Hospitals spend less on operations — largely by squeezing labor costs — to make up for lost revenue when Medicare cuts hospital prices, according to a study published in the journal Health Services Research.
The study found that hospitals eliminate 1.7 full-time jobs for every $100,000 drop in Medicare revenue. Nurses accounted for one-third of the reduced workforce. The study did not look at any impact on quality of care.
The results suggest that hospitals have the flexibility to respond as Medicare continues to squeeze hospital prices under the Patient Protection and Affordable Care Act, said co-author Chapin White, a senior researcher with the Center for Studying Health System Change and former principal analyst for the Congressional Budget Office.
“When Medicare cuts prices, it looks like hospitals figure out how to operate in a lower-cost way,” he said in an interview.
Many hospitals are moving aggressively to tighten spending on labor and supplies and to streamline care in response to recent and anticipated reductions in rates from public and private payers.
Under the ACA, Medicare will pay hospitals 1.1% less a year over a decade, starting in 2011, than it would have paid without the law, the study said.
That's $321 less per patient after 10 years, using a definition that accounts for patients who were admitted and those treated as outpatients, according to the paper. That takes into account the likelihood that private payers will cut prices as Medicare does....
Source: Modern Healthcare.
