While the CMS has proposed a net 0.8% increase for inpatient payment rates, “non-quality” providers will see a cut of 1.2%, he noted.
“The Medicare program is not for your survival—it's for your beneficiaries' survival,” Goldberg said. “I think what you see is the best you're going to see, and I'm afraid it's going to get worse.”
Goldberg also said he expects to see a reduction in the number of critical-access hospitals, as restrictions on them grow, and more facilities converting to emergency or urgent-care centers.
Andrew Bressler, managing director at Bank of America Merrill Lynch, similarly told a standing-room-only crowd that cuts related to penalties such as excessive 30-day readmissions could leave hospitals on the hook for as much as 6% of Medicare revenue.
He also saw large cuts on the horizon for post-acute-care providers, such as home health, which has enjoyed Medicare margins above 10%; inpatient rehabilitation facilities (8% Medicare margins); and long-term acute-care hospitals (6% margins). Acute-care hospitals, in contrast, have operated with negative Medicare margins. “You can see why the home health guys have sort of been targeted here,” he said.
Bressler also cautioned that the Congressional Budget Office has again revised its estimate of how many people will gain health insurance coverage—which means hospitals may not see the large gains in volume they were expecting. The projection is now at 25 million, which represents some “leakage” from employees who lose insurance at work but don't pick up coverage on an exchange, he said.
Employer coverage is expected to decrease by 7 million, while small business exchanges are now targeted for 2015 as the government focuses on the individual exchange.
And coverage on the individual market likely won't be as comprehensive as employer coverage. The less expensive “bronze” plans are likely to have significant cost-sharing baked in, covering only 60% of actuarial costs, Bressler said.
Insurance companies are also limiting entry into certain markets or offering much narrower networks, such as including only 30% of providers.
“In year one, you don't know what the risks look like,” Bressler said. “That seems to be the direction we're actually going.”
While the financial markets have cheered healthcare reform by boosting the share prices of investor-owned chains, Bressler cautioned that the estimated $37 billion net positive impact will be shared unevenly among 5,000 hospitals over 10 years.
“When you shake it out over 10 years and 5,000 hospitals, it's not going to be as big a win as first thought,” he said. “You have to be cautious about that.”
Follow Beth Kutscher on Twitter: @MHbkutscher
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