Reform must reward low-cost, high-quality hospitals

Posted Nov. 20, 2009, at 6:53 p.m.

Maine’s 39 community and specialty hospitals strongly support health care reform at the national level that would expand insurance coverage, slow the escalation of costs and improve the quality and safety of health care services. Clearly the current system is unsustainable and needs significant reform and soon. It is also clear that the states cannot do it on their own.

As community nonprofit hospitals, we experience every day the reality of what it means for a family to be without health insurance coverage. Although care is always available in our emergency rooms, too often when people lack coverage they delay accessing important preventive care and basic primary care until they are very ill. Access to affordable coverage is critical to obtaining the right care at the right time and in the right setting.

Yet Maine hospital leaders are very concerned about a one-size-fits-all approach to health care reform that doesn’t recognize real regional differences in health care quality, spending and costs. Maine hospitals are high-quality and low-cost. The Agency for Healthcare Research and Quality ranks Maine hospitals as third best in the nation in overall quality. Hospitals achieve this quality by spending an average of $6,952 per Medicare enrollee — far less than the national average of $8,304.

Hospitals understand that the biggest challenge for expanding access to coverage will be the price tag and the best way to pay for it. Some reform plans propose across-the-board cuts to hospital Medicare reimbursement. Estimates project that Medicare reimbursement for Maine hospitals would be cut by more than $800 million over 10 years as a result of the House health care reform bill and the likely proposal in the Senate. Such cuts harm Maine hospitals and ignore how our hospitals differ from the rest of the nation in cost and quality of care.

Maine hospitals receive the second-lowest Medicare reimbursement in the country despite being nationally recognized for providing high-quality care. Maine hospitals are reimbursed slightly more than 79 cents for every $1 of care they provide Medicare patients. Nationally, the average reimbursement is about 90 cents for every $1 of care provided.

Consequently, in 2007, hospitals in Maine incurred over $142 million in Medicare losses because of the unreimbursed costs of caring for Medicare beneficiaries. On top of that, Maine’s hospitals had more than $260 million in uncompensated care costs between bad debt and services provided through charity care.

The Medicare losses aren’t because Maine’s hospitals’ costs are higher — indeed our costs are in line with the national average and below the New England average. Rather, the formula used to figure Medicare reimbursement unfairly assumes that the difference in wages between urban and rural states is greater than it really is. Maine hospitals must compete with urban areas to our south for health care professionals and recruit for physicians in a national market.

Policymakers in Washington must understand the challenges that we in Maine face to preserve access to health care services. Maine’s hospitals subsidize an array of services including physician services, mental health services, home health, long-term care and public health. We do this to ensure access to vital services that otherwise would not be available without the hospital’s financial support.

Maine’s hospitals employ more than 78 percent of all primary care physicians and 45 percent of all licensed physicians in the state. In 2008, Maine’s hospitals spent more than $70 million subsidizing access to these physician services. Diverting money away from hospitals through Medicare cuts will hamper our ability to preserve this access and, worse, will increase cost shifting to the private sector with a corresponding increase in commercial health insurance premiums.

The good news is there’s a way to fix all of this. Any reform package must change the payment system to reward low-cost and high-quality providers such as Maine hospitals. This will lower the cost of health care in Maine, create the right incentives to positively change the system and preserve hospitals’ ability to meet their communities’ needs and preserve Maine jobs.

Steven R. Michaud of Topsham is president of the Maine Hospital Association.

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