Cities and counties dumping hospitals in advance of ObamaCare
posted at 9:30 am on August 31, 2010 by Ed Morrissey
Hey, maybe they just need some reeducation! Either that, or cities and counties that already have stressed budgets and limited means of raising revenues are looking to escape the vastly escalating costs of providing health care. The Wall Street Journal reports that many of these facilities are providers of last resort — the exact places where millions of new Medicaid patients would have gone for care:
More than a fifth of the nation’s 5,000 hospitals are owned by governments and many are drowning in debt caused by rising health-care costs, a spike in uninsured patients, cuts in Medicare and Medicaid and payments on construction bonds sold in fatter times. Because most public hospitals tend to be solo operations, they don’t enjoy the economies of scale, or more generous insurance contracts, which bolster revenue at many larger nonprofit and for-profit systems.
Local officials also predict an expensive future as new requirements—for technology, quality accounting and care coordination—start under the overhaul, which became law in March.
Moody’s Investors Service said in April that many standalone hospitals won’t have the resources to invest in information technology or manage bundled payments well. Many nonprofits have bad credit ratings and in a tight credit market cannot borrow money, either. Meantime, the federal government is expected to cut aid to hospitals.
“We’ve been hit by that whiplash recently, with industries closing down and the number of insured growing less,” said J.D. Mosteller, the attorney for Barnwell County, S.C., which is considering selling its hospital.
Right now, that just means that the facilities get sold to for-profit chains. Those organizations don’t necessarily have a mandate to keep underperforming locations open for business, however. Given that these hospitals and clinics usually service the people who pay the least — Medicaid and indigent patients — they will likely get the axe as companies consolidate. Cities and counties have little choice but to get out of the hospital business for the same reason, especially when the 16 million Medicaid patients start flooding their waiting rooms because private-sector providers won’t accept Medicaid reimbursement rates.
Government sales of hospitals and clinics have hit a rate not seen in almost twenty years. It’s the result of years of neglect of the problems inherent in the third-party payer system and especially the government-run systems that generally feed these locations, but certainly ObamaCare doesn’t help, for the above reasons. The rational policy choice would have been to pursue reforms that eliminated the tax breaks on third-party-payer comprehensive insurance and moved people to reliable and inexpensive catastrophic policies, where young people have the same interest in protection and share the risk pool willingly with older people and pay premiums that make sense for themselves. Rather than dictating reimbursements from Washington, these facilities would have been able to work with higher-paying private insurers — and kept these cities and counties from diving into a sea of red ink.
As ObamaCare produces more demand at ridiculously low reimbursement rates, private-sector providers will simply refuse to accept them, and these hospitals are expected to take up the slack. What happens when they’re no longer around? That Medicaid expansion won’t mean much at all in that circumstance.