Hospitals: Funding the 'Doc Fix'

“Hospitals all of a sudden, if 30% of their business is Medicare, about 2% of that 30% is going to be impacted,” says Sutton. “Now you’re cutting a third of their profit margin.”

Look, nothing is going to change the fact that people believe hospitals and physicians have control over much of healthcare costs. They don’t. In large part, hospitals price things in order to stay in business. There are plenty of inefficiencies hospitals need to address as a group—that’s true—but hospitals are inefficient in large part because of regulatory law. Nurses can only do certain things, for example. That specialization costs money.

“Does that mean the healthcare system is not broken? No. But there’s no stopping the pharma and device manufacturers and surgical equipment manufacturers from charging whatever they want,” Sutton says.
Politicians are great at finding and exploiting the weakest constituent in painful legislation that has the potential to affect all stakeholders. With few exceptions, hospitals’ primary customers are not patients but physicians, so they don’t want to be seen as the ones who are holding up the fix to the 21% physician pay cut.

In this case, hospitals are that weakest constituent. So they pay the price.