HFMA VIEWS

HFMA President and CEO Dick Clarke recently asked a group of CFOs what they would do if the Medicare payment level was the best they could get from any payer? The answers first focused on the fact that Medicare payments have not kept up with cost increases, are arbitrary, and therefore are inadequate to sustain operations. As the conversation continued, however, the focus shifted to the need for fundamental shifts in care and service delivery.

As this week’s testimony by MedPAC Chairman Glenn Hackbarth before the Health Subcommittee of the House Committee on Ways and Means indicated, MedPAC sees little reason to boost the level of Medicare payment. Although Hackbarth acknowledged that most hospitals have a negative Medicare margin, he strongly suggested that the reason was too little attention to cost containment.

Hackbarth drew a distinction between hospitals under “high financial pressure” and those under “low financial pressure.” Those under high pressure have low non-Medicare margins and have seen little growth in net worth; the opposite is true for those under low pressure. MedPAC believes that hospitals under high pressure have shown an ability to constrain costs. The implied recommendation for low pressure hospitals that run negative Medicare margins is that they must better control their costs. As stated by Hackbarth, “Medicare payments are still adequate to cover the costs of efficient hospitals.”

The value strategy--bringing down costs while increasing quality--is becoming more compelling for all healthcare providers. HFMA has recently launched its Healthcare Financial Pulse project. Over the coming months, Healthcare Financial Pulse will be providing resources and case studies illustrating how healthcare organizations are making gains in a variety of areas. One area of focus--costs and quality--will describe how hospitals are driving a value strategy. We encourage you to visit the site often for new updates and information.