Tag Archives: hospitals
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.
Employers to the Rescue?
In Part 1, I explained how the only way hospitals have been able to survive their money-losing Medicare and Medicaid patients has been to charge higher rates to private payers. That’s why private insurance now costs $1,788 more per family than it would if the government paid the same provider prices as everyone else. Moreover, health reform’s promised addition of 15 million new Medicaid patients, along with billions of dollars in lower Medicare payments, will drive the demand for private subsidies even higher. Additionally, as the current 27 million individually insured begin transitioning to the insurance exchanges in 2014, their continued ability to pay higher hospital charges is doubtful. Ditto for the 17 million uninsured who are expected to sign up for exchange insurance. Indeed, under health reform, exchange insurers may need their own external financial assistance. That leaves only private, employer-based insurance to pick up the slack by paying ever higher hospital prices. That, too, is unlikely to happen.
A couple of weeks ago I sent a letter with supporting documentation to the publisher of a local (and mercifully low-circulation) tabloid, the Colorado Springs Business Journal, pointing out material errors in its reporting on my views and activities when I served on a local citizens commission charged with determining the fate of city-owned Memorial Hospital. I never heard back from him, but did exchange subsequent emails and phone calls with his editor, Allen Greenberg, resulting in his agreement to make limited corrections of some of the more blatant misstatements in reporter Amy Gillentine’s article. Nonetheless, the original, uncorrected article remains on the paper’s website, and my Google search of the promised language fails to find it anywhere. Unsurprisingly, I don’t read the paper itself, so missed any printed notice that may have appeared.
MEDICAID, MEDICARE, AND THE INSURANCE EXCHANGES
The new health reform law’s central message to America’s hospitals is a classic good news/bad news story. First, the good news. Hospital exposure to 46 million uninsured Americans showing up in their ERs is about to drop by two-thirds over the next several years. Medicaid alone is predicted to take on 15 million of them, as the states—with temporarily enhanced federal assistance—expand eligibility to cover all non-seniors who fall below 133 percent of the federal poverty level ($24,350 for a family of three). And assuming the individual insurance mandate survives likely court challenges, another 17 million uninsured will be required to buy subsidized private health insurance through new state health insurance exchanges beginning in 2014. This adds up to 32 million people who hospitals will no longer have to treat for free under the federal EMTALA law and their own charity-care policies.