"This transition we're going through is messy and sloppy," Kaufman says, speaking broadly about the reimbursement shift toward value measurements in determining reimbursement. "Infrastructure costs for clinical integration and the employment of entrepreneurial physicians is a disruptive process and requires sloppy revenue to sort of smooth it over. My message has been that while we talk about ACOs and bundling as some future state, if you're not currently getting 150% of Medicare [from commercial payers], you're not going to be able afford the transition."
Perhaps Kaufman's clients are the ones I hear so often saying that they need to manage to operate at a positive margin even if all of their reimbursement were at today's Medicare rates of reimbursement. It gives them a simple touch point on a goal of removing waste and inefficiency, even if they are currently able to leverage much higher rates of reimbursement from their commercial book of business.
Many, according to the most recent CMS data book, Kaufman says, have already spent a lot of time and effort getting to that point. The book identifies 742 hospitals that actually made money on Medicare in 2010.
"The reason they made money on Medicare is that their costs were 10% below the national average," Kaufman says. "Their profit margin from their non-Medicare business was negative so they had no choice but to modify their cost structure."