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WHAT WILL HEALTH REFORM DO FOR (OR TO) AMERICA’S HOSPITALS? PART 3

How They Can Survive and Thrive

For America’s community hospitals, using the traditional cost-shifting revenue model is the maddening equivalent of simultaneously playing rugby, Australian-rules football, major-league baseball, and cricket—dictated by the rules of multiple third-party payers rather than by rational pricing models.  Success is ultimately dependent on having enough privately insured patients to subsidize the government ones and the uninsured. In most places, this model has allowed hospitals to earn sufficient margins to support ongoing capital replacement and growth while staying abreast of technological advances. But in economically stressed locations lacking critical masses of private payers, many institutions have gone broke (including fourteen in Los Angeles, alone, in one recent year). As pressures on cost-shifting intensify under health reform (See Parts 1 & 2), community hospitals will increasingly adopt new coping strategies to survive. Two in particular, consolidation and integration, have become popular in recent years. Unfortunately, neither will fix the problem.

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