2018 Healthcare Industry Outlook: What Providers Need to Know

By Chris Emper, JD, MBA, President, Emper Healthcare Advisors, LLC


Following his surprising November 2016 electoral victory, on January 20, 2017, Donald J. Trump took the oath of office and was sworn in as the 45th President of the United States.  Hours later, between the inaugural parade and inaugural balls, President Trump began acting to fulfill a major campaign promise when he signed an Executive Order directing his Administration to begin the process of repealing The Affordable Care Act, aka Obamacare. 
In the year that followed, healthcare issues occupied the national spotlight more than any year in recent memory.  However, despite the nation’s focus on healthcare issues throughout 2017, in many respects little has changed one year later: aside from some important legislative and regulatory tweaks, The Affordable Care Act remains the law of the land and the Trump Administration and Republican-led Congress are still working to repeal major provisions of it. 
Unsurprisingly, this has left many healthcare providers more confused than ever about what to expect from Washington, D.C.  But with the lessons and experiences of 2017 now in the rearview, the healthcare industry outlook for 2018 has come into focus.
First and foremost, providers need to be prepared to sustain more downward pressure on traditional fee-for-service reimbursement in 2018.  As a result of Obamacare, the MACRA law (Medicare Access and CHIP Reauthorization Act of 2015), and other bipartisan legislation, Medicare and Medicaid reimbursement rates will again fail to keep pace with inflation this year.  For Medicare physicians, CMS instituted a de minimis $0.10 (or 0.31%) increase in 2018 payment rates under the Medicare Physician Fee Schedule that took effect January 1, 2018.  Hospitals could see more severe reimbursement cuts due to the “productivity adjustments” included in the ACA and the expiration of other temporary payment provisions.
Despite any news or industry headlines suggesting the contrary, the transition to value-based reimbursement will continue in 2018.  CMS recently confirmed an 18% increase in the number of ACOs participating in its largest Medicare ACO program and announced the launch of a new voluntary bundled payment model for select specialty procedures and episodes of care.  While 2018 will continue as another “transition year” for MACRA’s Quality Payment Program (QPP), we will also see the release of the 2019 QPP regulations, which as required by the underlying legislative statute, will include more stringent performance requirements and a greater financial impact than the 2017 and 2018 performance years.
In 2018, commercial payers are expected to continue to follow (or in some cases lead) CMS’ efforts to link fee-for-service payments to value through provider incentives and/or alternative payment models.  Meanwhile, higher deductibles and co-pays will continue to penetrate commercial health insurance plans.  As a result, providers must continue to build strategies and invest in competencies that will enable them to attract and serve this new class of healthcare “consumers” who will be searching to maximize the value of their own healthcare purchases. 
As for the ACA itself, following multiple failed attempts in 2017, the Republican-led Congress is unlikely to renew legislative efforts to repeal the law (or its major provisions) this year.  At the same time, the Trump Administration is likely to continue to repeal (or revise) as much of the law as possible through regulatory actions.  With the law providing tremendous regulatory authority and discretion to the Secretary of the Department of Health and Human Services (HHS) and former HHS deputy secretary and pharmaceutical industry executive Alex Azar nominated to fill that open position, if confirmed, Azar would play a key role in shaping the law’s future.  Obamacare’s individual insurance market and Medicaid program provisions are the most likely target of regulatory changes and pairing any new changes with the recent tax law’s repeal of the individual mandate could have a major impact in those market segments. 
Beyond the ACA, Congress faces a busy first few months of 2018 as funding for the federal government and several key healthcare programs, including the Children’s Health Insurance Program (CHIP) and federally qualified health centers, is scheduled to expire.  2018 is also an election year, and with every House seat and one-third of all Senate seats on the ballot in November, it is safe to assume Congress will struggle to pass any significant healthcare legislation until after the midterm elections.   
Looking beyond 2018, the results of the midterm elections could have a significant impact on the healthcare policy agenda of Congress & President Trump in 2019.  However, absent a new President and an aligned government with political supermajorities in both houses of Congress, it is unlikely that we’ll see any major changes to our healthcare system driven by new legislation.  As such, providers should continue to prepare for a future of declining pure fee-for-service reimbursement paired with increasing risk/reward for value-based reimbursement. 

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