Systems eager for adoption of new payment structures
By JULIE MINDA
Like other health care providers across the U.S., Catholic health systems and facilities are feeling the impact of multiple types of cuts to reimbursements they receive from government insurance payers.
One area of concern for providers is across-the-board cuts to Medicare reimbursements as a result of sequestration rules that went into effect in March. The Budget Control Act of 2011 stipulated that if Congress failed to enact at least $1.2 trillion in deficit-reduction legislation by Jan. 15, 2012, automatic cuts to both discretionary and mandatory spending would take effect. The sequestration cuts require a 2 percent reduction in Medicare provider payments over nine years. According to information published in The Health Lawyer, cuts in Medicare Parts A and B are being made to each individual Medicare provider payment, while cuts to Parts C and D are being made to the monthly payments from Medicare to the private plans administering the programs.
The cuts will amount to approximately $123 billion over nine years, with hospitals shouldering an estimated 32 percent of the Medicare cuts; insurers, 45 percent; physicians, 12 percent; nursing homes, 7 percent; and home health providers,
4 percent.
Brooke Timmons, vice president of government relations for Chesterfield, Mo.-based Mercy, said Mercy forecasts that sequestration cuts will reduce its projected Medicare revenue by about $33 million annually. Providence Health & Services of Renton, Wash., expects to experience cuts of about $32 million. Wheaton Franciscan Healthcare of Wheaton, Ill., expects sequestration rules to reduce its Medicare reimbursement by about $8 million annually.
Layers of cuts
Timmons said the sequestration cuts "are only one example of the unpredictability of payments from government programs … (and the cuts) exacerbate an already challenging operating environment for hospitals." She mentioned the near constant uncertainty associated with the "doc fix," or short-term work-arounds to the Medicare funding formula. Without these funding fixes, the government would balance Medicare accounts by reducing the fees it pays doctors, possibly dropping reimbursement to a level where providers begin to flee the program.
Jonathan Sohn, senior vice president and chief financial officer of Wheaton, added that reform- related reimbursement reductions include penalties for avoidable hospital readmissions of Medicare patients and cuts related to changes in the "market basket" formulas that the Centers for Medicare and Medicaid Services use to update payments and cost limits.
Joel Gilbertson, senior vice president of community partnerships and external affairs for Providence Health & Services, added that the pending reduction of disproportionate share hospital payments will be harmful as well. Those cuts were to have been offset by increased revenue for hospitals as a result of the coverage expansions included in health care reform, but such revenue increases are not expected to materialize to the extent that policy makers had intended. This is in part because, as Catholic Health World went to press, 25 states — including two of the five states served by Providence — are not expanding their Medicaid rolls as envisioned by the Affordable Care Act.
Said Gilbertson: "It's hard to expand access to health care when revenue is reduced."
Balancing act
Ministry leaders said their systems and facilities have been improving operating efficiencies and reducing spending to mitigate the effect of reimbursement challenges.
Like many providers, Mercy has been moving toward proactively managing the health of populations. It is working to improve patient outcomes and reduce preventable rehospitalizations through better management of how physicians and care providers support patients making transitions between care locations, Timmons said. It is using telemedicine to expand access to care and to deliver care more efficiently. Wheaton, said Sohn, is improving the efficiency of its medical group by consolidating sites, expanding hours and putting in place initiatives to increase patient volumes; tightening up its scheduling to ensure that it has the appropriate staff patient ratios and that staffing adjusts correctly to patient volumes; and working to achieve greater efficiencies in its supply chain. Providence, too, is improving the way it manages the health of populations and improving primary care delivery.
Lisa Smith, CHA senior director of government relations, said population health approaches can improve the health of uninsured and underinsured populations, so that they avoid seeking care in the emergency department for which the hospital may receive no compensation.
Payer alignment
The providers expect that focusing on these types of improvements will help them manage through a challenging period of declining reimbursements, while continuing to provide care to the vulnerable.
Gilbertson said, "We are still committed to working toward health care coverage expansion, but sustainability is predicated upon working together in new ways. We require payment models that reward the right things and deliver the right outcomes."
In the immediate term, CHA is advocating that Congress delay scheduled cuts to the Medicare and Medicaid disproportionate share hospital program as part of a federal budget agreement. There is a year-end deadline for that budget agreement, and CHA said in November that it had learned that not enough support has been expressed on Capitol Hill for legislation to delay the cuts, and ministry action is urgently needed.
Although ministry members contacted for this story said they are warning their congressional delegations about the potential harm of the cuts to vulnerable populations, several said they don't expect Congress to address reimbursement issues related to health care reform until next year. It is unclear how a divided Congress would reach consensus on solutions to the funding challenges providers face. The ministry executives said there are many lawmakers who understand the situation providers are in, but political battles can interfere with sound policy making.
Timmons said Mercy is "speaking to lawmakers, both at the state and federal level to inform them of the financial vulnerabilities of all hospitals, not just Mercy. Unless cooperation in the budget process is (achieved), hospitals may continue to see broad cuts to Medicare and other government-based payments."
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