Thursday, October 1, 2009

Health care re-form XII (Random chart)

So, do hospitals really 'lose' money on Medicare and Medicaid? The charts above (source: the Medicare Payment Advisory Commission's (MedPAC) 'Hospital inpatient and outpatient services' report) show that the overall Medicare margin has been deteriorating since 1997 and has been negative since 2003... It also shows that while the margin is negative overall, the effect is different for different groups of hospitals, and there are some that have positive margins.

As always, when you start to drill into the underlying data it gets very complicated in a hurry. Here's an article, 'Does Medicare Under-Pay Hospitals,?' that looks at this question and concludes that, "The situation with Medicare payments and hospital profits is much more complicated than some people would like to suggest The losses many hospitals report may be real, but there is tremendous variation depending on management choices, location, and the ways in which costs are incurred. Some hospitals are indeed losing large amounts on Medicare services, while others actually are making a profit. Most individual Medicare patients are profitable. Many others could make a profit if hospitals improved their operations." The reader may or may not agree with this conclusion...

The one thing this blogger takes issue with in the article cited is the fussing re hospital CEO pay. Granted, there may be some CEOs that are overpaid, and such cases should be dealt with. But to generally fuss that "many hospital CEO’s now making seven figure salaries" without providing any context is simply a silly appeal to the lowest common denominator. Some of these hospitals are huge and this blogger would expect that the CEOs would be paid commensurately to the size of their responsibility! For example, the University of Pittsburgh Medical Center Presbyterian has annual revenues of $9.2 billion. A six- or seven-figure salary is certainly appropriate in this case!

The above discussion has all been regarding Medicare, what about Medicaid payments from the states? Generally Medicaid payments are lower than the corresponding Medicare payments for the same services, averaging just 72% of Medicare's level. So, here it would seem fairly sure that any "loss" is greater. Drilling in, we find that there is a large geographic variation, and there are some states where Medicaid pays the same as Medicare...

The bottom line answer? An overall 'yes' that masks wide variations. As annoyingly always in the health care debate, no easy answers!

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