Affordable Care Act puts financial strain on hospitals

Affordable Care Act puts financial strain on hospitals (Image 1)

Vanderbilt University Medical Center made headlines this year with the elimination of more than 1,000 positions in order to cut $250 million from its operating budget over the next two fiscal years. But the financial pressures facing Vanderbilt are not unique. Other top tier hospitals around the country also have to make difficult cuts.

The Cleveland Clinic announced in September it would be offering 3,000 buyouts, Indiana University Health plans to cut 800 employees and dozens of rural hospitals are on the brink of closing their doors.

The financial strain is due in part to the Affordable Care Act and the role of Medicaid.

Hospitals are required by law to treat everyone, regardless of ability to pay. To compensate for indigent care, hospitals have been paid federal subsidies called disproportionate share hospital payments, or DISH.

However, that ends with Obamacare, because it was assumed states would expand their Medicaid programs with federal dollars.

The Supreme Court decided states could not be required to do that and about half, including Tennessee, have not. And this leaves hospitals with DISH and without Medicaid to cover poor patients.

Vanderbilt University Medical Center Spokesperson John Howser says, “It's probably in the order of 15 or 16 million for the current fiscal year we're in and the figure will probably go up to 20 million for the coming fiscal year.”

Compounding the strain is the $9.9 billion in sequester cuts to Medicare, and sequester cuts to the National Institutes of Health, which supplies research grants to hospitals including Vanderbilt. “We have a constellation of issues that we are dealing with, said Howser.

For small, rural hospital, it may be too much.

In Georgia, where Medicaid will not be expanded, three rural hospital shut down this year and as many as 15 more could close, according to industry experts.

That is a very real health risk, as some communities will lose their ER departments and patients will be sent farther away for care.

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