A new plan by the Bush administration to lower the Medicare payments for medical procedures may throw the pricing structure of the region’s nonprofit hospitals into turmoil and drive up health care costs for everyone else.
The administration is seeking to restructure Medicare reimbursements for a wide range of services based on its estimates of the actual cost of the medical procedures, not on what hospitals have historically charged the government. The effect will be to force hospitals to drastically recalculate their charges downward.
The restructuring, the biggest change in Medicare pricing since 1983, would take effect for all Medicare patients discharged after Oct. 1. It is a change some say hospitals are generally not ready to face.
“All we are asking [of Medicare] is that they give hospitals time to retool and to prepare for these changes,” said Michael Rodgers, senior vice president for public policy and advocacy of the Catholic Health Association of the U.S.A. in D.C.
The federal government is forecasting a drop in Medicare reimbursements of 20 to 30 percent under the new cost schedules. Hospital groups such as CHAUSA are warning that many nonprofit and specialty hospitals will drastically lose revenue under the lower prices. The majority of hospitals, clinics and specialty treatment centers in the Washington region operate as nonprofit organizations.
Experts say the revenues received from Medicare and private insurance companies are hospitals’ lifeblood. They will have to either absorb the lost revenue or find other ways to make up the difference. One likely avenue is to increase the amount charged by private health insurers for patient care. Insurance companies, in turn, are likely to pass such increases along to subscribers.
“Most hospitals are decidedly NOT nonprofit,” said LouisRossiter, director of the Schroeder Center for Healthcare Policy at the College of William & Mary in Williamsburg, Va. “They make a profit, including a big profit from cardiovascular surgery.”
The high profit margins on certain procedures such as heart surgery are one of the things being targeted by the new plan.
“The Medicare payment system is not intended to pay a hospital for a particular disease and guarantee a profit for that disease. It is intended to reimburse the hospital a reasonable cost for all of the patients it treats,” Rossiter said.
He told The Examiner that most hospitals know that intensive procedures, such as treatments for heart disease, are often overpriced. He also believes that some expensive procedures have been promoted by some medical centers at the expense of specializing in other, less common or less lucrative surgeries.
“There needs to be some balance,” in the mix of services hospitals offer patients, Rossiter said.
The administration claims the new plan will improve medical care in addition to cost savings. Of the two objectives, Rodgers pointed to tight federal budgets for reimbursements as the dominant reason for the push to quickly implement the new schedules.
“Cost is really what is driving the desire for these changes,” he said.
Have information about area nonprofits? Contact Frank Sietzen at [email protected].
