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1st appeared
17
March 2000
Troubled Times for Teaching Hospitals The UCSF Medical Center’s ongoing economic pressures – unrelated to the merger -- mirror the woes experienced by many US urban teaching hospitals. As the health care marketplace becomes more price competitive, all payers – including private payers, Medicare and Medicaid – are reducing their payments to teaching hospitals, which are no longer able to bill at rates that reflect the extra costs of their missions of teaching, research and patient care. Many patients require costly, complex tertiary care not provided at community hospitals. At the same time, academic medical centers, including UCSF, are experiencing higher costs for labor, drugs, medical devices, new technologies and information system upgrades. "The annual increases in these costs exceed the gains in reimbursement by payers, so the shortfall gets worse every year," adds Ted Schrock, chief medical officer at UCSF. Teaching hospitals across the country are feeling the pain from these financial pressures. According to recent news reports:
The UC Regents on Wednesday heard the sobering news about UC’s medical centers, each of which must continue to focus on cost reductions where appropriate – literally scrutinizing every program and physician practice. "We are focusing campus by campus to be as efficient as we can," said William Gurtner, UC vice president for clinical services development. Gerald Levey, dean of the UCLA School of Medicine, says one of the lessons learned from the recent painful process of cutting $40 million in expenses from the hospital and $20 million from clinical departments is that the crisis forced faculty and staff to recognize their weaknesses and inefficiencies. The other lesson, he says, is that they realize that they have not successfully made the case to support academic medicine to their elected representatives. "On a national level, when the Balanced Budget Act occurred, I think we were asleep at the switch," Levey told the Regents. "I don’t think we’ve done a particularly effective job in educating Congress as to the importance of academic medical centers." The Balanced Budget Act (BBA) has been devastating to UCLA, he says, equating to an $18 million loss this year alone. Several Regents echoed Levey’s sentiments, with Regent Howard Leach calling upon President Richard Atkinson and the University of California to lead the effort to educate and gain support for academic medical centers nationwide. Scott Sudduth, assistant vice president for federal governmental relations at UCOP, told the Regents that legislators are not looking to Medicare to solve reimbursement woes for teaching hospitals. Faced with increasing eligibility of Medicare beneficiaries due to the aging population and the need to keep costs down, some congressional leaders are considering other alternatives to lend financial support to academic health centers, he says. One controversial proposal is to set up a general revenue fund to finance academic medicine, which would subject UC medical centers to the annual appropriations process. "We are seeing the beginning of a national debate as to how to pay for medical education," Gurtner says. "What we are seeing at all five medical centers is that the historic funding stream of academic medicine is changing." Call for action Calling attention to the financial crisis, the Association of American Medical Colleges (AAMC) last week worked with the American Hospital Association and other national hospital organizations to launch an advocacy campaign to Congress. The goal is to gain support for legislation providing financial relief, including protecting teaching hospitals from further impact of Medicare cuts mandated by the BBA of 1997. The BBA’s changes to Medicare and Medicaid provider payments include reductions in payments for wages, drugs, devices, medical supplies and new technology plus cuts in payments that specifically reimburse teaching hospitals. Chief among these changes are reductions in Medicaid Disproportionate Share Hospital (DSH) payments for treating uninsured and low-income patients in addition to reductions in Medicare payments that reimburse teaching hospitals for the higher costs associated with educating health care professionals or Indirect Medical Education (IME). After the academic medical center community rallied together, Congress passed the Balanced Budget Refinement Act (BBRA) last year. Although it is considered an important first step, the BBRA merely delays the implementation of the 29 percent cut in IME payments by one year. It maintains IME payments at 6.5 percent in fiscal year 2000 before reducing IME to 6.25 percent in fiscal year 2001 and to 5.5 percent in fiscal year 2002, according to the AAMC. The typical teaching hospital will still lose more than $40 million between 1998 and 2002, even with the enactment of BBRA. Total operating margins will continue to decline by over half from 4 percent in 1998 to 1.6 percent in 2002, according to the AAMC. The purpose of AAMC’s letter-writing campaign is to urge representatives to co-sponsor and support academic medical centers as House and Senate committees hold hearings on the fiscal year 2001 appropriations, which include Medicare reform and prescription drugs. From these discussions, legislators will develop a priority list for federal funding for fiscal year 2001. To assist AAMC-member institutions and their faculty, staff and students in their efforts to communicate with their federal legislators, the association has expanded its web-based grassroots site. This site, currently provides essential information on three leading issues needing immediate action, including relief from the BBA, a 15 percent increase in funding for the National Institutes of Health and a 10 percent increase in funding for health professions programs authorized under the Public Health Service Act. To impact the House and Senate appropriations process, letters should be sent in the next three weeks. Link: Regents Hear Financial Forecast for Medical Center Source: Lisa Cisneros, Newsbreak Editor |
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