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What Drives Your Success? Maybe Not What You Think

Philip Betbeze, for HealthLeaders Media, August 17, 2012

"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."

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1 comments on "What Drives Your Success? Maybe Not What You Think"


Dr. Rob (8/21/2012 at 2:00 PM)
"That's why Kaufman says that if you aren't getting substantially higher commercial rates than your competitors right now, it's time to start thinking about a merger, or at the very least a precursor to a merger that helps your finances survive a big hit to reimbursements. All the higher current commercial rates buy you is some indeterminate amount of time." I do not follow the logic. You are recommending facilities to cost shift to HMO's, or until the Stae and Federal enrolled members bleed them dry. You are essentially adding another unfair burder on the working class and those who can afford healthcare coverage - essentially another "tax" to subsidize the care rendered in Federal/State programs? How will this sustain "quality healthcare for all"? It won't. IT would be more prudent to reduce the current services offered, or cost shift to the current enrolled members of Medicare and Medicaid? When the money runs out of these programs, further reductions will need to be realized, or further co-payments by these members will need to be implemented in the Federal/State programs. It is only a matter of time until this happens. Current levels of spending in Medicare and Medicaid are NOT sustainable. Current levels of reimbursement have never been close to actual costs. Members are receiving "Mercedes" care on "Model-T Ford" budgets.