Looming Budget Cuts Make Hospital Belt-Tightening Increasingly Difficult

John Commins, for HealthLeaders Media , March 5, 2012

The economy might be on the rebound, but the nation's hospitals should still brace for the possibility of $360 billion in cuts in Medicaid, Medicare, and other federally funded healthcare programs and services over the next decade.

Moody's Investors Service said in a credit outlook that the ongoing reductions in federal funding for healthcare in the fiscal 2013 budget and beyond could make it disproportionately more difficult and more expensive to borrow money for hospitals that rely on Medicare.

"If adopted, the cuts would reduce reimbursement to hospitals, forcing these institutions to continue finding additional expense savings or new sources of revenue to avoid the credit negative deterioration of their profit margins," Moody's said in a budget analysis.

"Most hospitals have been adjusting to negative credit trends since 2008, and many have improved their quality and efficiency substantially. But past operating savings reflect harvesting 'low-hanging fruit,' while future savings will be harder to achieve and will require more wrenching change."

Medicare rate increase reductions installed under the healthcare reforms will enter their third year when the fiscal 2013 budget takes effect in October. Over the next decade, Moody's says, about $268 billion in Medicare reductions could adversely impact funding for critical access hospitals, graduate medical education, and bad debt relief.

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1 comments on "Belt Tightening Gets Tougher for Hospitals"

ANTHONY WUNSH (3/11/2012 at 10:38 AM)
The area they can have the most impact on to reduce these potential challenges is revenue cycle. There is billions in wasted costs, and hundreds of billions in uncollected dollars. Slow pay and no pay by both patients and insurance and government is an epidemic and can not be sustained. I have been preaching for three years, we need to impact what we have control over and the processes used to manage revenue cycle are out dated, inefficient and broken, They were never designed to handle 31% patient responsibility or the additional mandates in audit, meaningful use and technology. WE lose in wasted cost or lost revenue over 800 billion dollars a year now, imagine this impact on the cost of care delivery. Also in charitable care the cost to process and time to process these patients is so cumbersome that more than 80% never get processed and these dollars are just written off. I would love to share more if you request it




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