ACA Cuts Worry Hospital Executives; Cost Efficiencies Being Implemented

Hospital executives report an increase in confidence in the overall economy, but fear the impact of reimbursement cuts from the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) will not be offset by increases in volumes from insured patients, according to the Hospital Executive Confidence Index reported by ITG, a market research company. Executives were looking towards new reimbursement models and new technology solutions as a way to discover new efficiencies, according to the report. In addition, hospital executives report that purchase trends will continue for new equipment and capital improvements, but that the amount spent on large capital purchases will be less.

ACA Concerns

More than 60 percent of hospital executives continue to be concerned about Medicare and Medicaid reimbursement cuts from the ACA. While they report an increase in volume of insured patients in their outpatient departments, they are worried about a decrease in inpatient volumes. “The implication is that executives are concerned that any increase in volume of insured patients from the new healthcare law will not offset the significant cuts they are seeing in reimbursement,” said Graeme Christianson, Director of Healthcare Market Research at ITG. Most acknowledge, however, that the full impacts of the ACA changes have yet to be realized.

New Payment Methods

To address these concerns, many executives are looking for efficiencies in newer reimbursement methodologies. Executives report a growing interest in entering into risk-based relationships with private and public payers, which they expect to have a dramatic impact on their cost management. Risk-based contracting has penetrated a small proportion of the market, according to the hospital executives, but almost half of the executives surveyed plan to begin implementation of risk-based contracting within the next year. The most common risk-based models currently in use are shared savings and bundled payment programs, but a number of hospitals are entering into accountable care organizations and group purchasing organizations, as well. In the short-term, a third of the executives report that they will be putting staffing cuts in place during the next year as a way to reduce cost, as well.

Infrastructure Investments

Nearly 90 percent of the executives surveyed indicated that their hospitals have a fully functioning electronic medical records system, but many of the executives according to the report are asking, “O.K. so what’s next?” To that end, many executives are investing in new health care information technology (IT) to use that data to uncover efficiencies and cost management benefits. The report showed that executives are also investing in robotic surgical equipment and a variety of cardiovascular, orthopedic, and spine implant equipment. Even with these new expenditures on equipment, over 40 percent of the executives surveyed said they expect to spend less on large capital equipment over the next year.

“There has been a promising uptick in executive confidence about the overall economy,” said Christianson. “But executives are now asking when this economic lift will translate into improvements in the financial performance of their hospitals or health systems,” continued Christianson.