Medicare: New Payment Structure Will Hurt Rural Hospitals

One of the weirder features of the health care debate is assumption by many otherwise thoughtful commentators that most hospitals are under no great financial stress. This phenomenon often manifests itself in a “Yea, Right� response to policy concerns raised by the AHA. A good example can be found in yesterday’s post at Healthblawg:

If you listen to the rhetoric of the hospital industry, you may be forgiven if you believe that the proposed 2008 Medicare IPPS rule will practically bankrupt the hospital industry all by itself . . . . 

Ironically, despite such insinuations that the AHA is protesting too much, most of us who actually work in the hospital industry think the organization is too cautious and diplomatic in its public statements. In other words, they tend to understate the crisis facing hospitals.

The reality is that two-thirds of U.S. hospitals are either losing money or barely breaking even. Most of these distressed hospitals serve rural areas, and the proposed IPPS rule  threatens to put many out of business. In Modern Health Care, the financial impact of the rule is described thus:

The 2.4% “back door” cut the CMS wants to apply to the standard payment rate in fiscal 2008 and 2009 to compensate for MS-DRG changes would result in a $5 billion reduction to hospital payments.

For rural institutions that scrape by on margins of less than 1%, which is most of them, this will be the straw that breaks the camel’s back. Some will be forced to join the hundreds of American hospitals that have already closed their doors, and they will most likely be in underserved areas.

 So, the AHA is not indulging in hyperbole when it protests the latest machinations of CMS. They will do real damage.

Comments 2

  1. David Harlow wrote:

    David, lighten up! I agree with you. CMS has been squeezing providers serially for years. Ten or so years ago, every sector of the health care provider community went through a wrenching series of bankruptcies as payment reform hit, and now the federales are still at it.

    The $64,000 question (or, rather, the $2.2 trillion question) is how to limit health care expenditures and rates of growth — everyone’s talking about it, and here’s hoping some good comes out of all this talk.

    Posted 25 Apr 2007 at 3:39 pm
  2. Catron wrote:

    OK. I probably over-reacted to that passage. As you can tell, I’m a leeeeetle touchy on this issue.

    I can’t tell you how many times I’ve heard people (including staff members at my hospital) suggest that we’re awash in money.

    Posted 25 Apr 2007 at 3:54 pm

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