Healthcare Reform: Will You Survive the Cut(s)?

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aVN0b2NrXzAwMDAxMzI5NjExMVhMYXJnZS1NUjIwMTEtMDctMTIgMTg6MjI6NDA=.jpg - Decreasing Revenue

By 2015, 30 to 50 percent of hospitals will face extreme budget shortfalls and have limited access to capital. Cardiology already has endured multiple cuts, including a 36 percent slash in SPECT imaging reimbursement for independent cardiovascular practices, which have forced many private practices to merge with hospitals, creating strain and resistance. Meanwhile, hospitals will need to restructure payment models and care delivery to survive (and possibly thrive) in this increasingly challenging landscape.

Within most hospitals, the cardiovascular sector accounts for up to 40 percent of all revenue and nearly 60 to 80 percent of profits. However, as the belt tightens around healthcare costs, cardiology will begin to see a decrease in unit prices and procedural volume. Already, PCI procedures are down 25 percent across the U.S. over the last several years. In addition, the average hospital's Medicare margin could decrease 1 to 2 percent per year. Today, it is estimated that community hospitals lose appoximately 12 cents on every dollar spent for Medicare patients and 35 cents per dollar for Medicaid patients, according to Kaufman Strategic Advisors.

As a solution to cut the lofty healthcare expenditures, the federal government is turning to accountable care organizations (ACOs); however, their ultimate design, benefits and costs remain an enigma. Due to these uncertainties, a vital question remains for hospitals: How can facilities stay afloat and survive the next round of reimbursement cuts while still providing optimal patient care?

Hospitals/private practices face-off

By 2020, Medicare costs are set to double from the current $528 billion to a whopping $1 trillion, according to the Congressional Budget Office. Already, 33 states have announced they will need to slash Medicaid payments in fiscal year 2012 to survive, according to a survey from the National Governors Association.

Nathan S. Kaufman, managing director of Kaufman Strategic Advisors in San Diego, suggests that the future of healthcare will call for:

  • A dramatic improvement of quantity and quality of outcomes per unit of cost. The fee-for-service model will need to be phased out and payments should instead be tied to value;
  • Collaborative and coordinated care;
  • Improved transparency in price and quality;
  • Hospitals to become more accountable for the services they provide; and
  • Patient-centered medical homes.

Due to the murky economic healthcare forecast, cardiology practices and hospitals must find strategic ways to tackle high costs and veer off the current spending path, which is now 16 percent of the U.S. gross domestic product, says Alexander A. Stratienko, MD, a cardiologist with Cardiac and Vascular Associates at the Chattanooga Heart, Lung and Vascular Center in Tenn.

In addition, the Centers for Medicare & Medicaid Services (CMS) have already threatened to slash Medicare physician payments by 29.5 percent in 2012, unless someone steps in to provide a long-term solution.

Hospital integration remains the paramount tactic for practices to deflect reimbursement cuts, however, it needs to be properly evaluated. Yet, within the first three years of an integration agreement, the hospital could lose $150,000 to $250,000, according to a recent perspective (New Engl J Med 2011;364:1790-1793). The authors noted that for hospitals to break even, newly hired primary care physicians would have to generate at least 30 percent more visits and specialists 25 percent more referrals. "Strategically, hospitals with a robust employment strategy will be well positioned to compete under various reimbursement scenarios," Kocher and Sahni write.

Sixty percent of cardiology practices already have fully integrated with hospitals in hopes of finding a safe haven. In fact, according to a recent Accenture report, only one-third of physicians will remain completely independent from a hospital by 2013.

However, some cardiologists remain fearful that hospital bureaucracies will overtake physician independence. Stratienko warns that cardiologists may have made a "Faustian deal" through these integration agreements that could ultimately hurt physicians when healthcare dollars begin to tighten in 2014.

"When there is employment and consequent loss of autonomy, will the physician be able to champion the patient's interest effectively?" Stratienko asks in a recent editorial (J Am Coll Cardiol 2011:57;2139-2140). "If hospital administrators appropriately protect the profitability