“The worst form of inequality is to try to make unequal things equal.” — Aristotle
Operating a hospital has never been more challenging than it is today. At the most fundamental level, hospitals are small towns that operate 24/7, year-round, built around expert clinicians, as well as a wide variety of highly skilled employees in multiple disciplines. Collectively, they are tasked with the awesome responsibility of delivering a broad spectrum of high-quality healthcare services to everyone in their respective communities, regardless of their health or socio-economic status.
Our MHA Chief Medical Officer, Gary Roth, DO, often says “healthcare is everyone’s destiny.” He’s right: at some point, all of us – or our loved ones – will require the assistance of our healthcare system. And when that day comes, we as patients can and should expect that we have ready access to care. Michigan hospitals take that expectation very seriously, whether that comes in the form of physician recruitment, retention and call coverage, drug acquisition, facilities maintenance and expansion, or ensuring that the latest diagnostic and treatment technology is on-site.
Here is an economic reality: being prepared to care for anyone, for any diagnosis, at any time, creates high fixed costs. In classic business terminology, hospitals are “price takers” when it comes to government payers, because Medicaid and Medicare effectively tell hospitals what they will receive in reimbursement.
Against this backdrop, our field is currently facing a strong push at the federal level to prevent hospitals from receiving Medicare reimbursement at a level that appropriately recognizes the higher fixed and operational costs referenced above. Referred to as “site-neutral payments,” this policy would force hospitals to accept the same rates as those paid at other sites of care. This ignores the fact that the cost structures between the two settings are very different because hospitals go to great lengths to have the infrastructure in place to save lives every day. Non-hospital settings serve a very valuable but different role, and the reimbursement they receive today reflects those differences. In addition to being open 24/7/365 to all patients – including those with multiple comorbidities, and little or no health insurance coverage, hospitals must have redundant systems for energy and water so surgeries and other patient care can continue uninterrupted when the power goes out or other systems are compromised. Physician offices have no such requirements and don’t bear these costs.
Hospital outpatient departments also provide convenient access to care for the most vulnerable and medically complex patients. These settings are more likely to treat Medicare patients who have more chronic and severe conditions, have been recently hospitalized or in an emergency department and are dually eligible for Medicare and Medicaid. These patients are more expensive to care for and rely on hospital outpatient departments for their increased healthcare needs.
Implementing site-neutral payment policies would be detrimental to access to care for patients across Michigan and the country. If reimbursement is slashed across the board, hospitals will be forced to reduce their costs, which will come in the form of reduced hospital beds, service lines or even potentially hospital closures. This plan for inadequate payment can be particularly harmful for hospitals serving a high percentage of vulnerable patients, including rural hospitals. When a hospital closes services due to site-neutral payment policy, they will close to everyone, not just people covered under Medicare.
I was recently honored to be appointed to the American Hospital Association Board of Trustees and this issue is clearly a key focus of their advocacy work on Capitol Hill. The MHA is joining that effort by advocating with Michigan’s members of Congress, and our message is unambiguous: comparing hospitals with other sites of care is not comparing apples and oranges – it’s comparing apples and space shuttles. More importantly, reducing healthcare costs can’t come at the expense of reduced access to care.
As always, I welcome your thoughts.
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