Healthcare Business News

Deficit talks may mean big cuts for hospitals: Frist

By Rich Daly
Posted: November 7, 2012 - 6:15 pm ET

Looming deficit-reduction negotiations coming soon after Tuesday's federal elections could result in larger-than-expected cuts to hospitals, some health leaders warned.

Dr. Bill Frist, former Republican Senate Majority Leader, told attendees at a Washington health policy symposium that he expects a so-called grand bargain on deficit reduction within a few months with 2.5-to-1 ratio of spending cuts-to-tax increases. And hospital payments are the likely source of much of the coming federal spending cuts, due to the large share of Medicare and Medicaid spending they receive.

“I don't think hospitals understand how deep these cuts are going to be in the grand bargain,” Frist said at the World Healthcare Innovation and Technology Congress.

The possibility for more hospital spending cuts on top of those coming under the Patient Protection and Affordable Care Act was not a surprise to some.

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“If you just take a look at where the money goes in terms of federal expenditures, healthcare is right there,” said Dr. Robert Laskowski, CEO of Christiana Care Health System, Wilmington, Del. “So the bull's-eye is an accurate description of the risk.”

In response, his health system is focusing on implementing and expanding quality improvement and cost-savings initiatives. Laskowski said he did not know whether such initiatives by many hospitals would succeed in dissuading deficit negotiators from targeting them.

Chip Kahn, president and CEO of the Federation of American Hospitals, said federal negotiators may be pushed to make a wide-ranging deal on the a deficit by the looming debt law cuts and tax increases—collectively known as the fiscal cliff.

The Obama administration and congressional leaders have acknowledged that they are considering a grand bargain in which to wrap up numerous outstanding legislative issues, while reforming the tax code, avoiding planned automatic cuts and reducing future federal deficits. At least one other healthcare-related approach that drew some support from the Obama administration and congressional Republicans during deficit negotiations last year also was drawing criticism in the wake of the election: increasing the Medicare eligibility age.

David Certner, legislative counsel at AARP, blasted lifting the Medicare eligibility age as a “classic example” of how the federal government shifts healthcare costs to others.

“Healthcare cost is the big driver and big underlying problem,” Certner said. "We need to focus on changes that will reduce costs as opposed to the debate we're having in Washington, which is to reduce federal costs but shift that to other payers.”

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