Millions in Obamacare Grants Aim to Revolutionize Healthcare

The Department of Health and Human Services is spending hundreds of millions on innovative solutions designed to boost access to care and improve outcomes.

Jul 11, 2014 at 1:28PM

The Affordable Care Act isn't only an insurance program designed to get millions more people covered under private plans and Medicaid, it's also a source for hundreds of millions in funding to companies hoping to revolutionize health care consumption and lower overall health care spending.

Just this week, the Department of Health and Human Services announced both $100 million in new grants designed to establish new community-based health care centers and more than $350 million in new grants to fund health care innovation. That spending may or may not end up succeeding in developing a new health care paradigm, but it does give clues into where health care thought-leaders are heading.


Source: Dept of Health and Human Services Flickr.

Consumer driven care
The new grant program for health care centers continues a trend of delivering care where and when patients need it.

Non-profit health centers, urgent care centers, and in-store retail clinics are providing an entirely new option for millions of patients by providing primary care that would otherwise end up handled by emergency rooms.

At the forefront of this shift in care have been retail pharmacy chains CVS Caremark (NYSE:CVS) and hospital operator Tenet Healthcare (NYSE:THC). Both companies have made substantial investments to improve access to care, particularly in heavily populated, under-served markets.

CVS has already opened over 800 MinuteClinic health care clinics in its stores that are staffed by nurse practitioners that provide basic care including treating sprains, the flu, or chronic disease. CVS MinuteClinics are succeeding at providing low-cost care while generating profit-friendly prescription volume and front-end merchandise sales. As a result, CVS plans to operate more than 1,500 MinuteClinics by 2017.


Source: Tenet Healthcare.

Tenet is also increasingly embracing outpatient care by opening centers designed to reduce the number of inpatient hospital stays. Tenet operates 190 such facilities, including freestanding emergency rooms, urgent care centers, and outpatient surgery centers.

Despite growing access to care from providers like these, there's still a significant shortage of health care options for many, particularly in low-income regions. As a result, more than 550 non-profit centers have opened in the past three years. Overall, the nation's 1,300 clinics serve more than 21 million patients, and thanks to the administration's support, it would seem the trend toward just-in-time care will continue to capture an increasingly larger proportion of health care spending.

Breaking the mold
Innovation is going to be necessary to keep health care costs in check. There's a big gap between people who need care and the ability to provide that care that clinics and outpatient centers can't bridge alone.

However, fostering that innovation is often too risky for private institutions keenly focused on the bottom line, or non-profits already boot-strapping projects.

To overcome those hurdles, the Affordable Care Act includes an innovation provision that funnels money into projects like telehealth that seek to revolutionize disease prevention and access and delivery of care.


Source: Apple.

Telehealth is intriguing because it reduces in-office visits while providing a more convenient solution for patients living in rural communities or without access to transportation.

In short, teleheath may help reduce readmissions, improve care coordination, and lower costs.

That appeal is attracting a lot of attention. In total, seven telehealth projects are receiving ACA innovation grants this year, including projects at The Nebraska Medical Center, University of Kansas Hospital, and University of New Mexico Health Science Center.

The Nebraska Medical Center is testing remote intervention for specialty complex care by using remote patient monitoring for 90 days following a discharge. The University of Kansas will be incorporating telehealth to improve cardiovascular care for both those at risk of heart attack and stroke and those recovering from it. And the University of New Mexico aims to transform its existing 11 hospital telehealth infrastructure into a 30 hospital, statewide system.

These investments reflect a growing interest in deploying telehealth, but these institutions are far from the only ones integrating telehealth and mhealth solutions.

In February, CVS reported that MinuteClinic is testing telehealth services at 28 locations in California, and last year, Rite-Aid announced a pilot telehealth program at more than 50 locations that connects patients to physicians through UnitedHealth Group's OptumHealth segment.

Fool-worthy final thoughts
Spending by government to foster changes in how we provide care won't solve all of our health care challenges, but it should help to spark new ideas that could have significant impacts on public and private industry participants.

Whether it be through CVS' in store health care clinics or Tenet's urgent care centers, more people than ever are going to be receiving care not only because our population is getting older, but because an increasingly larger percentage of Americans will be covered by insurance. That suggests there will be plenty of profit-friendly innovation in the private sector over the coming years, too.

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Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned.The Motley Fool recommends CVS Caremark. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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