While it is hard to feel sorry for hospitals since they appear to be a major cause of excessive spending growth, they have a significant dependence on Medicare, which has been a difficult and probably inadequate payer. Not only has reimbursement growth been slow to non-existent, but a variety of programs can reduce those payments, such as the readmission penalties and value-based purchasing. Research published in Health Services Research examines how hospitals have coped with Medicare reimbursement issues. (HSR Article) Medicare is a major revenue source for the typical hospital, so reimbursement growth that does not keep up with cost of care growth means a hospital must cut those costs or find more revenue from other payers. The study covered 1996 through 2009 and looked at a variety of hospital types to ascertain responses to persistently below-inflation Medicare reimbursement growth. Most hospitals experienced a decline in reimbursement in real terms over this period, although the amount of decline varied substantially. Rural hospitals were the least affected, probably because they have a different reimbursement formula. It also appears that most hospitals did not make up for Medicare revenue shortfalls by charging more to other payers. In fact a one dollar reduction in Medicare revenues was associated with a $1.55 reduction in overall patient revenues. Of that reduction in patient revenues, about $1.40 is compensated for by operating expense reductions. Three-fifths of that is personnel cost cuts. For-profit hospitals cut expenses more aggressively, but still took a bigger hit to profits than did non-profits. The authors project that the continuing reductions in reimbursement growth from the reform law will lead to substantial cost-cutting by hospitals, with possible implications for quality. Anecdotal evidence may support the authors’ conclusions, as there are currently many stories about hospitals laying off staff in response to payment pressures.
✅ Subscribe via Email
About this Blog
The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at [email protected].
Healthy Skeptic Podcast
This is an outstanding report on total global drug spending and trends, with projections out to 2025. It helps you understand this important area of health care, which does much...
June 1, 2021
MedPAC 2019 Report to Congress
June 18, 2019
Cano Health apparently cannot, as it declares bankruptcy due to too much debt. Building primary care centers to serve Medicare, Medicaid and commercial populations, which is Cano’s business, was hot...
February 6, 2024
Turquoise health raises a fresh $30 million in capital for its price transparency platform, as the market for funding health care companies isn’t quite dead yet.
January 24, 2024
I am co-f0under of a company that manages cell and gene therapy for health plans. Cell therapy has made a big difference for many cancer patients but like all new...
January 24, 2024
Access ACO Care Management Chronic Disease Comparative Effectiveness Consumer Directed Health Consumers Devices Disease Management Drugs EHRs Elder Care End-of-Life Care FDA Financings Genomics Government Health Care Costs Health Care Quality Health Care Reform Health Insurance Health Insurance Exchange HIT HomeCare Hospital Hospital Readmissions Legislation M&A Malpractice Meaningful Use Medicaid Medical Care Medicare Medicare Advantage Mobile Pay For Performance Pharmaceutical Physicians Providers Regulation Repealing Reform Telehealth Telemedicine Wellness and Prevention Workplace