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Can Hospitals Break Even with Medicare?

Elyas Bakhtiari, for HealthLeaders Media, December 13, 2010
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Ironically, the Medicare-dependent hospitals of today could have a leg up going forward. Hospitals with better payer mixes can afford to improve efficiency around the margins. But an organization like Providence Regional that exists on federal reimbursements doesn't have as many cost-shifting options and has to pay more attention to cost-cutting.

Hofheins is already trying to prepare for a future environment where utilization is going to have to be reduced across the board. In particular, imaging and testing levels will have to come down, so Providence is working on patient tracking and communication strategies that will help avoid duplicating tests and procedures now. He sees tighter integration with physicians and EHR connectivity across the continuum as first steps.

"That is going to be on my mind to be sustainable in the future. I don't have a lot of individual line items in mind. A lot of the work we're doing is to create a tighter community of care," he says. "There's no single way to do it. You have to look at lots of different ways of managing it."


Elyas Bakhtiari is a freelance editor for HealthLeaders Media.
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5 comments on "Can Hospitals Break Even with Medicare?"


Todd (12/20/2010 at 5:06 PM)
I have to agree with Steven Watkins. Why would the government continue to pay facilities above break even? A facility showing it can effectively get cost out will just further show the government that it makes sense to cut reimbursement. In the future, look for fully public (Medicare and Medicaid) facilities and fully private facilities to provide care.

Insight 101 (12/16/2010 at 12:43 PM)
It's not a given that hospitals have to lose money on medicare. One commenter noted they often can't truly identify if they are losing money by the payer in the truest sense of the concept. I work for an large MA only company and we believe hosptials could become more profitable with us if they become more engaged. There is so much opportunity to improve they just tend to have no interest. I can't frankly explain the reticence but it's real and unfortunate.

Steven Watkins (12/15/2010 at 2:19 PM)
The answer is, "No". Hospitals cannot make money on Medicare(or Medicaid) only. As soon as hospitals reduce costs, Medicare reduces reimbursement...so it's a never-ending cycle. In fact, facilities operating with 70% Medicare and Medicaid (without dipping into a mega-foundation) would be hard-pressed to demonstrate high quality and patient satisfaction scores today. In response to Obamacare, we'll soon see "Medicare Only" facilities and "Private Only" facilities in the same communities.