat down with Dan Boston, a top D.C. healthcare lobbyist and president of Health Policy Source Inc., and Jarrard Inc. Partner Kevin Phillips to get the skinny. Our firms have recently formed a strategic alliance to better advise and serve our respective clients. The Q&A below gives their candid insight about the impending reform process, potential ramifications for hospitals and health systems and strategies they might explore to navigate the coming years.

There has been, and continues to be, a lot of forceful language about repealing and replacing the Affordable Care Act – and doing so in very rapid fashion. How might that process look?

Dan Boston:

The GOP has never been good at healthcare messaging. Period. They enacted S-CHIP as part of the Balanced Budget Act of 1997 – which is one of the most successful healthcare reforms out there – but they pretty much get no credit for it. Same thing with the Medicare Part D drug benefit – that happened under George W. Bush. Again, there’s been very little credit for it. From there you can see that they’re maybe not the best messengers on healthcare.

So, in the heat of the campaign, it’s easier to default to repeal and replace. And, by the nature of how it sounds – and how it’s spun – it’s presented as a binary choice; an on/off switch. In that sort of narrative, it’s also presented as a single package. But that’s clearly not how this is going to go down.

You’re not going to see one mammoth legislative package, in terms of the replacement plan. You’ll likely see several packages.

Further, I think in terms of the repeal, there are a bunch of the insurance reforms that they’ve said are going to stay. On the commercial side, I think it’ll really be a matter of getting them to apply to a broader population – not so much in terms of pre-existing conditions but in terms of letting kids stay on their parents’ plans until they’re 26.

So, it’s really going to be a question of how you move from one product to another not necessarily completely repeal one and put a new one in its place.

Kevin Phillips:

The insurance reforms are going to be a tough place to start.

Dan Boston:

Yeah, I think they have to. Work the calendar backwards: We’re already in plan year ’17. But the bids, and all of the other things that have to happen for ’18 literally start next month. I mean that’s when the call letter goes out.

Kevin Phillips:

As far as timing for the next enrollment cycle, sure. Those reforms are certainly going to be one of the more complex pieces of the debate, however; depending on what things that are said to be mandates and are not mandates. If, for example, insurance companies are “mandated” to require coverage for individuals with pre-existing conditions but they don’t have a cap on what that plan costs, the coverage is meaningless. These are going to be fights that are hard fought.

Dan Boston:

Well that could be the rub on this whole thing – whether it’s affordable.

Kevin Phillips.

Right. Coverage doesn’t mean much if no one is able to buy it.

Dan Boston:

Broadly speaking: There are going to be some immediate changes that are going to be due. Some are rhetorical, some are optical and others are more fiduciary. Take the eligibility requirement.

There was supposed to be interaction with Social Security and CMS to affirm that people were, in fact, exchange eligible. It’s never been enforced. The Obama administration never wanted it enforced. But the General Accounting Office believes that roughly 10 percent of the people getting exchange products aren’t even eligible. The goal of the administration was not to enforce eligibility criteria, it was to promote coverage at all costs.

So, circling back; as the industry transitions, how do hospitals and health systems respond?

Dan Boston:

In general, let’s say you’re a hospital – forget even a multi-hospital system – just a single hospital. On average, 75 to 80 percent of your revenue is derived from federal payers, and you’re 100 percent regulated by the federal government. If you don’t engage, you have no control.

The thought, at an operational level, of just ceding authority to a single entity or most national trade associations that default to the lowest common denominator or the biggest voice in their membership, is foolish.

Kevin Phillips:

I agree. If the core of a hospital’s strategic plan is to just rely on their national association to “handle it”… it’s simply a bad plan.

Dan Boston:

The ability to be nimble and respond to the changes, whether they’re regulatory or legislative, in a real world operational manner is absolutely critical. Almost none of the people on Capitol Hill have any operational experience at an institutional level in healthcare. Clearly Dr. Price, Dr. Burgess and others recognize the constraint on physicians, especially as it relates to their specialty or sub-specialty, but they’ve not run hospitals. No one on Capitol Hill understands that. They do not understand the cumulative strain that these organizations face is not just at the caregiver level but is at the legal and compliance level.

What is the best way for small or other hospitals to get involved?

Dan Boston:

There has to be at least some introspection on the front end – understanding where they stand organizationally from a balance sheet perspective, from a service line perspective, etc. What is it that sets them apart? What do they want to be known for? How do they fit?

Going to Capitol Hill and saying “we’re concerned about the repeal of the ACA” doesn’t do much. Because the logical response from regulators is going to be “it was multiple bills and tens of thousands of pages of regulation. What specifically are you concerned about?”

If you don’t present with the specifics of what you’re concerned about or what you’re looking for the situation becomes ‘junk in, junk out.’

