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Obamacare is Killing Small Medical Practices – The Death of Health Care Services

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Whatever Court Rules, Major Changes in Health Care Likely to Last

This article is by Reed Abelson, Gardiner Harris and Robert Pear.

For the nation’s health care system, there may be no going back.

No matter what the Supreme Court decides about the constitutionality of the federal law adopted last year, health care in America has changed in ways that will not be easily undone. Provisions already put in place, like tougher oversight of health insurers, the expansion of coverage to one million young adults and more protections for workers with pre-existing conditions are already well cemented and popular.

And a combination of the law and economic pressures has forced major institutions to wrestle with the relentless rise in health care costs.

From Colorado to Maryland, hospitals are scrambling to buy hospitals. Doctors are leaving small private practices. Large insurance companies are becoming more dominant as smaller ones disappear because they cannot stay competitive. States are simplifying decades of Medicaid rules and planning new ways for poor and rich alike to buy policies more easily.

But how to pay for these changes, and what will happen to the 30 million uninsured Americans the law intends to cover, will be up in the air if the mandate at the heart of the law — the requirement that individuals buy health insurance or face a penalty — is struck down.

The election results of 2010 and stiff state opposition to the mandate also complicate the picture. Hospital administrators, insurers and doctors are counting on federal subsidies and coverage expansion that would result in a surge of patients with insurance to offset cuts in government programs that many fear could soon become draconian. Large health systems could then use their newfound clout to demand higher prices from private insurers even as federal and state governments pay less.

Other changes influenced by the legislation may leave some patients and doctors lost in the new land of giants. As medicine moves from a cottage industry to one dominated by large organizations, some patients with insurance will probably find their choices more limited. But their care may be better coordinated, as hospitals, doctors and even insurers join to streamline services.

“The system is transforming itself,” said Charles N. Kahn III, president of the Federation of American Hospitals. “But the success of these changes depends a lot on whether there is sufficient funding.”

Hospital systems are anticipating a major influx of federal funds and patients as a result of the law. In Maryland, for instance, the Johns Hopkins Hospital and Health System recently bought two suburban hospitals and is spending several hundred million dollars on computer systems to link its clinics and hospitals across the state. It has hired hundreds of primary care doctors and nurses, forged partnerships with urgent care clinics and expanded home health service to serve an expected flood of new patients.

“If the law is struck down, health care reform will have to continue one way or another,” said Patricia Brown, president of Johns Hopkins HealthCare.

Across town, Baltimore Medical System, a community health center, expects to expand its medical staff by 50 percent over the next three years to accommodate an anticipated increase in patients to 70,000 from 47,000.

“We are looking for new clinicians on a constant basis,” said Jay Wolvovsky, the system’s chief executive, who said that hiring would stop if the law were overturned and federal funding were in doubt. “We wouldn’t be able to expand and we’d be stuck where we are.”

In states like Texas, the law is deeply unpopular, and the medical association has a “Calendar of Doom” listing the timeline for important provisions of the law and other government rules. Still, changes in delivering medical care are taking hold, including a move away from small doctor practices that were predominant for more than a century.

Texas medicine will never be the same no matter what happens with the law, said Louis J. Goodman, the association’s chief executive, and older doctors blame a cascade of new rules and changes well beyond the new health law. “There’s a feeling among doctors here that government is crushing them,” Mr. Goodman said.

And even though critics say the law does little to reduce the costs of care, its passage touched off myriad efforts to pare widespread waste.

“The interest from the doctor and hospital community has accelerated,” Tom Richards, a senior executive at Cigna, said of efforts to exact savings and improve care.

The law’s passage was “a statement that things need to change and that the status quo doesn’t work,” said Paul Markovich, chief operating officer at Blue Shield of California, a health insurer based in San Francisco. “It sends a loud message to all the players.”

So far, other requirements under the law have prompted state regulators, insurers and others to work with federal officials over new regulations.

For example, insurance companies now must spend at least 80 cents of every dollar they collect on health care for their customers, limiting how much they are permitted to spend on brokers’ commissions, executive salaries and profits.

Federal and state regulators were granted greater authority to review insurers’ proposals for raising premiums, and the federal government has already awarded the states about $155 million in grants to help their oversight efforts.

The new rules appear to have had some effect, with some insurers deciding to hold down premiums to avoid being forced to refund money or justify higher rates. “That scrutiny is important,” said Sandy Praeger, the insurance commissioner in Kansas.

Some states are taking matters even further than the federal law, to adopt changes regardless of whether it is ruled void. “What we’ve tried to do here in California is to take the provisions of the Affordable Care Act and put them in the state law so we can move towards implementation,” said Dave Jones, the state’s insurance commissioner. He credited closer review of insurance rates for saving residents about $87 million a year.

