The cuts come primarily from the healthcare reform bill passed by Congress in March, which requires approximately $155 billion in cuts in exchange for expanded coverage for uninsured patients. These will come mainly in the form of cuts to Medicare reimbursement payments.
Additional cuts will come from a bill passed by the Senate in June. This law’s primary goal is putting a 21 percent Medicare payment cut on hold until a more permanent solution can be reached, but in exchange, hospitals will no longer be able to submit separate claims for inpatient and outpatient therapeutic care within 72 hours of admission. The Congressional Budget Office estimates that this measure will save approximately $4.2 billion over the next 10 years.
Both Peg Burnette, CFO of Denver Health, and Clifford Deveny, MD, president of Summa Physicians, the physician practice arm of Akron, Ohio-based Summa Health System, believe that their hospitals are ready to handle the cuts.
Denver Health has been implementing lean business practices for the last five years in an effort to save money, says Ms. Burnette. It all began in 2005, when Denver Health CEO Patricia Gabow, MD, decided that the system needed to change. “She became frustrated with the fact that if felt like we had been doing things the same way since she was an intern,” says Ms. Burnette. “She saw waste everywhere she went.”
The system turned to an outside company to help it implement lean practices. Today, it uses lean processes in 14 major areas, called value streams, which each have an executive board sponsor. According to Ms. Burnette, lean has already saved approximately $50 million. “We have seen real results in our financials as a result of lean,” she says. “The cuts are not going to come right away, so we will manage that. A big part of how we will address that is to continue to implement lean.”
Summa Physicians have also implemented practices that Dr. Deveny believes have prepared them for the cuts, with the goal of bringing down cost while meeting quality guidelines. According to Dr. Deveny, Summa has been moving in that direction philosophically for the last 10 to 15 years, but in the last six months, work groups have been created to put together demonstration projects to create an accountable care organization.
“Our health system has seen this coming for a while,” he says. “Rather than be victims, we decided we would be proactive.”
How is your hospital preparing for these cuts? Share your thoughts by emailing Lindsey Dunn, editor of Becker’s Hospital Review, at lindsey@beckershealthcare.com, or posting your comments below.
