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Opinion: Hospital Cuts Demand Sharp Instruments

By Michael Regier, for HealthLeaders Media  
   July 29, 2011

As budget talks and related recriminations continue in Washington, payments to America's hospitals once again appear to be on the chopping block.  

It's one thing to stand inside the Washington Beltway and list ways to cut healthcare spending. It's quite another to stand inside a hospital and see the needs for care in your community--from the ER and the NICU to the nursing stations and the supply rooms.  

That's why hospital leaders nationwide are wondering how they can stomach another round of cuts on top of the $155 billion already sacrificed to support health reform. And that's before fully implementing the many requirements called for in the new law, under which hospitals could lose as much as 10 percent of today's Medicare payments in the next three years. Little wonder, then, that hospital executives are losing sleep wondering whether any debt deal will mean further payment cuts.

It's no surprise that federal officials are looking to save money in the Medicare program. According to the most recent Medicare trustees report, expenses for Medicare in 2010 were $523 billion and exceeded program income by $37 billion.

That report also projects that the balance in the Hospital Insurance Trust Fund (which pays for hospital, home health, skilled nursing and hospice care) will be exhausted in 2024—five years earlier than the prior year's report projected. And research has suggested that a significant portion—perhaps as much as a third—of the care provided in the Medicare program might be avoidable.

Clearly changes must occur if we are to sustain Medicare for the long-term, and hospitals across the nation are already making dramatic changes.

Continuing to improve safety, coordinate care across multiple settings, reduce readmissions and improve health outside of the hospital are priorities for leaders at community, urban and rural hospitals alike.

Hospitals are working with each other to find answers, and they are partnering with government, too. Just consider the more than 2,000 hospitals that have joined the U.S. Department of Health and Human Services' Partnership for Patients initiative, pledging to find ways to advance the critical work of making care safer, more reliable and less costly for all Americans.

That's partly why recent suggestions that we can cut payments to Medicare-participating providers without affecting the healthcare provided to patients have prompted such concerns. But those suggestions don't face the facts. 

Medicare's payments already don't cover the costs of providing care for many, if not most, hospitals, and more payment cuts will ultimately mean reduced access to care for the nation's most vulnerable citizens--seniors, those with limited means and those living with serious illnesses. We need look no further than the rapidly-increasing number of physicians who are unwilling to accept new Medicare patients for our best evidence that provider payment cuts reduce access to care.

Then what can be done? First, we must focus on eliminating unnecessary or ineffective care. That means preventing errors, coordinating care to avoid unneeded hospitalizations, and better managing patients with chronic conditions. We can use real comparative effectiveness research to inform treatment decisions by providers and their patients. We can use payment structures like value-based purchasing and bundled payments to reward quality, not quantity, and to reward providers for effectively working together. We can drive out the costs associated with defensive medicine by enacting liability reform that limits providers' liability when they adhere to documented best practices and standards of care.

And if necessary, we can consider ways to restructure beneficiary cost-sharing, readjust the Medicare eligibility age, and even consider increasing FICA taxes.

In the end, our problem isn't lack of options. We have plenty of them. So before we aim the financial equivalent of a blunt instrument at hospitals and other Medicare providers, we should do all we can to eliminate unneeded and ineffective care and unnecessary spending from the system. It's the best way to make real change in Medicare without compromising the care our communities need.  

Michael Regier is senior vice president of legal and corporate affairs and general counsel of VHA, Inc. He can be reached at mregier@vha.com.

 

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