In anticipation of rising health care costs following a legislative overhaul of the system, Sharp HealthCare officials say they’ll look for wiggle room in their building leases. Other hospitals are considering scaling back certain health programs.
For the most part, though, hospital administrators say they won’t know the exact impact of health reform legislation to their bottom line until a few years from now, when individual insurance mandates take effect and the newly insured begin seeking care.
Most said they worry about caring for additional patients covered under government programs, which don’t cover the full cost of care. California has one of the lowest reimbursement rates in the nation for Medicaid and Medicare, and the state’s rising unemployment rate could continue to see patients dropped from their employer-based coverage. Already, many San Diego doctors have stopped seeing Medicaid patients because of the low reimbursement rates.
“Hospitals aren’t going to see the benefit to the newly insured for nearly four years,” said Chris Van Gorder, CEO of Scripps Health, a 13,000-employee nonprofit health care system that operates five local hospitals. “But we’re going to start seeing the costs.”
Last year, Scripps Health reported revenues of $2.2 billion. At the same time, Van Gorder said it lost $137 million taking care of Medicaid patients and $55 million providing care for patients covered under California’s version of Medicaid, known as Medi-Cal.
A government mandate that individuals carry some form of health insurance or pay a penalty doesn’t begin until 2014, creating some concern among hospital executives that they will continue to see a rise in uncompensated care.
Lack of Doctors a Concern
“Hospitals in particular, and doctors, will bear the financial burden of health care reform,” Van Gorder said.
Meanwhile, hospital executives said last week that they were bracing for cuts to Medicare physician payments that weren’t addressed by Congress in the health care reform package signed by the president.
A previously postponed 21 percent cut to Medicare physician payments took effect April 1. Legislation passed in the House in November called for replacing the schedule of cuts with annual increases costing $210 billion, but the Senate didn’t take up the matter before it convened. Congress will reconvene April 12, and some health care leaders expect lawmakers to take up the matter then.
“If they don’t fix that by sometime in mid-April, I believe you’ll see physicians not being able to take care of (Medicare) patients,” said Mike Murphy, CEO of Sharp HealthCare, a $2.1 billion nonprofit that operates five hospitals in San Diego County.
Moving forward, many physicians groups say they’re concerned about a lack of primary care doctors coming into the system.
“There is going to be a whole lot more people who are going to be able to afford non-emergency health care,” said Tom Gehring, executive director of the San Diego County Medical Society, which represents county physicians. “The demand for physician services will outstrip the capacity for physicians to provide those services.”
The number of doctors will not change significantly in the next few years, so lines to see the doctor will inevitably increase, he said.
Reform Complicates Budgeting
Beginning this year, insurance companies will no longer be able to cancel policies because of sickness, deny children with pre-existing conditions or place lifetime monetary limits on policies. Young adults could remain on their parent’s insurance plan until age 26.
Some say they expect insurance premiums to go up as a result, although much of the effect remains to be seen.
“Now you add a third child on that’s 25 that hasn’t been in the historical family rate,” said Bob Hemker, CFO of Palomar Pomerado Health, the state’s largest health care district serving 800 square miles in inland North County. “There’s going to be incurred cost to cover that additional child.”
Local hospital systems like PPH are trying to prepare their budgets for the upcoming fiscal year, without knowing how health reform will impact their budgets.
“We’re sitting here now getting ready to go into budget review and we’re asking how much of these trigger aspects do we put into our fiscal 2011 budget?” said Hemker.
PPH is unique in that that hospital system will debut a new Escondido hospital before many of the reforms take effect. Palomar Medical Center West is planned to open in 2012, and Hemker didn’t rule out any additional cost savings.
“We will continue identifying and achieving the cost efficiencies as we have in the past,” he said.