Nexus: Reject short-sighted cuts to hospital care Last Updated: February 17, 2015
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As Congress seeks a path forward on critical physician payment reform, the Premier healthcare alliance urges lawmakers to support these efforts and those already underway to transform our healthcare system to provide higher value and better coordinated care. Hospitals have been making impressive progress in improving quality while simultaneously reducing costs, and data from the government and our nationwide performance improvement collaboratives demonstrate this with hard numbers. Despite hospitals’ leading role in reducing the growth in healthcare spending, they have sustained more than $113 billion in cuts over the last four years alone to finance Medicare sustainable growth rate (SGR) “patches” and other policy changes. Physicians and Medicare beneficiaries urgently need a system that provides adequate payments for care and incentives to improve quality and efficiency. But in the process of accomplishing this, Congress should take great care not to make further cuts that could undermine quality hospital patient care or slow work to transform care delivery.

Changes hospitals have been making to improve quality and reduce costs are contributing to the slowdown in healthcare spending

  • According to the Congressional Budget Office (CBO), growth in hospital inpatient spending fell from an average annual rate of 4.3 percent between 2000 and 2005 to 1.7 percent between 2007 and 2010. In fact, the reduction in the growth of spending for hospital inpatient and outpatient care and physicians’ services accounted for the majority of the overall slowdown in national healthcare spending.
  • The CBO found that Medicare spending was not measurably diminished by the economic recession, but rather by changes in how providers deliver care and by other factors affecting beneficiaries’ care. Other economic experts have also pointed to the shift toward value-based purchasing and accountable care as factors contributing to the drop in spending growth.
  • The Premier alliance’s experience in the private market, such as through our QUEST®: High Performing Hospitals collaborative, demonstrates that measurable cost savings are being achieved through reforms that focus on quality rather than quantity and change the way healthcare is delivered.

To sustain this progress and achieve transformation hospitals cannot continue to sustain cuts in payments for vital services

  • Overall Medicare margins for hospitals were -5.4 percent in 2012 for all hospitals and -7.1 percent for nonprofit hospitals, according to the Medicare Payment Advisory Commission. Overall margins for all hospitals are expected to dip to -0.6 in 2014, without even taking into account the effects of the sequester.
  • Hospitals are already contributing $155 billion through Medicare and Medicaid payment reductions to fund the expansion of coverage in the healthcare reform law. Now some of the coverage offsets, including states’ Medicaid expansion, are in question, leaving hospitals vulnerable to higher levels of uncompensated care.
  • As part of Budget Control Act and subsequent extensions of the sequestration to finance debt reduction and other policies, hospitals will face another 2 percent cut in payments through 2024.

Nexus - Hospital cuts 03.25.14

  • While all sectors of our economy have to share in deficit reduction efforts, hospitals are doing this by moving forward with cost-saving initiatives which require significant financial investments while shouldering reductions in Medicare and Medicaid payments. No other sector in healthcare has been as impacted as hospitals by value-based purchasing and penalties for poor performance.

Continuing to make short-sighted cuts to hospitals will harm local communities

Communities rely heavily on their hospitals for care that is available 24/7. Hospitals are on the front lines during emergency situations and are the “safety nets” that provide care to the most vulnerable in our society.

Hospitals create jobs, stimulate the economy through spending and support other jobs and economic activity. Employing over 5.6 million people nationwide, hospitals spend approximately $757 billion on products and services from other businesses and are the second largest source of private sector jobs. Yet we are seeing a downward trend in hiring that the sector has not seen in 20 years, even while our population ages and requires more healthcare services.

In moving forward with urgently needed SGR reform in this area, Premier strongly urges Congress to reject any offset proposals that cut funding for hospitals, which would compromise care for the very Medicare patients SGR reform aspires to benefit.