Researchers predict Medicare price cuts will lead hospitals to reduce numbers of staffed beds. The effect that response will have on quality of care and access remains unknown.
Medicare price cuts under the Patient Protection and Affordable Care Act will likely lead hospitals to reduce their numbers of staffed beds, resulting in a drop in inpatient service utilization among the elderly, according to a Health Affairs study.
"Medicare is going to have its foot on the brakes in terms of price growth going forward," says study co-author Chapin White, a senior health researcher at the Center for Studying Health System Change in Washington, D.C. "It seems like that may continue to restrain the size of the hospital industry and contribute to lower trends in utilization."
That's good news in terms of containing healthcare spending, but the effect a shrinking supply of staffed hospital beds will have on quality of care and Medicare beneficiaries' access to services is unclear, he says.
The PPACA contains Medicare cuts that will reduce Medicare expenditures by an estimated $379 billion from 2012 to 2021, according to Congressional Budget Office projections. Hospitals could respond in a number of ways, according to the study.
Analysts have cited a range of possible hospital responses to Medicare price cuts. Some have speculated hospitals could increase the volume of Medicare services they provide to compensate for lower pay rates, or they could "upcode," which would involve changing their reporting of diagnoses and procedures to increase payments — a controversial practice highlighted by the Center for Public Integrity last year.
Finally, hospitals could "cost shift" by raising the prices they charge private health insurers. However, Dr. White has studied the cost-shifting theory and found hospital markets with relatively slow growth in Medicare inpatient hospital payment rates also showed slow growth in private insurer pay rates. Dr. White’s recent findings suggest Medicare price cuts will lead hospitals to reduce their capacity and output.
He and Truven Health Analytics Research Leader Tracy Yee used data from 10 states from 1995 to 2009 to examine the market-level relationship between Medicare prices and elderly patients' hospital utilization rates. They concluded through regression analyses that a 10 percent reduction in Medicare prices would drive discharges among elderly patients down by 4.6 percent, coinciding with a 6.3 percent decrease in staffed beds. The researchers found Medicare price cuts didn't have an impact on patient case mix and length of stay.
These results suggest Medicare price cuts could save the federal government even more than expected as utilization decreases, Dr. White says. However, researchers are not sure whether that drop in beneficiaries using hospital services will represent a needed reduction in unnecessary treatment or a potentially harmful decline in access to care.
The study concludes the price reductions in the PPACA and their potential effects on the budget and the care beneficiaries receive needs close scrutiny. Dr. White says he hopes to revisit the issue to resolve unanswered questions.
"There are some people who will see lower inpatient utilization and interpret that as reduced access," he says. "There are other people who see that and might think there are people who didn't really need to go in the hospital, and somebody made a good decision to keep them out. The truth is probably some mixture of those. At this point we don't have enough information to tell which story is closer is being right."
More Articles on Medicare Payments:
Bipartisan Panel to Consider Medicare Reform
Medicare Advantage Not Hurt So Far by PPACA Cuts
Study: Medicare Costs for Heart Attack Patients Up 17% Over 10 Years