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Medicare cuts are hard rural hospitals

Medicare pay cuts will have a disproportionate impact on small rural hospitals and the cuts will soon be deeper.

A 1% reduction in all Medicare kidnapping payments began on April 1, after Congress suspended the program during the COVID-19 pandemic. Cuts will increase to 2% on July 1; an additional 4% reduction in Medicare reimbursement is planned for 2023 under the Pay as You Go Act.

Hijacking, combined with declining reimbursement levels for private insurers, declining COVID-19 relief grants, reduced patient volume and higher operating costs, endanger more than 600 rural hospitals. , or more than 30% of the approximately 1,800 rural hospitals in the U.S., according to a report by the Center for Health Quality and Payments Reform. Two hundred of these hospitals are at risk of closing for the next two to three years, according to the report.

PAYGO and Affordable Care Hijacking Market Basket Market Cuts Include Estimated Revenue of $ 316,000 in 2023 for Guadalupe County Hospital in Santa Rosa, NM This is about 5% of its revenue net of $ 6.3 million in 2021, said Christina Campos, the administrator. of the Hospital of the County of Guadalupe.

“It’s just constant pressure. There seems to be less opportunity to pivot,” he said. “Without the extra dollars of COVID-19 relief funding, we would certainly be in the red like most rural hospitals.”

Medicare hijacking is expected to cut rural hospital revenue by nearly $ 230 million by 2022, according to estimates by the Chartis Center for Rural Health.

Had it been implemented this year, PAYGO would have reduced rural hospital revenues by more than $ 900 million, Chartis data show. The program would reduce Medicare spending by $ 36 billion a year, illustrating the latest push between the federal government trying to keep the program solvent and hospitals pushing for adequate reimbursement rates.

“The boogeyman is the PAYGO cuts. They would be catastrophic,” said Michael Topchik, Chartis’ national leader. “If we go back to where we were before the pandemic, half of the rural hospitals were operating in the red and closing a record number. Add that up with an additional 4% cut and it would be unsustainable.”

Larger health systems have more shock. As Medicare reimbursement decreases, they may transfer their resources to other payers and service lines.

The Dallas-based hospital chain Tenet Healthcare, for example, estimated that reimbursed Medicare hijacking cuts would reduce hospital chain revenue by $ 46 million in 2022, a Moody’s Investors Services report said on Thursday. . But that’s less than 2 percent of Tenet’s $ 3.3 billion in earnings before interest, taxes, depreciation and amortization in 2021.

“Obviously, this year, obviously, hijacking has a year-on-year impact, but we will continue to focus on growing services with higher acuity and higher margins,” said Daniel Cancelmi, Chief Financial Officer of Tenet. the call for results for the fourth quarter in February. “This has been an area of ​​focus, and will continue to be an area where we allocate capital and believe it is truly beneficial.”

Hospitals such as Guadalupe County Hospital are disproportionately dependent on Medicare beneficiaries, given their relatively larger population. But private insurers tend to mimic the Medicare reimbursement, which has further taxed the hospital, Campos said.

Reimbursement rates for commercial insurers did not keep pace with an average 3% increase in rural hospital patient service costs in 2020 amid labor shortages, according to the Center report for Healthcare Quality and Payment Reform. Meanwhile, total charges for services fell by an average of 2% in 2020, according to the report. Volumes have not yet recovered, rural hospital operators said.

Although the hijacking cuts and the extinction of COVID-19 aid will have a negative financial impact, they will not lead to a significant number of rural hospital closures, according to Ge Bai, a professor of accounting and health policy at the University. Johns Hopkins studying rural hospitals.

“Hospitals, like all other organizations, have discretionary spending and can adjust it when they face revenue issues,” he said. “Relying on prolonged federal aid rather than improving operational efficiency will exacerbate structural problems, such as low employment rates, and increase financial risks for these hospitals.”

Tenet’s self-reported figures and the objectivity of the report of the Center for Health Quality and Payment Reform are questionable, Bai said.

Policy experts expect new payment models, such as the rural emergency hospital model that eliminates hospitalization services in exchange for higher Medicare payments, to stabilize rural hospitals. But the Rural Emergency Hospital salary increase will not be enough, said Harold Miller, director general of the Center for Health Quality and Payments Reform.

“Creating global hospital budgets, eliminating federal abduction, eliminating hospitalization services, and expanding Medicaid will not solve the serious problems facing rural hospitals,” he said in a press release. “The only way to ensure that residents of small rural communities have access to affordable, high-quality health care is to have their health insurance plans properly pay for the services provided by their local hospitals.”

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