Hospitals Look to Future with White House Deal

The 10-year, $155 billion revenue cut that the nation’s hospitals agreed to this summer to help President Obama push his healthcare reform package through has elicited mixed reactions as stakeholders debate whether reimbursement cuts in the short term will pay off in the long run. And while some hospitalists worry that hospitals might cut support to HM groups, the head of the American Hospital Association (AHA) says the deal was a smart move—one that creates an opportunity for hospitalists to further prove their worth.

Rich Umbdenstock, FACHE, president and CEO of the AHA, says some estimates had hospitals absorbing north of $300 billion in cuts from Medicare reimbursement. “We think that overall, although they are significant reductions, they’re not nearly as onerous or as far-reaching as what the president and the House were proposing,” Umbdenstock says. “As tough as it will be for all of us to navigate this, we believe we have limited the impact to a manageable amount.”

Managing that deficit is an area in which HM leaders can help their respective institutions, Umbdenstock adds.

More than 90% of HM groups receive hospital support from their institutions, according to SHM’s 2007-2008 "Bi-Annual Survey on the State of the Hospital Medicine Movement." “It’s a reality that has some HM groups nervous that the cuts will reduce hospital subsidies. When this money disappears, hospitals are going to have to make some very difficult decisions,” says hospitalist Marc Westle, DO, FACP, CPE, president and managing partner of Asheville Hospital Group in North Carolina. “Something will have to give.”

Umbdenstock sees opportunity in the challenge. And while acknowledging that QI won’t be an HM-centric concern in the coming years, SHM and rank-and-file hospitalists can lead the charge. “We’ve got to get better at understanding what gives us the best positive impact, the best return on information,” Umbdenstock says. “Given the role hospitalists play, they’ll be an increasingly important constituency to further the understanding of where those efficiencies … can be found. They’re on our front lines.”

The White House and hospital groups agreed to $103 billion in savings from delayed increases in Medicare payments, $50 billion from cutting charity care compensation, and $2 billion from readmission rates. Healthcare economists already have argued that the agreement will have less impact than some fear. Mark Pauly, PhD, professor of healthcare management at The Wharton School at the University of Pennsylvania, says hospitals operating on thin margins might suffer from upfront costs, but are likely to profit more when health insurance creates more “paying customers in the long run.”

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