Healthcare’s Debt Deal

Brandon Ousley, Practice Consultant, Halley Consulting Group
August 9, 2011

Once again, the U.S. Congress has passed legislation that places more tension on an already stressed relationship between Medicare recipients and healthcare providers. The August 1 debt reduction deal, spun as a plan that will not affect Medicare beneficiaries, will indeed result in more challenges for Medicare patients. Even though their financial expenditures won't change, the costs to physicians and hospitals will increase. According to a recent FierceHealthcare.com report, "hospitals could see their Medicare payments cut by $1.1 to $1.4 million annually over the next 10 years."

The report goes on to state that: "Under the debt-ceiling legislation, a 12-person bipartisan congressional committee is tasked with coming up with $1.2 trillion to $1.5 trillion in deficit reduction by Nov. 23. It's that "super committee" that is making healthcare providers worried about how the next phase in spending cuts will affect hospitals' bottom lines, as well as patients' access to quality care."

Hospital and physician reimbursement is on the block as one of the guaranteed cuts - either by the soon-to-be-appointed debt committee, or by the mandatory cuts set forth in the plan. According to the American Hospital Association, "Cuts to Medicare funding for hospitals could overload emergency rooms, shut down trauma units and reduce patient access to the latest patient treatments." The problem of overloaded emergency departments already is plaguing many communities, as the number of physicians accepting Medicare patients is declining, and those on Medicare have no other choice.

Physicians are facing even more cuts as current law calls for an automatic 30-percent reduction in payments beginning next year. Dr. Roland A. Goertz, president of the American Academy of Family Physicians, recently stated that "Medicare payments to doctors are not grandiose. If you cut them further, it could result in more doctors dropping Medicare patients." Both of these groups agree that Medicare funding should have been exempt from this bill, as was Medicaid and Social Security. Those on Wall Street seemed to agree.

The debt deal, along with the announcement of an 11-percent reduction in Medicare reimbursements to nursing homes, resulted in the index of hospital companies falling by 6.1 percent on August 1, compared to an overall less-than-1-percent market decline (granted, the 11-percent reduction is in response to overpayments made previously by Medicare). Nursing home groups have lobbied Congress to spread out the reduction over multiple years to help reduce strain on the system.

The Medicare system is front and center whenever government and finance meet. Politicians are at their best when pulling on the heartstrings of America's seniors with each side threatening changes to Medicare and Social Security. The passage of this debt reduction legislation does not change that idea. The fact is that waste and fraud in Medicare should be the focus instead of cutting payments to those providing the care.

Brandon Ousley is a Practice Consultant at Halley Consulting Group, which specializes in building successful medical practices and physician/hospital partnerships through a variety of consulting and interim management services.

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