Hospitals nationwide continue to be relied on to serve their communities following a global pandemic, but the financial reality is hospitals are not fully compensated for a significant amount of the care they provide.
The cost of providing care is rising, in part because onerous insurance company policies and regulations – like prior authorization – divert caregivers’ valuable time away from patients. Other sources of financial strain, such as high labor costs and workforce shortages, are only worsened by severe underpayments from the federal government for care provided through Medicare and Medicaid – offsetting whatever savings hospitals may otherwise manage to attain.
Underpayments are defined as the difference between the cost of providing care and the reimbursement received by hospitals. Currently, Medicare and Medicaid account for more than 60% of care provided by hospitals, but Medicare only pays hospitals 84 cents to the dollar of care provided, while Medicaid pays 88 cents to the dollar. In fact, underpayments to hospitals for Medicare and Medicaid amounted to more than $100 billion in 2020.
This creates large financial deficits, forcing hospitals to find other sources of revenue to compensate for losses on the cost of care. But this does not stop hospitals from continuing to serve patients in need and offering high-quality care, regardless of a patient’s ability to pay.
Because they do not fully cover the cost of providing care, any reductions in reimbursements from public programs like Medicare and Medicaid can have devastating consequences for access to care. Similarly, allowing insurance companies to set prices would amount to funding cuts for critical hospital services.
As hospitals continue to face mounting financial pressures nationwide, it is paramount that policymakers reject any reimbursement cuts that could put patients’ access to care at greater risk.
“Site-neutral” regulations could cause irreparable harm to this access by falsely equating the costs borne by hospitals with those of other sites of care that have fewer regulatory requirements and treat patients that are healthier, wealthier and have fewer complex conditions. As patients continue to seek out the high quality care they need, it is vital that lawmakers do not cause access to these essential sites of care to disappear through misguided cuts.
Solving rising expenses will take time and a comprehensive, systematic approach accounting for all factors at play. As policymakers seek those solutions, they must protect America’s patients and the care they depend on – and that starts with protecting the hospitals that serve them.