November 1, 2011
Future Reimbursement Cuts Could Affect Healthcare Employment and Quality
By Debra Wood, RN, contributor
October 24, 2011 – While technology holds promise to improve efficiencies and outcomes, healthcare remains a people business, with high-quality care dependent on having enough nurses and other staff available to pick up subtle changes in patients’ conditions, ensure best practices are followed through and provide the care patients need. Yet with unemployment hovering around 9 percent, state and federal lawmakers are considering further cuts to government reimbursements.
“Cuts exacerbate problems,” said Jim Kaufman, Ph.D., vice president of public policy at the National Association of Children’s Hospitals in Alexandria, Va. “If you keep cutting, you eliminate efforts [to improve coordination to give the patient the most cost-effective, best quality care]. You will end up driving up costs in the long run.”
Quality must remain on the radar, since reimbursement will be more greatly tied to results, but at the same time organizations must find ways to reduce operating costs. The 2011 HealthLeaders Media Industry Survey of Finance Leaders showed a shift in priorities since 2009, when 68 percent of respondents cited quality and patient safety as their top priority. That slipped to 34 percent in 2011, with cost cutting now coming out as the top priority at 39 percent.
More cuts may be on the way
The bipartisan Joint Select Committee on Deficit Reduction (nicknamed the Super Committee), created by the Budget Control Act of 2011, must come up with deficit reductions totaling at least $1.5 trillion over the next 10 years and have them approved by Congress before December 23, 2011, or Medicare cuts of 2 percent will occur. Medicaid is exempt from the across-the-board reductions.
A report from the American Hospital Association (AHA) estimates a 2 percent cut would result in an approximate $41 billion loss in revenue to hospitals during the next 10 years, and the loss of 194,000 jobs.
The National Association of Children’s Hospitals is asking Congress and the Super Committee not to take action on Medicaid, since states are already reducing Medicaid reimbursement. The organization reports Arizona has cut hospital payment rates 5 percent this year, California 10 percent, Florida about 12 percent, Texas 8 percent and Washington 8 percent.
According to an association letter to Congress, “the Office of Management and Budget recently projected federal Medicaid costs would be $3 billion lower in 2011 and $98 billion lower over the next 10 years than previously estimated. The OMB attributed this adjustment, in part, to lower than projected payment rates.”
Kaufman said one of the biggest problems is that the average children’s hospital relies on Medicaid for 50 percent of its income. That may only get worse as other hospitals eliminate their pediatric programs, due to declining reimbursement. Kaufman added that, as access to care becomes more difficult, parents will take their children to the emergency department, a more costly option.
National Association of Children’s Hospitals recommends more care coordination for children with complex needs could save money. Kaufman cited a program in Wisconsin that saved $5 million annually with such a program, but at the present time, reimbursement does not recognize or pay for such efforts.
“It’s not a sound financial model, so it cannot last and cannot be expanded,” Kaufman said.
Mixed employment reports
The U.S. Bureau of Labor Statistics (BLS) reports that in September 2011, health care employment continued to expand, with the sector adding 44,000 jobs–more than 26,000 in ambulatory care settings and more than 13,000 in hospitals. The AHA reports that hospitals have created more than 84,000 jobs in the past year.
But the news is not universally so good. BLS data from August 2011 show 30 mass layoff events, involving at least 50 people, in the healthcare and social assistance industries. And for the second quarter of 2011, BLS reports 197 mass layoffs in the sector.
Among those hospitals shedding staff are MetroHealth in Ohio, which will reduce its workforce by 450 employees during the next two months to stem losses, and Inova Health System in Virginia, which plans to outsource environmental and laundry services. It will also lay off teleservice employees and offer job placement assistance and severance, said spokesman Tony Raker. He called media reports, saying 606 employees would be cut, as “misleading in that those employees associated with both environmental and laundry services retained their positions and current pay rates with long-term transition to an outsource company dependent upon their employment requirements, including a pre-employment verification.”
The American Nurses Association and the AHA have joined forces to urge the Joint Select Committee on Deficit Reduction to reject cuts to Medicare and Medicaid payments to hospitals. The organizations argue that it would be counterproductive to target hospitals and the healthcare field for significant spending reductions at a time when they provide economic stability and job growth in a sluggish economy.
“Now is not the time for Congress to make cuts to a sector that is driving economic growth and creating jobs,” said AHA President and CEO Rich Umbdenstock in a written statement. “The impact of cuts to hospital care would have ripple effects throughout our nation’s economy.”
Physicians worried too
In addition to the 2 percent across-the-board Medicare reimbursement cut if the “Super Committee” fails to act, physicians are facing a 29.5 percent reduction in reimbursement on January 1, 2012, associated with the sustainable growth rate. The Medicare Payment Advisory Commission has recommended a “doc fix” that would freeze reimbursement for primary care physicians and cut reimbursement for specialists.
The American Medical Association opposes that solution. President Peter W. Carmel, M.D., said in a written statement that it falls short of what is needed to preserve access to care, citing a 20 percent gap between Medicare payment updates and the cost of providing health care to seniors.
“Congress must act now to permanently repeal the formula and stabilize the Medicare system for patients and physicians,” Carmel said.
Matt Jacobson, CEO of SignatureMD in San Ramon, Calif., said he expects that scheduled cuts to Medicare reimbursement will bankrupt many medical practices, explaining that most primary care practices operate with 60 percent overhead. A 30 percent cut in reimbursement equates to 75 percent less take home pay, unless the practice squeezes in more patients, and a 20 percent cut would mean 50 percent less money in the pocket.
Jacobson anticipates practices will add more mid-level providers, while others are giving up their practices and joining larger groups or leaving medicine. Some physicians are opting to transition to concierge or personalized medicine, which will give them more time to work with patients on prevention.
“It allows them to practice in a meaningful way and delivers high-quality care to patients,” Jacobson says. “It will allow them to survive the pay cuts, remain independent, and prosper and thrive.”
