In Modern Healthcare this week (Aug. 16, p. 8), my colleague Matthew DoBias and I take a look at how struggling state budgets, the federal deficit and health reform are affecting two major hospital payers: Medicaid and Medicare.
The House returned from recess last week and approved $16 billion to extend temporary relief for state Medicaid budgets included in last year's economic stimulus law. The bill, which already had Senate approval, was quickly signed by the president. But as DoBias explains, states did not get all the relief they sought. Many states began fiscal 2011 with budgets that anticipated Congress would spend $25 billion.
Meanwhile, hospitals face cuts to payments from Medicare in October that will reduce hospital revenue by $440 million, which one major credit-rating agency said last week underscores its negative outlook for not-for-profit hospitals.
Moody's Investors Service compared the upcoming cuts to Medicare reductions in the late 1990s that squeezed hospital margins. So what did it look like in the late 1990s? Well, here's one snapshot:
The median operating margin for freestanding hospitals and single-state systems rated by Moody's plunged to 0.51% in 1999 from 3.33% in 1997. The percentage of solo hospitals and single-state systems that lost money on operations rose to 43% in 1999 from 18% two years earlier.
That's compared with a median operating margin of 1.5% in 2008 for stand-alone hospitals and single-state systems rated by Moody's, the most recent year available, when high unemployment contributed to flat hospital admissions. In 2007, the median operating margin among freestanding hospitals and single-state systems was 2.1%.
Send us a letter