Struggling hospitals see new law as only first step

By Marion Davis
Contributing Writer
Don’t get them wrong – Rhode Island hospital leaders know how serious the uninsured problem is, and they realize the huge role of health care reform in solving it. More

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Struggling hospitals see new law as only first step

COST OF CARE: South County Hospital President Louis R. Giancola said that it’s too early to tell whether reform will significantly affect hospital finances.
By Marion Davis
Contributing Writer
Posted 5/10/10

Don’t get them wrong – Rhode Island hospital leaders know how serious the uninsured problem is, and they realize the huge role of health care reform in solving it.

It’s just that hospitals will pay a big part of the price, and in Rhode Island, most hospitals already struggle to break even. This year, almost all have been operating at a loss.

“I think that the effort to extend coverage to everyone is very important and a worthwhile outcome regardless of its impact,” said Louis R. Giancola, president and CEO of South County Hospital. “And at this point, it’s still too early to tell how it’s going to affect quality, services and the finances of hospitals.”

But hospitals are expected to contribute $155 billion to the reform budget over 10 years, the American Hospital Association has said, through reduced payment updates, decreases in Medicare and Medicaid disproportionate-share hospital payments, and financial penalties.

For South County and others, Giancola said, which already subsidize Medicare patients, because payments fall short of costs, the upcoming reductions make an “alarm bell” go off.

“If you take a program that already pays less than cost and you reduce what it’ll pay, it’s concerning. And we think it’s going to present significant challenges going forward,” he said. “It’s certainly going to encourage hospitals to become as efficient as they can possibly be.”

Statewide, health care reform is expected to reduce hospital payments by about $400 million, said Edward J. Quinlan, president of the Hospital Association of Rhode Island.

“So clearly that’s a significant impact, and hospitals will have to adjust,” he said. Rhode Island will also be particularly hard-hit, he noted, because it’s already 32nd in the nation in Medicare payments; in 2009, local hospitals got an average of 89 cents per $1 of costs.

The hospitals don’t all get paid the same – local institutions fall into two different markets, with Providence County hospitals paid more because they’re deemed to be part of the Boston labor market, and academic institutions paid extra for the cost of medical education. Plus every year, there are more performance incentives, both bonuses and penalties.

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