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Changes and challenges

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Healthcare financial experts have raised concerns about how non-profit hospitals will be impacted by healthcare reform that will bring difficult challenges of reduced payments while hospitals are also being tasked to improve efficiency.

Moody’s Investors Service warns stand-alone community hospitals could suffer, which might force spending cuts and mergers among smaller hospitals after healthcare reform measures become effective in 2014.

Representatives of some of Mississippi’s non-profit hospitals say it is too soon to know how they will be impacted.

Shannon Coker, director of advocacy and communications for the Mississippi Hospital Association (MHA), said while the full impact of healthcare reform is still unclear, MHA will continue to closely monitor the situation to help ensure that hospitals continue to provide access to high-quality healthcare.

“The MHA will keep working closely with the American Hospital Association (AHA), the national equivalent of the association, Congress and stakeholders to stay informed on how healthcare reform legislation will impact hospitals and the patients we serve,” Coker said. “We will work to protect our hospitals in the areas of reimbursement and preparedness through proactive advocacy, education and information.”

Coker said the Patient Protection and Affordable Care Act (H.R. 3590) does include additional criteria for non-profit hospitals to retain their Section 501(c)(3) tax-exempt status. Non-profit hospitals were mandated to comply with many of the new rules for tax years, beginning  March 23.

“However, non-profit hospitals will have two additional years to comply with new requirements focusing on community health needs assessment and reporting, which take effect for tax years beginning after March 23, 2012,” Coker said. “In some regards, hospital charity care and bad debt expenses should decrease as more Americans become insured. Additionally, hospitals that employ physicians should see revenue gains from increased Medicaid payments to primary care physicians. However, all hospitals will have to deal with decreases to Medicare reimbursement and disproportionate share (DSH) funding, and some hospitals could see even further Medicare reductions.”

Jonathan R. Werne, an associate with Brunini, Grantham, Grower & Hewes, PLLC, said uncertainty abounds for non-profit hospitals regarding the implications.

“It will be some time before this uncertainty disappears,” Werne said. “Multiple lawsuits have been filed throughout the U.S. challenging the constitutionality of the Health Reform Law. For example, 20 states have filed a lawsuit in the Northern District of Florida against the U.S. Department of Health and Human Services, U.S. Department of Treasury and the U.S. Department of Labor alleging the Health Reform Law is unconstitutional. Many of these constitutional challenges focus on the new federal mandate that requires all qualifying citizens and legal residents to obtain healthcare coverage or pay a penalty.  Even if successful, these constitutional challenges will not overturn the Health Reform Law in its entirety.”

Werne said the Health Reform Law’s multiple cuts to hospital reimbursement are a concern. Beginning in 2010, the Center for Medicare & Medicaid Services will reduce the market basket update for inpatient and outpatient hospital prospective payment systems.

“The market basket update is used to update payments to hospitals for services provided to Medicare patients,” Werne said. “Hospitals will begin to receive reduced payments for certain patient readmissions and hospital-acquired conditions.”

The Health Reform Law also reduces the Medicare Disproportionate Share Hospital (or DSH) payment starting in 2014. The Medicaid DSH payment will also be reduced starting in 2014:  a payment reduction of $500 million for 2014, $600 million for 2015, $600 million for 2016, $1.8 billion in 2017, $5 billion in 2018, $5.6 billion in 2019 and $4 billion in 2020 (the amount of the Medicaid DSH payment will vary by state as determined by the Secretary of the HHS).

“DSH payments are additional payments to hospitals that serve a significantly disproportionate number of low-income patients,” Werne said. “The economic impact of these cuts is uncertain. For example, the Congressional Budget Office (CBO) projects roughly a $22-billion cut in total Medicare DSH payments, while the Office of the Actuary of the Centers for Medicare and Medicaid Services (CMS) projects a total $50-billion cut. Another example, CBO projects a $156-billion reduction in Medicare ‘market basket’ and productivity adjustments, while the CMS Actuary projects a $233-billion reduction.”

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