What's in the Law

The most publicized aspects of the law are that it will provide insurance coverage to 32 million additional people, will cost $940 billion, and will reduce the deficit by $1.3 trillion over 20 years. Providers should note that the law will:

  • Reduce Medicare payment by $112.6 billion over 10 years starting in 2010
  • Reduce Medicare and Medicaid disproportionate-share hospital payments by $36 billion over 10 years starting in 2015
  • Implement value-based purchasing, reduced payments for high volumes of hospital-acquired conditions and readmissions, and pilot programs to test bundled payments, accountable care organizations, and medical homes

In addition, the law expands Medicaid in 2014 to 133 percent of federal poverty level and includes four new criteria providers must satisfy to retain not-for-profit status, and a $50,000 penalty for those who don't comply.

How Reform Will Affect Us

Moody's expects all hospitals "to benefit from reduced charity care write-offs and bad debt expense as the number of uninsured in the U.S. should decrease significantly." The rating agency also notes, however, that tighter government auditing and oversight of revenue will exert pressure on hospitals to operate more efficiently, forcing them to make spending cuts and precipitating mergers among smaller hospitals after 2014 when key provisions will have been implemented.

What We Need to Do

At the outset, hospitals will need to model the impact of key provisions, including:

  • Market basket update changes for acute, home health, and skilled nursing care
  • Reduction of payments to disproportionate share hospitals
  • Provisions regarding hospital-acquired conditions and unnecessary readmission payment reductions
  • Physician payment changes

These provisions will make it necessary for hospitals to transform the way they deliver care to lower costs, enhance efficiency and coordination among disparate providers, and deliver improved quality.

A Tipping Point for Health Care

According to HFMA President and CEO Richard L. Clarke, DHA, FHFMA: "[Reform] is a tipping point for our industry. It will change the fundamentals of how we perform our jobs as financial leaders. And HFMA will work hard to help you through this change process."

For a look at the resources that HFMA is developing to help healthcare finance professionals chart a successful course through the many phases of healthcare reform implementation, visit our Healthcare Reform website page .

Publication Date: Saturday, May 01, 2010

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