Thursday, April 13, 2023

1 in 5 California Hospitals is in Danger of Closure

California hospitals are in serious trouble due to:
  • The misguided government prohibition against non-COVID care during the pandemic;
  • Overall inflation;
  • And chronic underpayment from Medicare and Medicaid (only covering about 75 cents on the dollar of actual costs).
The underpayment then forces employer plans to pay absurdly high prices (224% of Medicare in last year's study) to make up for the fact that many hospitals can't survive on government reimbursements.

When Medicaid (Medi-CAL) first passed, it was designed to cover the lowest 2% of wage earners. It now makes up 80% of patient volume at many of these rural hospitals, and about four in ten Californians are born into it. That's what you call mission creep at its finest.

As Patty Maysent, the CEO of UC San Diego Health, explains, "[t]here are hospitals all around the state ... that are two, three or four months away from running out of cash."

There are answers! Employers need not suffer through this. I've written about this extensively. Here are a couple of good starting points:
  1. The fiduciary imperative of reference-based pricing: A legal and financial analysis; and
  2. America will dramatically change the way it provides health care by 2030