• AcademyHealth: Hospitals’ responses to Medicare cuts

    In 2011, Center for Medicare and Medicaid Services (CMS) actuaries made two predictions about the implications of Affordable Care Act (ACA) cuts to the prices Medicare will pay for hospitals services: (1) that they will cause 15% of hospitals to become unprofitable in a decade and (2) that they will be half those of commercial market prices by 2040. Recent work suggests that only one of these predictions is likely to be correct. A review of how hospitals react to Medicare cuts reveals which. You’ll find that review, by me, on the AcademyHealth blog.



    • You left out one potential response by hospitals: shifting patients from lower reimbursement outpatient services to higher reimbursement inpatient services. I’ve spent the past 25 years helping develop outpatient facilities. Now, the hospital are buying those facilities (or “buying” the patients of the physicians who use those facilities – it’s called integration) and either closing them or converting them to HOPDs.

    • I’d argue that hospitals are so complex and the billing systems so opaque, combined with a payment structure that encourages patients to seek the best care with little attention to cost, that hospitals don’t manage their costs until forced to. So Medicare cuts force them to look at the cost of those services and they find fat to cut.

      I just don’t get the idea that commercial prices would be twice Medicare’s. That implies either that 1) Medicare is getting a hidden subsidy or 2) the hospitals are perfectly capable of delivering care at Medicare prices, so why should anyone pay more for it?

      If the answer is 1) then we need to have a national conversation about the extent and fairness of that subsidy.

      If the answer is 2) it implies that the Government is far more effective at reining in medical inflation than the market and we need to seriously rethink the structure of our healthcare market.