Challenges to the financial stability of the American healthcare system

 

The American healthcare system is facing increasing financial instability according to the American Hospital Association (AHA). The organization said the situation that has been worsening over the years due to multiple factors, but the biggest contributors are the unsustainable, decreasing Medicare reimbursements combined with high inflation, rising drug and supply prices, staffing shortages and the resulting rise in staffing costs.

Health Exec spoke with Bharath Krishnamurthy, AHA director of health policy and analytics, who provided a comprehensive overview of the challenges and the steps needed to address them. He said the Medicare pays about 82 cents per dollar of actual cost to deliver care to patients. 

"There's no other sector where you're expected to operate on 82 cents for every dollar of cost and remain sustainable," Krishnamurthy explained. "Reimbursements for Medicare and Medicaid have continued to fall below the cost of providing care. Coupled with rising costs due to inflation, workforce shortages, and increasing prices for drugs and medical supplies, hospitals are in a precarious financial situation."

Hospitals, especially in rural and underserved areas, are already feeling the brunt of these financial pressures, which have led to a large number of hospitals closing their doors. Since 2010, he said over 130 rural hospitals have closed, and many more are on the brink of closing or reducing services offered

"Hospitals are being asked to do more with less. They must treat every patient, regardless of their ability to pay, and are struggling to maintain access to care under these financial conditions," Krishnamurthy said.

In addition, hospitals are not only dealing with financial shortfalls, but also increased regulatory requirements, such as maintaining cybersecurity standards to prevent cyberattacks.

Another major administrative burden that is driving up healthcare costs, leading to staff burnout and in some cases poorer patient outcomes, is the rapidly rising number of prior authorizations. Krishnamurthy said both Medicare and private insurers require many prior authorizations before a patient can diagnostic tests, drugs or treatments. 

A recent American Medical Association (AMA) survey found 78% of physicians reporting that prior authorization often or sometimes results in their patients abandoning a recommended course of treatment. The survey found 94% of physicians say prior authorization causes delays in the delivery of care. About 55% of respondents said care is delayed “always” or “often.” Read more

AHA advocacy efforts to keep the system stable

All these factors have called into question the financial stability of the American healthcare system. The AHA says these are critical issues that require urgent attention and action from policymakers. AHA said it is advocating for policies that protect hospitals' ability to provide high-quality care to all patients and to ensure healthcare services remain accessible across the nation. These advocacy areas include:

Federal funding and reimbursements: Essential healthcare services in all communities require improved federal funding for Medicare, Medicaid, the Children’s Health Insurance Program, and the health insurance marketplaces. Government programs often reimburse providers significantly less than the actual cost of care. AHA is actively working to stop cuts to Medicare and Medicaid reimbursements. They aim to protect Disproportionate Share Hospital (DSH) payments and prevent harmful site-neutral policies from impacting Medicare reimbursement. 

Patient access: Ensuring patient access to primary care and other outpatient services is crucial. This involves rejecting additional payment cuts and policies that restrict access to certain sites of care.

Commercial health insurers: The AHA is advocating for accountability among insurance companies, focusing on reducing the administrative burden on hospitals. This includes addressing prior authorization policies and other practices that delay care and increase costs. Holding commercial health insurers accountable also includes ensuring adequate provider networks, reducing account receivables and limiting inappropriate service denials.

Workplace safety: Strengthening workplace safety by enacting federal protections for healthcare workers against violence and intimidation is necessary. Krishnamurthy said this is needed to create a better working environment and to help retain staff during the overall growing shortage of healthcare workers.

Drug pricing: The AHA also wants to protect the 340B drug pricing program to ensure that hospitals can maintain vital patient services and expand access to care for lower income patients.

Workforce shortages: AHA is addressing physician and nursing shortages by advocating for increasing residency slots eligible for Medicare funding and reauthorizing nursing workforce development programs.

Telehealth and home programs: Making certain telehealth services permanent and creating a permanent Centers for Medicare and Medicaid Services (CMS) hospital-at-home program are important steps.

Tax-exempt status: Protecting not-for-profit hospitals’ tax-exempt status is vital for their financial health.

The AHA is calling on Congress to ensure that Medicare reimbursements are not cut further. They emphasize the need for a sustainable reimbursement model that covers the actual costs of providing care. Krishnamurthy stresses that hospitals need support from Congress to continue delivering high-quality care and maintaining their role as pillars of their communities.

"First and foremost, I think we need to ensure that they're not cutting reimbursement, which is already low. I think that's the number one thing. I think before we can even start thinking about what other reforms do we want to Medicare policy, we want to stop these harmful policies from going into effect in the first place. I think there is this narrative that hospitals are cash rich and they're able to provide all of these services to their patients. But the fact of the matter is not all hospitals are in that situation and hospitals need support from Congress so that their reimbursements aren't cut even further to the point where they simply just can't do business," Krishnamurthy said.

He added that money is also needed to continue to expand care and address things like health disparities, to bring in state-of-the-art equipment, better diagnostic testing, new treatments and to ensure high quality patient care.

Dave Fornell is a digital editor with Cardiovascular Business and Radiology Business magazines. He has been covering healthcare for more than 16 years.

Dave Fornell has covered healthcare for more than 17 years, with a focus in cardiology and radiology. Fornell is a 5-time winner of a Jesse H. Neal Award, the most prestigious editorial honors in the field of specialized journalism. The wins included best technical content, best use of social media and best COVID-19 coverage. Fornell was also a three-time Neal finalist for best range of work by a single author. He produces more than 100 editorial videos each year, most of them interviews with key opinion leaders in medicine. He also writes technical articles, covers key trends, conducts video hospital site visits, and is very involved with social media. E-mail: dfornell@innovatehealthcare.com

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