Hospital executives in Chicago last week for the American College of Healthcare Executives' 2013 Congress on Healthcare Leadership said they would seek to wring costs to offset the lost revenue and prepare for further pressure on revenue from public and private payers.
Iowa Health System budgeted for the upcoming Medicare pay cut, William Leaver, president and CEO of the system, said in an interview with Modern Healthcare.
The two-state system began more than a year ago to target costs, he said, an effort that analyzed clinical productivity and variation for waste. The West Des Moines-based system will also review employee benefits and sees growth as an opportunity to reduce overhead costs, he said. The system owns or manages 23 hospitals. Leaver said the system will seek to reduce its expenses by 20% in the next three to five years. The system reported $2.3 billion in total expenses in 2011.
Many other hospitals also factored the deficit deal's 2% reduction into budgets. Congress agreed to the Medicare reduction under the 2011 Budget Control Act, which included $1.2 trillion in federal spending cuts if lawmakers failed to draft an alternative plan by November of that year. Lawmakers did fail, and hospital executives said last year they would prepare for millions in dollars of lost revenue.
Catholic Health Partners estimated the annual toll at $23 million. Baylor Health Care System, Dallas, estimated the cuts would cost the organization $12.5 million a year. Scripps Health, San Diego, projected $10 million a year in lost revenue.
Chris Van Gorder, Scripps' president and CEO, said in a Modern Healthcare interview that the system's ongoing efforts to improve its processes would be adjusted to offset the lost revenue, a move that will force the four-hospital system to “dig in a little harder, faster than we had planned.” Scripps will seek to spare workers, he said. “We can't guarantee everybody their exact job in our system, but there is probably a job for everybody. So if their job gets eliminated as a result of no fault of their own, we'll find another job for them in the system.”
For Yale New Haven (Conn.) Health System, April's drop in Medicare pay and proposed state cuts to Medicaid come as the system is pursuing a costly strategy to prepare to shift more care toward managing chronically ill patients and promoting health. The system's investments—including more primary-care doctors, new information technology, capacity for actuarial and clinical forecasting—will cost $650 million, Nancy Levitt-Rosenthal, senior vice president at Yale New Haven's Greenwich (Conn.) Hospital, told attendees of the ACHE meeting. Officials have simultaneously launched a five-year effort to wring $500 million from expenses, she said.