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Local health providers facing more Medicare patients, less Medicare money

Published: Thursday, June 20, 2013 5:30 a.m. CDT • Updated: Thursday, June 20, 2013 7:08 p.m. CDT

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Tammy Pressley and others in the business of health care can’t say for sure how much they will be paid to provide care to the expanding number of Medicare patients.

But Pressley – director of community, government and public affairs at Cadence Health, the health care organization that runs Delnor Hospital in Geneva – said they know the general direction it’s headed.

“We fully anticipate our reimbursements will continue to decline,” Pressley said. “We don’t see any remedy to the situation on the horizon.”

For the past few years, hospitals and other health care providers and professionals have grappled with a fast-arriving new reality. While they say they always have been paid less than their costs for services rendered to patients covered by Medicare, the reimbursement rates have tightened.

Under the Affordable Care Act – known as “Obamacare” by many – providers already were anticipating belt-tightening in response to tighter Medicare reimbursements and other cost-control measures.

Across the country, smaller hospitals, fearing an inability to remain solvent amid the new environment, merged with larger hospitals with deeper pockets.

That process played out locally, too. Delnor merged with Central DuPage Hospital in Winfield to form the new Cadence system in 2011, and three hospitals in Elgin and Aurora became parts of larger health care groups.

Still other hospitals, and particularly those heavily dependent on Medicare-eligible patients, have laid off workers and reduced services.

However, while health care organizations anticipated the coming changes under the ACA, this year also has brought an added pinch from the federal sequestration budget cuts, which trimmed Medicare reimbursements by 2 percent.

And the federal Medicare Payment Advisory Commission last week recommended altering the payment arrangements more by further cutting payments by about 5 percent to hospitals and hospital clinics.

Local health care providers said the sequester cuts have had an immediate impact on their bottom lines. At Cadence, for instance, about 37 percent of patients treated at both Delnor and CDH are covered by Medicare. An additional 11 percent are covered by Medicaid, Pressley said.

Pressley said the sequester cuts alone will lead to a $50 million rate reduction at Cadence over the next 10 years. And at Advocate Sherman Hospital in Elgin, Medicare and Medicaid also account for about half of its revenue, a spokeswoman at that hospital said. However, she did not specify how much revenue the hospital stands to lose.

Representatives of the local hospitals said their organizations have responded to the cuts by trimming expenses and attempting to “increase efficiencies.”

At Cadence, Pressley said the cuts have not prompted staff cuts or decreased services.

“We’re growing as a system,” Pressley said. “We’re definitely not contracting.”

At Advocate Sherman, a spokeswoman said the hospital has reduced “supply chain costs” and increased “productivity through new staffing models.”

The cuts also affected physicians in private practice and clinics, such as Advocate Dreyer Medical Clinic, which operates locally in Aurora and Batavia, as well as Kendall, Will and DeKalb counties.

There, Jon Christofersen, a doctor who works at the clinic and serves on the clinic’s board of directors, said the sequester cuts alone have cost the clinic, which provides care during more than 700,000 physician office visits each year, about $750,000 a year.

The lost revenue may prompt the clinic to reevaluate whether it can continue to provide profit-sharing bonuses for its employees.

He said the clinic also is unable to pass on higher costs to non-Medicare patients or even uninsured patients to make up the difference, because of contracts with insurers that set rates and policies to offer discounts to those paying in cash.

But even as federal regulations further pinch Medicare funding, local health care professionals worried that their burdens will only grow as the market changes in other ways.

Pressley noted that nationwide, an aging population is adding 11,000 baby boomers to Medicare eligibility each day.

And Christofersen said he believes reduced Medicare reimbursements will pull even non-Medicare third-party reimbursements down toward the lowered Medicare rates through the regulated health insurance exchanges created under the ACA.

“If Medicare was our only payer, or if all payers come down to Medicare rates, as is expected with the exchanges, we would not have enough income to stay in business with our current structure,” Christofersen said.

But Pressley, Christofersen and others said the health care marketplace is evolving too rapidly to offer predictions that are too draconian.

Christofersen and others said the way doctors and hospitals are reimbursed has begun to change, moving away from a fee-for-service model which encourages quantity of visits or services, to a value-based model that Christofersen said could encourage a better quality of care.

“There are still so many unknowns,” Pressley said. “But our expectation is to continue to plan for declining Medicare revenue.”

*Note to readers: The online version of this story has been edited to correct an error.

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