Federal officials have already awarded nearly $516 million to states to help build new insurance exchanges, although some states whose officials are opposed to the law, like Florida and Alaska, have either refused the money or postponed any plans in hopes of getting the legislation overturned.

There is no question that creating insurance exchanges that would provide coverage for more than 20 million uninsured Americans would be more difficult without the backing of the law. Peter V. Lee, a former Obama administration official who is heading the exchange effort in California, said the state already has rules that make it possible to create a marketplace for small businesses, but covering individuals without federal subsidies and a mandate would “be a challenge for the system.” California has received about $40 million in federal funds for its efforts.

Even without a significant expansion of Medicaid for the exchanges, state programs will soon be transformed through a provision that tries to standardize some of the byzantine eligibility and other rules. It requires states to offer a single, simple Internet application for not only Medicaid recipients but everyone seeking care on health exchanges.

Toby Douglas, director of the California Department of Health Care Services, said that eligibility currently varies not only by income but by whether someone is disabled, a child, a parent or is pregnant. The forms are primarily filled out by hand, and income, immigration and other documents are required for verification.

The new system will rely on a single measure of income in every state, not by age, sex or parental status, and verification will be made by automatic links to federal tax and immigration databases. It is intended to be simple and cheap. “This is the opportunity to dramatically overhaul the complicated rules,” Mr. Douglas said.

Other states clearly have not been so enthusiastic in embracing even minor provisions of the legislation, and more than two dozen are involved in legal challenges to the law. Last week, Ohio voters rejected the federal mandate that residents buy insurance, although the outcome has little practical effect. And Georgia is the latest of six states to persuade federal officials to waive the rules limiting how much insurers are permitted to spend on overhead rather than medical care.

If the Supreme Court strikes down the individual mandate, it would need to decide whether other provisions of the law could survive — or whether they were so inextricably tied to the mandate that they too must be set aside. The question has provoked much debate and produced conflicting answers from judges. The Justice Department has said that the individual mandate cannot be separated from the requirement for insurers to offer coverage, regardless of pre-existing conditions. In Congress, the outlook for the health care law continues to be precarious. Republicans have kept up a steady barrage of criticism, in speeches and at hearings. The law is increasingly unpopular with the public, including Democrats, according to recent surveys.

Even if the Supreme Court upholds the law’s requirement for many employers to offer coverage to workers, it is not clear that Congress will want to keep the requirement in its current form or see it vigorously enforced. With the nation’s unemployment rate stubbornly stuck around 9 percent, businesses often cite the costs of providing health care coverage as one of the reasons they cannot hire or expand their work force.

“The law makes it harder and more expensive for job creators to hire new people,” Senator John Barrasso, Republican of Wyoming who is an orthopedic surgeon, said. “Under the law, businesses are permitted to drop out of paying for employer-provided coverage as long as they pay a fine. And the fine is about $2,000 per employee. This number is far smaller than what it would actually cost the business to provide family health benefits to their employees.”

Just last week, an inspector general’s report from the Treasury Department indicated that fewer small businesses than expected had taken advantage of a tax credit under the law that encourages providing coverage for employees.

Despite opposition in some corners and lukewarm reception in others, a wholesale repeal of the law by Congress may be unlikely. Lawmakers may find it unpalatable to abandon the entire effort, given the fact that critics of the law have not agreed on one comprehensive proposal that would offer coverage to anywhere near the 50 million Americans who are still without coverage. Even if the law goes into effect, an estimated 20 million will still be without insurance. “It’s hard to completely reverse course,” said Drew E. Altman, the chief executive of the Kaiser Family Foundation.

But as Congress searches for ways to save money, the funds necessary for larger Medicaid enrollment and subsidies for low-income people to buy private insurance are in more jeopardy. Governors of both parties have said they fear that states, many in fiscal distress, will eventually be required to share more of the new costs. Many have cut Medicaid programs already.

For all the changes taking place, there are many areas where political opposition and economic constraints will play a critical role in determining just how much the marketplace will change over the next several years. Patrick J. Geraghty, president and chief executive of Blue Cross and Blue Shield of Florida, where the state’s governor has refused any federal funds to set up new exchanges, emphasized that the road ahead would be a struggle with or without the federal law.

Florida has cut Medicaid as part of its overall budget-tightening, even though the state has one of the highest rates of uninsured Americans in the country, and relief for them is unlikely to come any time soon.

“All of this plays out against the political reality and the practical reality,” Mr. Geraghty said.

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