Hospitals Brace for Medicare Changes

by Luke Jones  on Monday, Oct. 1, 2012 12:00 am  

It's a time of flux for health care, and local doctors and hospitals are buckling down for changes to Medicare and Medicaid.

Several major cuts are coming down the line for the former:

  • First, the Affordable Care Act of 2010 cuts Medicare's rate of increase by about $155 billion nationwide over 10 years, or about $2 billion for Arkansas.
  • Second, the Budget Control Act of 2011, if implemented in January, would create a 2 percent sequester reduction on total Medicare payments, resulting in a loss of about $403 million in the state.
  • Finally, Medicare's sustainable growth rate formula causes cuts to physician reimbursements each year. Instead of overhauling the formula to avoid the cuts, however, Congress postpones them each year.

"As you can imagine for a rural state like Arkansas, hospitals are already struggling," said Paul Cunningham, executive vice president of the Arkansas Hospital Association. "It's going to make things much more difficult and put a lot of hospitals financially at risk."

Arkansas hospitals are concerned especially about the ACA cuts. They relate to the way hospitals are reimbursed for Medicare.

"They have payments that are based on a complex formula," said Mark Lowman, vice president of strategic development at Baptist Health Medical Center in Little Rock. "Congress sets the Medicare increases every year, and what this $155 billion over 10 years does is reduce that increase we would have gotten."

According to Cunningham, about 42 percent of Arkansas' inpatients are covered by Medicare, and almost 50 percent of outpatients are.

"If you add in Medicaid, that's another 20 percent on the inpatient side and 24 to 25 percent on the outpatient side," he said. "When you put those two together, that's a significant number of patients involved."

Lowman said almost 50 percent of Baptist's patients are on Medicare, and 10 percent are covered by Medicaid.

"And the Medicare reductions equate to $138 million over 10 years for Baptist," he said, noting that sequestration would cut an additional $42 million.

The reductions worry hospitals due to the amount of money already lost through charity patients, Lowman said.

"In 2011, Baptist Health provided $175 million in services to people that we didn't get paid for services," he said. "It was either charity or bad debt. We're concerned that Congress will continue to use Medicare payments to providers as a cash cow for deficit reduction."




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