ASHHRA: Learn to Live with Lower Medicare Reimbursements

John Commins, September 15, 2011

Hospitals and health systems that hope to survive in the era of healthcare reform will have to learn to live with lower Medicare reimbursements, says healthcare consultant and futurist Ian Morrison.

"Do as every other industry has done and change how you deliver services," Morrison said Tuesday as the keynote speaker at the closing ceremony for the 47th Annual Convention & Exhibition of the American Society for Healthcare Human Resources Administration, in Phoenix, AZ.

"That is what we have to confront very rapidly and I don't see enough evidence that we are doing that," he urged.

Morrison says many healthcare executives operate under two flawed assumptions: That reimbursement should cover the cost of care, and that "the way we are doing it now is the right way."

He said he was recently confronted by a hospital CFO who complained that Medicare doesn't cover the cost of care. "I said 'Dude, let me rephrase that. Medicare doesn't pay the income aspirations of you and your people for doing things exactly the same way you've been doing them for 25 years. Change the way you do the things you do, like every other industry has had to do over the last 25 years,'" he recalled.

That acceptance of lower reimbursements will require "new math," Morrison says. For example, a shift towards population-based payments will encourage healthcare providers to change the way they conceive of integrated care. "People say that sounds like capitation. It is capitation," Morrison said.

The new math will also require consumers to become more engaged in their healthcare coverage and its limitations. "The high-cost fancy places are going to be called out in these high-performance networks as unaffordable and if you, the public, want to go there, you are going to have to sign up with some other plan," he explained.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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