Hospitals Face $252.6B in Cuts for Medicare and Medicaid Payments

03 November 2019 - Collaborative Imaging
doctor hand using calculator for account about medical costs with stethoscope and computer notebook on the desk at modern office
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Prudent radiology professionals working in hospitals know how important it is to stay on top of developments in their field so they can deliver the best service to patients. This includes keeping current on technological advances and new protocols for diagnosing and assessing patients, as well as ongoing legislative and regulatory changes. 

If you’re like most professionals in your situation, you are already busy enough with your radiological duties, making it harder to keep up with news from Washington, D.C. regarding healthcare. 

As a case in point, you may not have seen a recent study conducted by health economics and policy consulting company Dobson DaVanzo & Associates, which Healthcare Dive says indicates that hospitals face a total of $252.6 billion in payment reductions between 2010-2029. This total comes from a number of recent regulatory and legislative activities.

Federal Spending Cuts Analyzed in the Study

A range of economic factors were collected and analyzed in the Dobson DaVanzo & Associates study, including:

  • 2% cut in Medicare payments
  • Reduced Medicare reimbursement for bad debt to hospitals
  • Post-acute care payment cuts
  • Restrictions of home health inflation-based payment increases
  • Medicare Severity diagnosis‐related groups (MS‐DRGs) payment reductions
  • Medicaid disproportionate share payments cuts

Comparing Hospital Sizes for Impact on Profitability

It’s also worth noting a recent Kaufman Hall report on hospital profitability discussed by Healthcare Dive, which found that while profits did fall overall this year (in June), there were some hospitals that managed to do better. For example, hospitals supporting 500 or more beds realized pre-tax profit increases for 3 months in a row, because of a boost in revenue. 

Hospitals with less than 25 beds and those with 200-299 beds also experienced better margins because of growing inpatient numbers. The hospitals that struggled during this period are those with 100-199 beds, and medium-sized hospitals ranging from 300-499 beds had the worst profitability declines out of the organizations studied by Kaufman Hall. So clearly, the size of the hospital where you work will affect the financial stability and ability to recover from federal spending cuts, all other things being equal.

What Payment Reductions Mean for Health Service Providers

If your hospital’s demographics include a lot of patients who rely on Medicare and Medicaid, the ongoing reductions in payments from the federal government are bound to have an impact in how you provide services. 

In fact, the American Hospital Association and the Federation of American Hospitals, which was responsible for commissioning the Dobson DaVanzo & Associates study, is denouncing these payment reductions and the impact they will have on the bottom line of hospitals across the U.S., according to a report from Healthcare Dive.

Payment cuts were established during 12 separate acts of legislation along with a range of regulation updates from the Centers for Medicare & Medicaid Services (CMS). Reductions include payments for inpatient and outpatient care, rehab and long-term hospital care. Of course, radiological services are going to be a part of the support needed for these vairious patient categories.

Healthcare Dive noted that FAH president Chip Kahn responded that “Hospitals are nearing the tipping point we have predicted for so long. The disruptions that come with Medicare and Medicaid cuts of this magnitude have a real-world impact on our ability to deliver the vital services to the patients and the local communities that depend on us.”

Financial woes are not tied solely to a shortfall in federal spending in Medicare and Medicaid, however. Hospitals are seeing rising costs along with a reduction in service volume. Fewer patients are covered by commercial insurers as more aging baby boomers move to Medicare, which leads to an even smaller bottom line than hospitals previously enjoyed.

Your hospital could weather the growing financial strains by reducing costs and boosting operational efficiencies to match the increasing need for more services by the growing pool of older patients, a point underscored by a Fitch Ratings report about lowered profits in non-profit hospitals, cited by Healthcare Dive.

Payment Cuts and the Fiscal Health of Your Organization

You and fellow stakeholders in your organization who are devoted to radiology will need to keep in mind these cuts in Medicare and Medicaid hospital payments, since they can have major effects on how you allocate resources. 

From staffing levels to the amount of time you allocate to making images of patients, there are bound to be some changes that your team will need to accommodate. The more time you have to prepare and adapt to changes in the legislative and regulatory environment, the better you will be able to continue serving your patient population. 

And if you’re finding yourself short on time to keep up with all the changes in laws and policies affecting healthcare, stay tuned to this space for ongoing coverage.