Obama's Health Care
Reform is Unhealthy for Hospitals
By John D. Hatigan
BaltimoreSun.com
Over the last few months, the
U.S. Department of Health and Human Services
has exempted a long list of unions and employers
from an Affordable Care Act provision that would
have made it too costly for them to continue
some of their health care insurance plans. But,
in sharp contrast, HHS apparently doesn't intend
to do anything at all about a new health reform
mandate that could eventually force hundreds of
badly needed U.S. hospitals to shut their doors.
Many of these hospitals are already struggling
to make ends meet because
Medicare only reimburses them for 90 percent
of what it costs them to take care of Medicare
patients. But, instead of helping them out, this
rule change does the opposite. In a misguided
effort to pressure them to become more
efficient, it arbitrarily assumes that they can
achieve the same productivity savings as the
economy at large and decrees that these
hypothetical cost savings must be deducted from
any Medicare reimbursements they receive after
September.
The trouble with this is that it lumps hospitals
in with manufacturers like
IBM and
General Electric and takes it for granted
that they can ultimately save almost $30 billion
per year by replacing their workers with
equipment or by squeezing their operations into
tighter quarters. Nothing could be further from
the truth.
First of all, hospitals are far too labor
intensive to be able to slash payrolls as easily
as manufacturers. They can automate functions
like lab work and record keeping, but there's no
way they can substitute equipment for
nurses, orderlies, housekeepers, nurses'
aides, kitchen workers or maintenance men.
Moreover, hospitals can't downsize as readily as
manufacturers either. Hospitals that close
floors have to uproot the patients on those
floors and crowd them in with patients on other
floors, and there are obvious safety and
tolerability limits to how far that kind of
doubling up can be pushed.
Given these constraints, very few of the 4,686
U.S. hospitals providing patients with Medicare
Part A services are going to be able to boost
their productivity enough to make up for the new
reimbursement reductions. To quote Medicare's
own chief actuary, Richard Foster: "While such
payment update reductions will create a strong
incentive for providers to maximize
productivity, it is doubtful that many will be
able to improve their own productivity to the
degree achieved by the economy at large. ...
Thus, providers for whom Medicare constitutes a
substantive portion of their business could find
it difficult to remain profitable. ...
Simulations by the Office of the Actuary suggest
roughly 15 percent of Part A providers would
become unprofitable within the ten year
projection period."
That's a shocker. What Mr. Foster is telling us
is that deducting the legislatively presumed
productivity savings from Medicare
reimbursements would gradually turn more than
700 of our hospitals into chronic money losers.
And — while he doesn't spell out what would
happen when those hospitals eventually had to
shut down — there's no doubt that the impact
would be devastating. Patients in rural areas
would have to travel long hours to get to the
nearest hospital still open for business, and
patients everywhere would have to put up with
critical shortages of beds, operating rooms and
ICUs, as well as badly overcrowded clinics and
emergency rooms.
Not only that, care would almost certainly have
to be rationed. Grandpa might not get his heart
bypass. His daughter might not get her
mammogram. And his grandson would probably have
to wait months for surgery to repair a sports
injury.
Despite all this, HHS has no plans to intervene.
Brushing off Mr. Foster's warnings, his
superiors insist that the new Medicare
reimbursement reductions won't cause any harm to
hospitals or the communities they serve because
hospitals can "become more productive" if they
"invest in system changes." But that's just
bureaucratic posturing. In order to survive the
reductions, a typical 200-bed hospital would
have to achieve long-term productivity savings
of about $7 million per year, and investing in
"system changes" couldn't possibly cut payroll
costs by that large an amount.
So let's hope the new productivity mandate is
either eliminated or scaled down to a level
that's reasonable. Otherwise, our hospitals risk
becoming an endangered species.
John D. Hartigan, a
Chevy Chase resident, is a former vice
president and general counsel of Technicon
Corp., developer of the first fully computerized
hospital information system. His e-mail is
hartlex@comcast.net.