HHIC Study: Hawai’i Hospitals May Lose $3.3B

Hospitals in Hawai’i, like Hilo Medical Center, Ka’u, Kona Community Hospital, and other medical facilities are estimated to lose $3.3 billion in funding from Medicare through 2024, according to the Hawai’i Health Information Corporation’s recent study, “Ouch! Mounting Medicare Cuts Hurt.” The reduction is the effect of cuts and underpayments for care being delivered to Medicare fee-for-service beneficiaries.

Beginning in 2010, the United States Congress and Centers for Medicare and Medicaid Services enacted Medicare payment reductions for hospital services. The cutbacks were an attempt to address the federal deficit and offset other program costs, like the expanding insurance coverage under the Affordable Care Act.

Between 2010 and 2024, changed in Medicare FFS payment will cost hospitals in Hawai’i an estimated $838 million, according to the study.

According to the study, as reductions are carried into the future, they will serve as the base for additional cuts, a snowball effect that will continue to decrease hospital payments. The cuts will continue Medicare’s underpayment for care, which occurs when the amount that it costs to treat a patient is greater than how much is reimbursed for the care.

The federal government determines Medicare reimbursement rates through an analysis of cost of care in jurisdictions. The payment rates in Hawai’i don’t cover the cost of care. Instead, it pays 86 percent of the cost hospitals in Hawai’i make for the care.

HHIC’s study determined that about $766 million was underpaid from Medicare to Hawai’i hospitals between 2010 and 2014. An additional $1.7 billion could be incurred from 2015 to 2024 if patient volume, case-mix, and reimbursement rates continue down the current path.

Further Medicare payment cuts maybe be considered in the future, as the federal government determines ways to further reduce federal spending. Additional recommendations to reduce areas such as rural hospital programs, outpatient department payments, and federal support for medical education have also been considered.

“Hawai’i’s situation is different from much of the rest of the nation because our population is healthier and healthcare expenditures are low per capita,” said Peter Sybinsky, CEO of HHIC. “Medicare expenditures per beneficiary in Hawai’i are among the least nationwide so cuts from the federal government are likely to have a disproportionate effect on Hawai’i compared to states in which overall expenditures are higher.”