Hospitals Made Their Bed, but They Don’t Like Laying in It

by James A. Bacon

The Virginia Hospital & Healthcare Association has joined the Virginia College of Emergency physicians in suing the state Medicaid program over emergency budget cuts that they claim will cost them $55 million in reduced Medicaid payments, reports the Richmond Times-Dispatch.

The cuts will create hardship for hospitals already struggling with increased costs and decreased revenue relating to the COVID-19 epidemic, the VHHA says. Virginia hospitals claim to have suffered a net loss of $1 billion from March through June, even after federal aid from the Provider Relief Fund is taken into account. Losses for the year could exceed $3 billion.

I’m almost tempted to sympathize with the hospitals over a plight not of their making…. until I remember that Virginia’s hospitals led the charge for Medicaid expansion in 2018. And that, before the epidemic, Virginia’s biggest tax-exempt “nonprofit” healthcare systems earned profit margins far in excess of the 3.0% considered adequate for financially healthy hospitals, some of which they devoted to buying up doctors’ practices, starting their own insurance companies, and otherwise shoring up their vertically integrated monopolies.

The hospitals forgot a critical lesson: Politicians have no loyalty but to themselves. What the General Assembly giveth, the General Assembly can taketh away — and usually will in times of financial stress. Virginia’s hospitals fought for a bigger government role in healthcare, and they got it… good and hard.

The General Assembly enacted budget cuts to Medicaid reimbursements for providers during the April reconvened session as part of the state’s response to the COVID-19 budgetary emergency, which was expected to hammer state revenues. The budget directs Medicaid to reduce payments for emergency room services deemed later to be unnecessary and cut payments by half when Medicaid patients are readmitted to the hospital within 30 days if the return is later deemed to be preventable.

The state had already applied similar provisions to six managed-care insurance companies that oversee 90% of Virginia’s 1.6 million Medicaid recipients. “This is just making the hospitals accountable as well,” said Sen. George Barker, D-Fairfax.

“Pandemic or not — these policies are fundamentally flawed, constitutionally invalid, and a violation of federal law and regulations,” said VHHA spokesman Julian Walker. “The devotion to patients shared by Virginia doctors and hospitals compels us to stand against policies such as these that treat Medicaid beneficiaries as second class citizens when it comes to their health care.”

Walker is right: Low Medicaid reimbursements do force hospitals and physicians to treat Medicaid patients as second-class citizens. What he overlooks is that when Medicaid expenditures have grown as rapidly as they have — gobbling up discretionary revenues and crowding out spending on K-12 education, higher ed, and public safety — politicians periodically come under tremendous pressure to slash spending. And following the famous dictum of bank robber Willie Sutton, they go where the money is, which means hospitals and doctors. 

Virginia’s hospitals could have adopted a different strategy over the past decade:  pursuing public policies that increased competition, empowered consumers, promoted innovation in healthcare delivery, boosted labor productivity, drove down costs, and improved outcomes, in sum, making healthcare more accessible by making it more affordable. But they didn’t. They have exercised their political clout to block competition, protect their turf and maximize government revenue.

This is what happens when you become wards of the state.

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7 responses to “Hospitals Made Their Bed, but They Don’t Like Laying in It

  1. What did hospitals do BEFORE the Medicaid Expansion?

    who paid then? And what happened to people who went to the ER and could not pay?

    Now that we have people covered – we say they are treated as second class citizens.. ???

    It’s hard to understand exactly what Conservative are offering as alternatives. Oh yeah.. they want independent ambulatory centers that will sell services cheaper – like anyone who has insurance would actually pay less…

    The basic problem with Conservatives and health care – is that they have no real answers… they just would rather pretend it all go away and blame government.

    • There are 9,280 ambulatory care centers in the US. Half again more than the number of hospitals. I give up Larry – if people with insurance don’t use these centers then who does?

      https://blog.definitivehc.com/how-many-ascs-are-in-the-us#:~:text=Currently%2C%20there%20are%20more%20than,Healthcare's%20platform%20on%20surgery%20centers.

      • They DO use them but if they have insurance, the charges are determined by reimbursement that they have no control over.

        And in most areas – the insurance pays the same reimbursement no matter what facility you go to.

        • Larry, you are incorrect. Please go to: https://vhi.org/HealthcarePricing/default.asp to see the difference in insurance reimbursements depending on where you go.

          Use whatever example you wish, but for arthroscopic knee surgery, here are the numbers using statewide medians:
          Ambulatory Surgical Center: $4558
          Hospital Outpatient Department: $7270

          As for the methodology used to get these figures:

          “Claims are paid by health insurance carriers for the service billed by health care providers. These claims include the type of service performed and the allowed amount for each service”

          “Paid claims are submitted by health insurance carriers to the Virginia APCD which are then edited, combined and aggregated by VHI”

          So it matters, a lot, including when you pay your co-pay.

          • Jim – did you read the front of the report you provided?

            ” Here’s how this report can help you:
            Are you uninsured?
            Do you have a high deductible healthplan or high co-pay?”

            So this is for people who are paying out of their own pockets not for insurance reimbursements.

            And as you probably already know – the insurance companies and the provider will not reveal the price charged.

            In fact, Trump and the GOP claim they are going to force them to reveal it but right now – if you have insurance, you don’t know except when you get your EOB .

  2. Larry, I think you need to read more on the report methodology:

    http://www.vhi.org/healthcarepricing/about_healthcarepricing.asp

    http://www.vhi.org/apcd/

  3. re: ” So it matters, a lot, including when you pay your co-pay”

    okay did go to your link – and this:

    “Because insurance plans may have different benefits, our report does not show you exactly what you will pay. This information may be available from your insurance carrier.

    Consumers without insurance coverage may not get as much of a discount as a larger health insurance carrier.

    The median allowed amount of a service for some geographic areas within a Virginia Health Planning Region may vary

    Some health insurance carriers may negotiate lower allowed amounts than others. State averages do not show the lowest allowed amount. In some cases, price variations between carriers were high.

    it does not sound like consumers have access to the data – right?

    Surely you guys have insurance and have had x-rays and stuff. Were you able to “shop around” and lower your co-pay?

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