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Hospitals Brace for a Financial Pounding

 |  By Philip Betbeze  
   September 24, 2010

I wrote a story for HealthLeaders magazine's September issue about the ACO conundrum. It's an interesting window into how hospital and health system CEOs are running their ever-growing multifaceted organizations, and preparing for a future of greater accountability. Problem is, they're having a tough time, in many cases, translating what accountable care means to their bottom lines.

As you might imagine, it's sometimes difficult to get these people to wedge a media interview into their busy schedules, so inevitably, while I'm talking to these folks, I try to ask as many questions as I can in the time allotted, even if those questions don't necessarily relate to a specific story on which I'm working.

You might guess, correctly, that healthcare reform legislation offers myriad challenges about which these CEOs are uncertain. Sure, it's law, but regulators will be defining it for years to come, which means hospital CEOs are in a difficult place. What they think is coming in terms of reimbursement, patient demand, and endless other concerns, promises to provide a constantly shifting ground from which to make decisions that are long term in nature, expensive to implement, and represent a calculated gamble for these CEOs. Sometimes, they even ask me questions, even if they're rhetorical.

Here are a few I've heard in these conversations recently:

Q: What is an accountable care organization, and how can I construct one within my hospital or health system so we're not left behind?

A:Well, there are some demonstration projects, but beyond a basic framework, it's hard to tell what will work and what won't.

Q: Will sources of revenue that hospitals once depended on, such as disproportionate share funding and continuing medical education, be cut?

A:Probably. To what degree, no one knows.

Q: Will reimbursement per unit of service proceed on a downward slope as more people are insured by Medicaid, a notoriously poor payer?

A:There's little doubt about it. But how steep will that curve be?

Q: Will an influx of new, sicker patients overwhelm clinics and emergency departments?
A.: Probably. It happened in Massachusetts when the previously uninsured got coverage, and their uninsured level was much less than most states.

Q: How do you make smart investments in bricks and mortar that will serve everyone seeking care while not going broke in the process? Will government entities scale back their subsidies in the form of tax breaks?

A:Well?I'm out of answers. No one knows for sure.

And that's what struck me as I talked to these leaders about the impact of healthcare reform. If some of them are asking me these questions, they just don't know.

"It's fair to say we're not sure where to place our bets," says Gene Diamond, CEO of the Northern Indiana Region of Sisters of Saint Francis Health Services.

He's not the only one who's told me essentially the same thing. Yet decisions have to be made. In this case, best guesses. But I think organizations are holding back until the picture gets a little less murky. Yes, hospitals are still building, and they're still hiring, but they're doing these things based on what they do know. Many of them are already short of physicians or so-called physician extenders.

So they're hiring. Many already have overcrowded EDs, so they're working on patient throughput solutions, better handoffs between the hospital and the ED. But amid this flurry of activity, they're also sitting on their hands to some degree.

Writ large, this trend extends to other businesses, which clearly aren't hiring despite sitting on a record amount of cash. CEOs blame the Obama administration and its wave of regulation to the finance and healthcare industries, for the lack of hiring. They're not hiring, the thinking goes, because they don't know what it'll end up costing them if, say, a bureaucrat interprets one of the new financial or healthcare laws in a way that would dramatically increase their costs. That's a bit of a cop-out of course, but, as we all know, perception is reality. I might add a little corollary to that old marketing saw: Perception is even more real when the boss is perceiving it.

Philip Betbeze is the senior leadership editor at HealthLeaders.

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