Improving the Effectiveness and Efficiency of Healthcare Delivery Systems

Radical Transformation in the Wake of the Affordable Care Act

George R. Aldhizer, PhD, CIA, CFE, CITP, and Paul Juras, PhD, CPA, CMA

Hospitals used to enjoy substantial profit margins as generous private sector and public sector Medicare and Medicaid healthcare insurance plans provided reimbursement based on fees for services provided. Care delivery systems were often inefficient due, in part, to fragmentation. The lack of coordination across providers, even within a hospital setting, often led to siloed departments, each with its own administrator and policies and procedures, that had limited access to complete patient records. This sometimes contributed to redundant diagnostic testing and conflicting care plans, services that had only a modest negative impact on profit margins because the volume-based fee for service (FFS) model favored quantity of care over cost and quality of care. Both government and private insurers have applied pressure to change this practice through reimbursement methods that take more of a value-based rather than a volume-based approach to payments. This movement culminated in the passage of the Patient Protection and Affordable Care Act of 2010 (ACA).