If the decline in Part A (hospital payments) of the Medicare Trust Fund balance is to be reversed in accordance with the estimates made after passage of the Affordable Care Act— that is, if the cost curve is going to bend—health policy analysts, hospital administrators, group practice managers, and physician leaders should have a good understanding of their costs and the ability to control them. 

Exhibit 1

Web Extra_Young_Exhibit 1

The “handwriting on the wall” was revealed in a recent study of variations in 2009 Medicare spending among 35 hospitals for a 90-day episode of congestive heart failure (Mechanic, R., and Tompkins, C., “Lessons Learned Preparing for Medicare Bundled Payments,” The New England Journal of Medicine, Nov. 15, 2012). The results showed a wide variation among the studied hospitals. If Medicare were to draw the payment line at some reasonable level and were to bundle the price (as it likely will do), a significant proportion of the hospitals (and their attending physicians) in the study would have their payments reduced, with a corresponding need to reduce their costs. An exhibit illustrating the data in the study is shown below.  

Exhibit 2

Web Extra_Young_Exhibit 2

David W. Young is professor of management, emeritus, health sector program, Boston University School of Management, Boston; lecturer, Harvard School of Public Health, Boston; and a member of HFMA’s Massachusetts/Rhode Island Chapter (David@DavidYoung.org).

For more information, see David Young's "Fiscal Strategy in an Era of  Reform", hfm, January, 2013

Publication Date: Tuesday, January 01, 2013

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