Obama's Health Care Proposal Worries Hospitals

On Sept. 19, President Barack Obama released his plan to reduce the nation's deficit by $3 trillion during the next decade. Part of his proposal called for a $320 billion reduction in federal spending on Medicare and Medicaid.

The blueprint drove fear into hospital administrators in Arkansas and around the country; hospitals are already preparing for $155 billion in health care cuts that were part of 2010's Affordable Care Act and go into effect during the next several years.

Of the $155 billion, some cuts have already been made, but "those reductions will accelerate [next] fiscal year," said Marie Watteau, a spokeswoman for the American Hospital Association in Washington, D.C. The federal fiscal year starts Oct. 1.

The American Hospital Association said Obama's proposal to the Joint Select Committee on Deficit Reduction would result in reduced care and at least 200,000 job losses for hospitals by 2021, according to a Sept. 19 AHA news release.

"This is the wrong prescription to create a healthier America and sustain job growth in a sector of the economy that is actually adding jobs," Rich Umbdenstock, president and CEO of the AHA, said in the news release.

Others, however, say that the deficit is out of control and the cuts are needed.
"I think the president is giving people a little advance notice of just how serious this health cost problem is, and we're not going to get out of it without some sacrifices," said John Rother, CEO of the National Coalition on Health Care of Washington, D.C. The coalition is a nonprofit working to achieve health system reform.

Obama also proposed to reduce Medicare payments to teaching hospitals by $9 billion during the next 10 years. That proposal has made officials of the University of Arkansas for Medical Sciences nervous.

In Arkansas, hospital administrators are concerned about the proposed cuts, fearing they could lead to some hospitals closing, said Paul Cunningham, the senior vice president of the Arkansas Hospital Association.

"When you start looking at what the supercommittee [the Joint Select Committee] could do in terms of discretionary spending and making additional cuts in Medicare and Medicaid, I think everybody is a little bit worried," he said.

The prospect of more Medicaid cuts is troubling, Cunningham said.

Arkansas is in its third year of receiving a Medicaid provider tax for hospitals, he said. The money brings in about $140 million annually and has helped most hospitals post a net profit for their fiscal years that ended in 2010.

Without the Medicare and Medicaid reimbursement revenue, "we'd have to close the hospital," said Dede Obar, the administrator of Mercy Hospital of Scott County in Waldron.

She said the hospital was already having a tough time and cuts "would be devastating to us."

It reported a loss of $848,000 on patient revenue of $19.9 million for its fiscal year that ended June 30, 2010.

Cunningham said that if there were more cuts, money from other state programs would have to be diverted to make up for the shortfall in Medicaid at the state level.

One of the top priorities for the Arkansas Hospital Association now is working with the state's six members of Congress.

"We're ... trying to educate them on what the impact is going to be as far as hospitals are concerned," Cunningham said.

U.S. Rep. Tim Griffin, R-Ark., said in a recent email to Arkansas Business that he supports reforming Medicare.

"ObamaCare and bankruptcy ends Medicare as we know it," he said. "Simple cuts without bold reform won't save Medicare: it will only hurt seniors. We need to comprehensively reform Medicare to save it, and I have voted for the reform required."

That reform was part of an attempt earlier this year by U.S. Rep. Paul Ryan, R-Wis., to restore the Medicare cuts in his budget proposal, which passed in the House but failed in the Senate.

Obama's plan to cut the federal budget deficit by $3 trillion during the next decade includes $248 billion in cuts to Medicare and $72 billion to Medicaid.

The Joint Select Committee has to release its plan by Nov. 23 to Congress on ways to save at least $1.2 trillion during the next decade.

If the committee can't come up with a plan, or it is rejected by Congress, then an automatic 2 percent across-the-board cut in reimbursements will go into effect starting in 2013.
A Cascade of Fear
The American Hospital Association's Umbdenstock said in the news release that the funding cuts would reduce access to care for seniors and could overload emergency rooms, shut down trauma units and slow patient access to the latest treatments.

"Hospitals already face significant reductions in Medicare and Medicaid, which both pay hospitals on average less than the cost of providing care," he said. "Further reductions would exacerbate this problem."

Betsy Ryan, the New Jersey Hospital Association's president and CEO, also warned of what further cuts would do to hospitals.

"We can't continue to chip away at the very foundation of our health care system by continually cutting Medicare and Medicaid," Ryan said in a July 13 news release.
"The impact will be felt not only by Medicare and Medicaid beneficiaries, but by anyone who counts on access to quality health care in their community."

Ray Montgomery, the president and CEO of the White County Medical Center in Searcy, said he hadn't studied how Obama's proposal might affect his hospital.

But Montgomery said cuts tied to the $155 billion plan would hurt the hospital.

Starting in 2014 and continuing through 2019, White County expects to see about $19 million less in revenue from reimbursements, Montgomery said.

Montgomery said that White County Medical Center was projecting a loss of reimbursements of between $5 million and $7 million annually through 2019.
And if more cuts occurred, "that would just be staggering," he said.

The Arkansas Hospital Association's Cunningham said hospitals in Arkansas were projected to lose about $1.4 billion in reimbursements during the next decade as a result of the Affordable Care Act.

But he isn't sure what the impact will be because more people will have insurance - if the legal challenges to the health care reform laws are upheld.

‘Subject to Change'
UAMS Medical Center also fears more cuts, said Dan Riley, the center's chief financial officer. He said, however, that it was too early to tell what exactly Obama's plan would mean for UAMS' hospital if the cuts were approved.

"We feel there's going to be cuts in all revenue streams," Riley said. "It's just a matter of how deep they are and what form or fashion they come in, which right now is still subject to change."