DSH cuts rattle urban hospital execs
Safety-nets still hope for quality improvements
While most healthcare organizations are anxious to see what changes to the system healthcare reform will bring, executives at urban and safety-net hospitals are most concerned about the looming Medicare and Medicaid Disproportionate Share Hospital (DSH) payment cuts and the challenges these cuts will bring.
"While DSH cuts aren't exclusively affecting urban hospitals, they are much more targeted at them because urban hospitals tend to treat more Medicare and Medicaid patients than other hospitals," said Ellen Kugler, executive director of the National Association of Urban Hospitals. "There will be even fewer resources to provide care to hopefully more insured people under healthcare reform, so hospitals will have to do it more efficiently and effectively and in a more integrated way. However, the concern comes that particularly in 2014 these same hospitals will have to do it with significantly fewer resources - the same resources they've relied on for a while."
According to Kugler, Medicare DSH payments will decrease by 25 percent by fiscal year 2014, while Medicaid DSH payments will decrease by $14.1 billion between 2014 and 2020.
John Bluford, president and CEO of Truman Medical Centers in Kansas City, Mo., agrees that DSH cuts will have a significant impact on many of his urban safety-net institutions, but also sites Medicaid expansion uncertainty as a major concern.
"Depending on which state, there's a lot of uncertainty on what your fate may be," he said.
Kugler added that she's worried the formulas written in the Affordable Care Act (ACA) will not work any longer for the states that fail to expand their Medicaid programs. "In light of the Supreme Court decision, I am even more concerned about the DSH cuts because in the states where the Medicaid expansion won't happen, clearly the benefits of the ACA won't materialize. In the states where there will be expansions, there's still likely going to be additional losses to some of the safety-net funds."
Caroline Steinberg, vice president of trends and analysis at the American Hospital Association, has other financial concerns regarding urban hospitals as well, including technology and workforce solutions.
"Hospitals of course are always facing the high costs of keeping pace with technology. There's always a struggle to attract and retain employees. We expect over the long term for there to be a significant shortage of caregivers, which will drive up wages," she said. "We also see that hospitals are spending more money to comply with quality reporting, and there is a lot of auditing of proper payments. Hospitals are spending a lot of money for recovery audit contractors and responding to their initiatives."
Steinberg added that despite the fact that there are so many financial uncertainties for urban hospitals, there are a number of great opportunities coming up for them as well.
"There's going to be a continued growth in the number of seniors and a need for programs that attract seniors and meet their needs. Those hospitals that develop the right programs will be able to attract that population. I guess while there are a lot of expenses with it there's also a lot of opportunity to improve care," she said. "There's also a lot of opportunity in quality improvements and those can be helpful for driving down costs when it comes to value-based purchasing. There's opportunity to improve qualities and improve payments at the same time."
Bluford believes there are many opportunities as well. "There are great opportunities for urban hospitals. We have a step up on population management. We have an advantage and experience in being community-centric and oftentimes we have historical relationships with public health departments," he said. "So all of that bodes well with regards to our ability to outreach and make a difference in the health of our communities."
