Tuesday, May 25, 2010

Rate Freezes, Even Cuts Are Expected At Many Hospitals

The future for hospital reimbursement appears to be every bit a s bad as people had projected. Massachusetts health insurers have announced that they want to freeze or slash payments to some hospitals and physician groups this year, thus setting up the most contentious negotiating atmosphere we have seen in years. Why are things different? Because insurers are confident that they have the sympathy of politicians, regulators and employers.

Healthcare costs are rising out of control and the simplest answer appears to be just pay hospitals less. That answer may be easy but it is not going to solve the problem. Two thirds of hospitals in the country already lose money under Medicare. State Medicaid programs are worse. And managed care companies have long ago stopped any cost shifting in their direction.

So how will this play out? Certainly not well for most hospitals and ultimately not well for many patients. Yes, a number of hospitals can get themselves more efficient and shave some costs. But these are not the big dollars of waste in the system. Lynn Nicholas, President of the Massachusetts Hospital Association thinks this will ultimately lead to layoffs, mergers and closures for some hospitals in the state.

Massachusetts has been the bell weather for many trends in healthcare. This looks like another opportunity to see what will soon be happening around the country. Have some powerful systems used their clout over the years to force some favorable reimbursement? Quite possibly. But to take the approach that healthcare saving can be had simply by cutting rates to the average hospital without consequences is not well thought out. Let's tackle some of the areas with real waste and lets start with tort reform legislation.

More on this later.

Mark Brodeur

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