8:17am

Mon December 12, 2011
Health

Federal Budget Fights Cause Frustration At Hospitals

The fighting in Washington over potential cuts to Medicare has created worry and uncertainty at hospitals throughout Colorado, particularly in rural areas.

Various possible reductions could reach a total of 22 percent of Medicare payments for dozens of the state’s smaller hospitals.

What’s most frustrating, says Stephan Wilson, the chief financial officer at Montrose Memorial Hospital, is that he doesn’t know which cuts are coming – or if they’re coming at all. He’s left unsure how much revenue to expect.

“We have no way to figure out what’s going on or to plan,” he said.

The reductions could prompt some hospitals and doctors to stop seeing Medicare patients. It could become harder to find a doctor as early as next month.

Jobs across Colorado could be lost as well, especially in small towns where a hospital is a major employer.

Among the possibilities:

  • A two percent reduction in Medicare, set in play when the congressional “supercommittee” on the deficit deadlocked recently. Without further action, 93 hospitals in Colorado will receive a total of $36 million less from Medicare in 2013 and going forward.
     
  • ŸAnother roughly 20 percent cut in Medicare for 42 hospitals in small cities and towns in Colorado. A Congressional Budget Office analysis for budget negotiators found that elimination of supplemental Medicare payments to nearly 2,000 hospitals in rural areas and small cities would save $3.8 billion nationwide in the first year – and cost those hospitals an average of $1.9 million each.
     
  • A 27 percent cut in payments to physicians is set for January, and Congress would have to find more funding to stop it. That could cause more doctors to stop seeing Medicare patients. Congress has come close to this particular cliffhanger repeatedly, and repeatedly resolves it only temporarily.
     

These uncertainties leave hospital administrators like Wilson frustrated.

“There’s a lot of partisanship going on with all this,” he said. He feels that politics often trumps conversation about the best interests of Medicare patients, and the hospitals that serve them. At his hospital, potential cuts to Medicare could mean up to $2.5 million less, he calculated.

That’s a “big part of our bottom line,” Wilson said.

Late last month, the supercommittee’s failure to rein in the deficit triggered $1.2-trillion in automatic cuts to defense and domestic spending. Those reductions, including the two percent Medicare cut, were mandated by last summer’s deficit deal.

However, those automatic cuts don’t go into effect until 2013 and there are already efforts in Washington to revive the budget talks and find different reductions.

Without action, the two percent cut to Medicare would fall hardest on residents who are most at risk, and in rural areas, “where hospitals are often the only health care provider for many miles and the largest source of jobs in their community,” said Steven Summer, president of the Colorado Hospital Association, in a statement.

The CHA estimates the 93 hospitals in Colorado would lose $36.4 million in funding in the first year and $394 million over the next decade. For rural hospitals, that’s $6 million and $64.9 million, respectively.

National Jewish Health in Denver says the two percent reduction would cost it $1.7 million in funding. “While we will continue to see Medicare [patients], a cut of this magnitude will force us to make other cuts,” said Christine Forkner, the hospital’s chief financial officer.

Boulder Community Hospital would do its best to weather any cuts, said hospital spokesman Rich Sheehan.

Around the nation, the two percent reduction would mean $41 billion less for hospitals by 2021, according to a study by the Tripp Umbach firm for the American Hospital Association.

“With more than two-thirds of hospital spending going to the salaries and wages of caregivers and other workers, this cut could lead to cutbacks and layoffs at hospitals that would ripple throughout the economy as hospitals and hospital employees reduce their spending on the goods and services provided by other businesses,” the study said.

In the first year, 92,866 jobs across the nation could be lost and more than 194,000 jobs by 2021. The study did not determine how many of Colorado’s 71,000 hospital jobs would be lost.

Threat to small and rural hospitals
An even larger budget cut would be the elimination of additional Medicare funds to support 29 “critical access,” 12 “sole community” hospitals, and one Medicare-dependent hospital in Colorado.

The CBO analysis, which suggested the cuts to Congress as one of scores of policy options for paring down the deficit, said taking millions of dollars in Medicare funds away from small hospital budgets might force some “to convert to outpatient, or even close.” It said nearby residents might find it more difficult to obtain health care.

Talk of this set off a frenzy of concern among members of Congress who serve rural constituents.

U.S. Rep. Cory Gardner, a Republican in the 4th District, where 12 “critical access” hospitals are located, asked the supercommittee not to cut the program before politicians reached an impasse before Thanksgiving. Gardner said the cut would have “serious consequences for patient access and quality of care.”

Another 68 members of Congress reminded the committee in a separate letter that 72 million Americans live in small or rural committees, many of them seniors who are “on average, poorer and sicker” than their counterparts in urban and suburban areas.

The plan is off the table with the supercommittee’s failure. But hospitals worry this proposal has the potential to reappear in any future budget negotiations.

Administrators for such hospitals say the additional Medicare funds are needed because it is more expensive to keep care available in rural areas.

Don Burris, the chief executive officer for the Haxtun Hospital District in northeastern Colorado, said his facility is already running at break-even. The elimination of “critical access” payments at his hospital might lead to property tax increases or higher charges to other patients and insurers, he said.

East Morgan County Hospital in the northeastern town of Brush said that cuts in “critical access” Medicare funds would “have a profound effect on the entire community.” The hospital said it provides “jobs, growth and stability to the struggling rural economy."  It is one of the top three employers in Brush, with 192 employees who earn a total of $12 million.

As if all these possible funding scenarios for Medicare are not confusing enough, GOP Congressman Doug Lamborn of Colorado Springs supports yet another option: the Republican proposal to transform Medicare from a government program to private insurance. This would dramatically reduce projected government spending on Medicare.  It has a chance only if Republicans take over the Congress and the White House next year.

www.ColoradoPublicNews.org