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Health care industry

Medicare Reform Debate Hits Home for Local Hospitals

Strategic Insights

— 2 min read

Medicare reforms being debated in Congress could have devastating effects on local health care providers, with academic medical centers and hospitals facing severe budget cuts. The proposed reforms aim to reduce Medicare spending by $270 billion over the next seven years, with a significant portion of the savings coming from cuts to hospital reimbursements. Area health care professionals warn that these cuts will lead to a decrease in the quality of care and a shift in the financial burden to private payers.

Key Takeaways:

  • Academic medical centers, which receive higher Medicare reimbursements to cover the cost of training medical residents and interns, will be hit particularly hard by proposed cuts.
  • Teaching hospitals could see up to 30% of their Medicare reimbursement go toward paying for medical education costs and training residents.
  • Area hospitals in general will find any efforts by Congress to slow Medicare expenditures a painful process, as 30% to 50% of a hospital's revenues are tied to Medicare payments.
  • One in every two hospital beds occupied in Cuyahoga County is occupied by a Medicare patient, highlighting the importance of the program to local health care providers.
  • Local health care professionals insist that Medicare payments already fail to cover the cost of care provided under the program and that further cuts will exacerbate the problem.
  • Hospitals rely on cost-shifting to make up for the difference between Medicare payments and the actual cost of care, making further cuts to Medicare reimbursements extremely difficult to handle.

Statistics:

  • Medicare will cost the federal government $182 billion in 1995 and cover 37.2 million elderly and disabled Americans.
  • At its current growth rate, Medicare spending would reach $345 billion by 2002.
  • Republicans want to hold spending to $247 billion by the year 2002, which would require eliminating $270 billion from Medicare's scheduled expenditures.
  • 60% of Parma General Community Hospital's revenue comes from Medicare reimbursements.
  • The Ohio Hospital Association estimates the state would lose $9 billion in expected Medicare reimbursements over the next seven years.
  • The hospital association estimates the Republican plan could reduce expected Medicare reimbursements to Northeast Ohio by $2.3 billion in the seven-year period.

Sources:

  • J.B. Silvers, director of the Health Management Center at Case Western Reserve University
  • Thomas A. Selden, president of Parma General Community Hospital
  • Dr. Hermann Menges, chairman of the board of governors for the University Suburban Health Center
  • Dr. John D. Clough, chairman of the division of health affairs for the Cleveland Clinic
  • Charles Miner, president and chief executive of the Meridia Health System
  • Dr. Boris Komrovsky, a Cleveland ophthalmologist
  • The Greater Cleveland Hospital Association
  • The Ohio Hospital Association

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