Health system CFOs are closely watching for potential Medicare and Medicaid reimbursement changes under the new administration, but many questions remain as House Republicans push a budget blueprint directing the Energy and Commerce Committee to cut $880 billion in costs over the next 10 years.
As hospitals brace for potential funding cuts, national hospital groups have responded with strong opposition, arguing that disrupting Medicaid coverage would not cut healthcare costs but merely shift them, while also weakening efforts to combat chronic disease.
Medicare and Medicaid reimbursement make up a substantial portion of many health systems' revenue cycles, and any cuts to these programs would have significant ripple effects.
"The biggest thing we're following now is reimbursement and changes in Washington. Medicare and Medicaid reimbursement is such a big part of our business," Matthew Arsenault, CFO of Coral Gables, Fla.-based Baptist Health South Florida, said during an upcoming episode of the Becker's CFO and Revenue Cycle Podcast. "We're pretty much in wait-and-see mode, but it could really change how we operate. We're closely monitoring what is going to make sure we're prepared for any changes."
Lawmakers have yet to specify how the Energy and Commerce Committee — which oversees Medicare and Medicaid — will save $800 billion over the next 10 years, but hospitals have argued that any drastic cuts to Medicare or Medicaid would result in millions of people losing coverage as well as a surge in uncompensated care for providers.
"There’s uncertainty around potential policy changes," George Wiley, CFO of Albuquerque-based Lovelace Medical Center and Heart Hospital of New Mexico, told Becker's. "There’s also been discussion about Dr. [Mehmet] Oz's involvement and his support for managed Medicare, which has already contributed to a significant rise in denials. At the state level, we're tracking multiple regulatory issues, including changes to malpractice costs, potential mandatory staffing ratios, and policies impacting average length of stay."
A key regulatory issue for health systems across the country is Medicaid supplemental funding programs.
"CMS has recently encouraged states to move toward supplemental funding that approaches average commercial rates, which has been incredibly important for supporting health systems — especially in states like Louisiana, Mississippi and Florida, where I’ve spent much of my career," Michael Gleason, CFO of Franciscan Missionaries of Our Lady Health System, said. "While this is a positive development, as with all government programs, policy changes can happen quickly and unexpectedly."
Tenet Healthcare CEO Saum Sutaria, MD, said during the company's Feb. 12 earnings call that states will play a critical role in advocating for continued Medicaid funding and reinforced the need for operating discipline during this time.
"[Medicaid] is not some program that's generating incredible windfalls for health systems," Dr. Sutaria said. "The reimbursement is still below the cost of that care and I think that's going to be an important balancing factor. The states will play an important role in this."
With lawmakers yet to specify how these cuts will be implemented, health systems remain in a holding pattern, preparing for a range of possible financial impacts.