Decreasing Hosptial Reimbursement

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Over the past decade the rates paid by the government (Medicaid & Medicare) and private health plans (HMOs) failed to cover the costs of providing care in hospitals. In essence, these hospitals simply couldnt squeeze under a reimbursement bar that was set so low, "reimbursement limbo". It is extremely difficult for these hospitals to break even with their costs. There has been little, if any increase in reimbursement for physicians under Medicaid for nearly 10 years. During that same time, office overhead expenses (employee compensation, medical malpractice insurance, regulatory compliance, etc.) have increased dramatically. In 1, Medicare reimbursed hospitals for only 8 percent of the cost of services provided to beneficiaries. History demonstrates that squeezing hospitals further will induce them to charge more to private insurers. That may raise the cost of private coverage to employers and employees, which in turn could increase the number of uninsured and underinsured Americans.

Financially speaking, with many hospitals on the ropes, further cuts in Medicare payments could accelerate their demise or erode the quality of care they provide. Medicare already pays hospitals less than the costs they incur for treating patients. A decline in the number of hospitals, which will be likely even without further Medicare cuts. This will reduce patient access to health care. Although most analysts, seeing excess capacity throughout the system, agree that too many hospitals now exist, winnowing their number through reductions in Medicare reimbursement rates will hit some locations and types of individuals much harder than others. Many physician offices in small, rural communities serve Medicaid patients as a large portion of their revenue. If Medicaid reimbursement does not increase, it will be difficult to keep practices open in these areas. Medicaid patient levels have remained stable for many practices, and have increased dramatically in number in other practices as a result of changes in eligibility and changes in the economy. Increased Medicaid patient loads and decreasing reimbursement have the potential to cause physicians to limit the number of Medicaid patients they see, or in some cases close their offices completely.

As cost pressures continue to mount, not-for-profits, such as Sutter Tracy Community Hospital in California are playing an increasingly important role in the delivery of care to the community and throughout the state. In response to mounting financial challenges and in order to ensure that consumers in their community continue to have access to high quality care, Sutter Tracy chose to join the not-for-profit, community-based Sutter Health network in 1. Joining the Sutter Health network has allowed Sutter Tracy Community Hospital to better withstand challenging economic times so that they can keep their doors open and continue to enhance the quality of care they provide. They joined because not-for-profits dont have to return profits to private investors. Instead, Sutter Tracy Community Hospital and other not-for-profit hospitals reinvest whatever limited resources they have directly back into communities by improving facilities and enhancing care. But, while Sutter Tracy and the health care consumers of their community are among the fortunate, there are no winners in the game of hospital limbo - only struggling survivors. Reimbursement for emergency-room treatment from Medicare, and health maintenance organizations has also steadily decreased in recent decades. Meanwhile, the number of people without health insurance who cannot pay for the medical treatment emergency rooms are legally required to give them, has steadily increased. It is about percent in San Diego County. Due to this, the majority of Californias hospitals reported operating deficits in 000, and more than 50 emergency departments have closed since 10.

On the federal level, the Federal Governments Balanced Budget Act of 17 reduced federal Medicare payments to health care organizations by an estimated $4 billion in the first five years alone. Depending on the health of the federal budget, hospitals may suffer from more federal cuts in the near future. The threat of even lower reimbursement rates from the government comes at a time when a number of other factors are adding to hospitals financial pressures. A serious shortage of nurses and other health care professionals has contributed to significant increases in wages. Aging populations and cost of caring for uninsured pose additional financial challenges for hospitals. In addition, hospitals must also spend millions of dollars to upgrade their facilities to meet new state mandated earthquake safety laws. It wont be easy. The federal and state governments are experiencing huge budget deficits and for-profit HMO's are being pressured to increase profits by paying hospitals less than what they need and by charging consumers more.

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Sutter Tracy's financial performance has been strong and solid in the recent years, and they are committed to preserving and enhancing care in the face of these mounting financial pressures. But, great challenges remain. The bottom line the ability to continue providing care requires government and private reimbursement rates that cover costs. Even with all of the benefits gained by being part of a not-for-profit network, at the end of the day the only way to ensure hospital survival is to put a stop to the high-risk game of reimbursement limbo. The government and private HMOs must not be allowed to pay hospitals less than the actual cost of care. Reimbursement rates from HMOs and government sources must reflect reality. Dr. Paul Milling put it best, Medical reimbursement is going down, down, down, he said, the burden is getting greater, and doctors are finally saying enoughs enough. Theyre saying it all over the country.

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