Hospitals need to focus their leadership team to work with experts to identify what the “issue” is and then look at the through the lens of what is politically possible. It may be that there is a regulation you absolutely abhor, but it’s also possible that no political reality would ever contain its demise.

So, “Be self-aware, be specific, be realistic,” essentially…

Dan Boston:

Yes, exactly. And again, don’t just make a request and then go away thinking that’s the end of it. Remember that each representative has roughly 700,000 constituents. That doesn’t include businesses in the district or those that might be considering moving to the district as well. And then the member you need might not geographically represent your district but rather sit on a committee that has jurisdiction over Medicare and Medicaid, then others are approaching from all over.

You have to view this, not as a one off, but as a relationship with these people. And that relationship is a commitment to maintain an ongoing dialogue with these folks.

There’s never a vacuum in D.C. If you’re not up there talking, then someone else will be. Potentially it’s your competition, whether a direct competitor in your market or a competitor for Medicare funding, etc.

Are there any winners in this?

Dan Boston:

I don’t think we know yet. I think you can make the argument that the way ACA was promulgated was to say that everyone needs coverage and will get it. I think the way the Republicans are approaching it is to begin by saying, “How much money do we have to work with?” In theory, it will be better for taxpayers. However, until we actually see that in practice, it’s going to be hard see the future. It’s going to be a leap of faith.

Kevin Phillips:

So Dan, you remember when the ACA was being debated in 2008 to 2010? Across the hospital sector everyone froze for a couple of years – like treading water. Folks wondered, “Is it going to pass?” and not “What are the rules going to be?” Everyone just shored up what they had and tried to make their organization better at what they could do at that time and protected their territory. But there wasn’t buying and selling going on until it passed. And then everyone either decided they could live within those rules or find the workarounds they needed.

Then it started this current wave of consolidation and partnerships and other affiliation vehicles that continue today. Are we looking at another period of “freeze” because nobody knows what’s going to happen and what the new rules will be? Or will this be such a short phase that there won’t even be time to pause?

Dan Boston:

In terms of making an outright prediction, I wouldn’t presume. But I think the hospital community has the experience of the ACA. And while you have fairly general support behind the hospitals, you really don’t on the coverage side as there’s no unanimity among the states – those that have expanded and those that haven’t.

That really leads to an unbalanced playing field on the coverage side, which states are going to have to contend with.

Additionally, at the physician level, we’re now in the midst of the move to value in terms of MACRA legislation. And though the changes at the hospital are dramatic in terms of the coverage side, and the regulatory side, but the effect of the doctors is breathtaking. Some hospitals are largely immune based on what coverage they accept and they have that prerogative in many cases. Doctors have far greater exposure.

So, in terms of freezing, I don’t think hospitals are likely to stand by.

Kevin Phillips:

As repeal and replace occurs, the hospitals in rural areas will be especially hard hit. They already have the thinnest margins. If people lose insurance and government reimbursement is cut, those hospitals will need to find financial relief through partnerships – so I only see hospital market consolidation increasing, particularly led by large not-for-profit systems.

What’s the timeline look like for this?

Dan Boston:

I think you can almost break it down into two halves. Don’t get wrapped up in the machinations of budget reconciliation or things of that nature. Just break it into the legislative and the regulatory.

It will be at least a year to a year and a half on the legislative side. Once they hand off that piece, while there will be some elements that are effective upon date of enactment, it will be May or June-ish of 2018. The rulemaking associated with those potential pieces of legislation will take at least six months, if not nine months. So the operational impact isn’t really likely to hit until after the 2018 election cycle.

For the near term, people would be smart to focus on controlling what they can control. And for now what they can control is making sure their voice is heard and ensure that their system is heard. Because to say that, right now, there are a lot of people out there screaming about a lot of different things would be the mother of all understatements.

Members have a lot in front of them. While they may be focused on the ACA at the moment, they’re going to move on to tax relief pretty quickly after they get the repeal product done. And then they’ll move on to immigration and homeland security. And after that they’ll come back to replacement.

 

About the speakers:

Dan Boston, a Capitol Hill veteran, is President of Health Policy Source, Inc. Prior to joining the firm, he was Senior Public Policy Advisor with Baker, Donelson, Bearman, Caldwell & Berkowitz’s Washington Public Policy Group, where he founded the firm’s federal health policy practice, recruiting and servicing a diverse base of clients.

Kevin Phillips is a co-founding partner with Jarrard Phillips Cate & Hancock, Inc. With 20 years of deep political communications experience at the local, state and national levels, he is a national leader in successfully guiding organizations through communicating change during hospital mergers, acquisitions and other high-stakes transactional moments while navigating the evolving difficulties of the current healthcare environment.