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Shrinking Reimbursements Lead to Hospital Infighting

Dennis D. Keefe, CEO of Cambridge Health Alliance, disputes the claim that his organization is getting special treatment when it comes to dwindling reimbursement payments.

That the long simmering problem of inadequate government health care reimbursement is reaching a boiling point is not unforeseen. Years of deteriorating Medicaid and Medicare reimbursement below actual medical costs, now exacerbated by unprecedented economic conditions, poses real peril to hospitals with a disproportionate share of patients who rely on government health coverage. We, too, are struggling to restructure and preserve our mission in these challenging times.

Assertions that Cambridge Health Alliance (CHA) has somehow experienced “special” treatment are unfounded and neglect the realities of the past several years.

To forge a pathway in light of urgent funding challenges that imperiled 22 percent of our operating budget, CHA worked in partnership with state and federal officials and implemented an aggressive services reconfiguration. We took difficult steps to consolidate our clinical footprint aimed at preserving core services. CHA transitioned from three to two inpatient hospitals, reduced adult inpatient mental health beds and addictions beds, and is consolidating six primary care sites and other specialty clinics among many other changes.

Needless to say, this has not been easy for our patients or staff. Our workforce has been reduced by 11 percent, and employees have received no salary increases, an increasing share of their own health insurance premiums, and even made an additional $1 million contribution in voluntary givebacks. All in all, a total of $70 million in initiatives to reduce expenses and boost revenue are at hand this year.

All hospitals deserve to be reimbursed adequately for the services they provide. But the situation is especially dire for the subset of Disproportionate Share Hospitals (DSH) with concentrated patient care in state low-income programs, such as Medicaid, Commonwealth Care, and the Health Safety Net for the uninsured. This is because Medicaid and other state health programs are at the bottom tier in terms of reimbursement — Medicaid only covers on average 70 percent of actual health care costs, according to the Massachusetts Hospital Association. Those hospitals like CHA with patient care highly concentrated in Medicaid and other low-income programs face the biggest shortfalls. And because CHA provides significant mental health and outpatient care that are among the lowest reimbursed services, only about 60 percent of costs are covered.

Medicare, the federal program that provides health insurance for senior citizens and those with disabilities, covers on aggregate about 90 – 92 percent of actual costs.

Where to turn – the state or the federal government — for solutions depends on whether it is Medicaid, or another state low-income program, or a federal responsibility under Medicare, where further cuts loom in Washington as part of national health reform financing.

The DSH hospitals that filed suit this week rely much more heavily on Medicare than Medicaid for their DSH status. Medicare ranges from 38 percent to 54 percent of their patient care revenue. Medicaid ranges from a low of 8 percent to 21 percent
Conversely, Medicaid and low-income public programs constitute about half of CHA’s patient care. CHA has two times greater low-income volumes than the six hospitals - nearly 397,000 low-income patient encounters compared to 218,000 for the group.

Massachusetts is actively considering payment reforms to curb spending and to align financial incentives with wellness. Rectifying today’s payment inequities across insurances and services is essential. CHA endorses this change. But as state policymakers increasingly realize, payment reforms and global payments simply cannot be based on below-cost government reimbursement. Those institutions that serve the highest volume of low income populations, while also offering significant services that are poorly reimbursed (mental health, addictions, primary care) should continue to receive priority consideration.

Today’s broken health care reimbursement system must be reformed both at the federal and state levels in order to fix what ails our community-based health care system.

This program aired on December 4, 2009. The audio for this program is not available.

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