Sur­vival mode

While wait­ing for re­form, job growth, hos­pi­tals must look to con­trol costs

Modern Healthcare - - Opinions Commentary -

The only way out is for the econ­omy to cre­ate jobs— with health in­surance

Two years ago, on the eve of the fed­eral govern­ment’s mas­sive bailout of the fi­nan­cial ser­vices in­dus­try, I wrote in these pages that hos­pi­tals were un­der siege from “re­lent­less Medi­care and Med­i­caid fund­ing cuts, soar­ing med­i­cal mal­prac­tice costs, un­sus­tain­able pen­sion fund con­tri­bu­tions and the swelling ranks of the unin­sured.” My con­cern at the time, against the back­drop of an im­mi­nent re­ces­sion, was that cap­i­tal-starved hos­pi­tals would lose ac­cess to fund­ing mech­a­nisms that would en­sure they have the re­sources to care for their pa­tients and serve their com­mu­ni­ties.

A few months later, the Amer­i­can Re­cov­ery and Rein­vest­ment Act of 2009 in­cluded an in­crease in fed­eral Med­i­caid match­ing rates —hardly a cure for hos­pi­tals’ ac­cess-to-cap­i­tal prob­lems, but still an im­mensely im­por­tant re­prieve from what would have oth­er­wise been dev­as­tat­ing Med­i­caid cuts for dozens of states.

Two long years later, we re­main mired in a re­ces­sion that many econ­o­mists have de­clared the long­est in Amer­i­can his­tory. The na­tional un­em­ploy­ment rate hov­ers near 10%—a sober­ing num­ber that may well be the “new norm”—and gap­ing state bud­get deficits have be­come numb­ingly rou­tine. Cal­i­for­nia con­tin­ues to teeter on the precipice of bank­ruptcy, and Texas, with its $25 bil­lion deficit, has ac­tu­ally floated the idea of drop­ping out of the Med­i­caid pro­gram. Here in New York, a loom­ing $9 bil­lion deficit poses an omi­nous threat to a strug­gling Med­i­caid pro­gram whose fund­ing al­ready has been slashed a stag­ger­ing nine times since 2007.

Hos­pi­tals have hardly been im­mune to this eco­nomic malaise. In all 50 states, in­sti­tu­tions large and small are strug­gling with ra­zor-thin or neg­a­tive bot­tom lines, and over the past two years, many hos­pi­tals—in­clud­ing 160-year-old St. Vin­cent’s Hos­pi­tal in Man­hat­tan, a com­mu­nity an­chor if ever there was one—have closed their doors for good.

In­deed, New York mag­a­zine’s Oct. 25 cover warned that “Some­thing is Killing Our Hos­pi­tals … St. Vin­cent’s was just the be­gin­ning,” and the ac­com­pa­ny­ing story ob­served that “the fi­nan­cial health of New York City’s hos­pi­tals has been de­te­ri­o­rat­ing for years and ap­pears to be near­ing a crit­i­cal junc­ture.”

While New York’s hos­pi­tal woes may be par­tic­u­larly acute, there’s no ques­tion the out­look is bleak all over. And while the na­tional econ­omy may yet avoid the much-pre­dicted dou­ble dip re­ces­sion—a re­ces­sion fol­lowed by a short-lived re­cov­ery fol­lowed by an­other de­cline—I’m deeply concerned that Amer­ica’s hos­pi­tals won’t be as lucky.

For starters, those vi­tal en­hanced Fed­eral Med­i­cal As­sis­tance Per­cent­ages funds dry up in June 2011, and there are no signs that Congress has an ap­petite for an­other ex­ten­sion. So, even though the de­mand for Med­i­caid ser­vices will con­tinue to surge in many states due largely to en­roll­ment growth, an in­valu­able fund­ing stream for the pro­gram will go dry. And the im­pact will rip­ple be­yond Med­i­caid. Ac­cord­ing to the Con­gres­sional Bud­get Of­fice, the en­hanced FMAP as­sis­tance has been an ef­fec­tive mea­sure in cre­at­ing jobs and in­creas­ing de­mand in the econ­omy.

The loss of en­hanced FMAP fund­ing would be less trou­ble­some if state bud­gets were show­ing signs of re­cov­ery from their great­est fis­cal cri­sis since the Great De­pres­sion, but that’s sim­ply not the case. A re­port this year from the Cen­ter on Bud­get and Pol­icy Pri­or­i­ties found that 46 states face bud­get short­falls to­tal­ing $112 bil­lion for the fis­cal year end­ing next June.

In the very re­cent past, many states would have re­sponded to such ex­treme fis­cal pres- sures by rais­ing taxes, but that was be­fore the rise of the Tea Party. While its over­all in­flu­ence on the re­cent 2010 elec­tions has been a topic of con­sid­er­able de­bate, few would ar­gue that the Tea Party’s ag­gres­sive “Taxed Enough Al­ready” plat­form has had a chill­ing ef­fect on even the sug­ges­tion of rais­ing taxes. When New York’s gover­nor-elect flat-out dis­misses rais­ing taxes de­spite in­her­it­ing a $9 bil­lion deficit in the bluest of blue states, there’s no ques­tion the coun­try has turned hard against tax in­creases as a means to close bud­get gaps.

To be sure, hos­pi­tals (and their bot­tom lines) ea­gerly await the chief ben­e­fit of fed­eral health re­form—a huge in­crease in the num­ber of Amer­i­cans with health in­surance—es­pe­cially when, ac­cord­ing to the Cen­ters for Dis­ease Con­trol and Pre­ven­tion, one in four adults un­der 65 re­ported be­ing with­out health cov­er­age at some point in the past year. But that ex­pan­sion doesn’t be­gin in earnest un­til 2014, and for hos­pi­tals strug­gling just to break even right now, 2014 may as well be a cen­tury away.

In the mean­time, Med­i­caid and other state­spon­sored in­surance pro­grams from Maine to Cal­i­for­nia and Min­nesota to Texas will con­tinue to op­er­ate un­der se­vere fi­nan­cial pres­sures, and will doubt­less be prime tar­gets for the bud­get scalpel in 2011. So where does that leave us? As I see it, the only way out is for the Amer­i­can econ­omy to gen­er­ate jobs, jobs and more jobs. And they must be jobs that carry health in­surance so we can be­gin to tran­si­tion mil­lions of Amer­i­cans off the Med­i­caid rolls (be­fore health re­form puts mil­lions of oth­ers on them). It’s all about jobs. Be­cause no mat­ter what any egghead econ­o­mist says, there is no such thing as a job­less re­cov­ery.

And un­til those jobs ma­te­ri­al­ize, Amer­ica’s hos­pi­tals—the es­sen­tial back­bone of our nation’s health­care sys­tem—will sim­ply have to wring out ev­ery last ef­fi­ciency and do more with less.

Ken­neth Raske is pres­i­dent of the Greater New York Hos­pi­tal As­so­ci­a­tion.

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