Former CMS Administrator Thomas Scully Says Physicians Groups Well-Positioned to Take Advantage of Changes in Healthcare

Former CMS Administrator Thomas Scully speaking at Observation Care ’15.

The future of healthcare is for physicians, not hospitals.

That’s the message former Administrator for the Centers for Medicare and Medicaid Services (CMS) Thomas Scully emphasized at the Observation Care ’15 symposium. Scully, who was one of the principal architects of Medicare Part D, said the current trend toward hospital and health system consolidation won’t turn out well.

“History will tell you that hospitals won’t squeeze themselves,” Scully said. “The ones who are going to come out of this happier economically are the ones who are going to bend the cost curve.”

Scully believes that unlike big hospital systems, nimble and innovative physicians groups are poised to cut costs.

“If you rely on hospitals to reduce costs it won’t work,” he said.

Scully underscored that he is a friend to hospitals. Before serving as CMS Administrator, he was president and CEO of the Federation of American Hospitals, an association which represents more than 1,700 privately owned hospitals in the U.S.

Scully pointed to Maryland as the state that’s leading the charge in healthcare reform with its adoption of capitated payment systems.

Scully advocates for capitation and bundled payments in any form and cited Medicare Advantage as one of the best existing models, as it pays a set amount every month for each person enrolled. Scully predicted Medicare Advantage will expand in the coming years and that capitated payment systems and bundled payments will expand along with it, regardless of who wins the 2016 election. He added that it’s likely the Affordable Care Act is here to stay.

Hospitals, however, are simply not incentivized to do well under capitated payment systems. The primary goal of any hospital CEO is to fill beds, which ultimately means there is an inherent tension when hospitals are relied upon to reduce costs, he said.

Meanwhile, physicians and physician-led groups could do very well. “[Bundled Payments for Care Improvement] is growing aggressively and has huge economic potential It’s going to be scary, but that’s where we’re going,” Scully said. “I think getting ahead of the game and thinking about how [to] deal with a non- fee-for-service environment will be very good for companies that can do it.”