One healthcare finance executive thinks the U.S. healthcare system is on a path toward separate and unequal care.
Multicare CFO James Lee said the math that has held the system together for decades is starting to break down for good during an interview last week at HFMA’s annual conference in National Harbor, Maryland. Multicare operates 13 hospitals and more than 300 care locations across the Pacific Northwest, mainly Washington state.
“If you go back to 1997 when the Balanced Budget Act was passed in Congress almost 30 years ago, Medicare started to pay healthcare organizations less than cost. Fast forward to now, and we are getting paid approximately 80% of our cost — that’s for Medicare. For Medicaid, depending on the state, we’re getting paid somewhere between 50-70% of our cost. Fundamentally, our government doesn’t believe healthcare organizations should be paid fairly,” he remarked.
No other government contractor operates under those terms — no defense firm, construction company or IT vendor gets paid less than what they charge, Lee pointed out. But hospitals do, and the rest of the market has spent decades absorbing that gap, he explained.
Hospitals have historically offset the government’s underpayment by charging commercial health plans more, but Lee noted employers are becoming increasingly unwilling to fund this.
Research shows U.S. products are becoming globally uncompetitive in part because healthcare costs are baked into their price, he added. Because American companies have to factor expensive health benefits into the price of their goods, they lose ground to foreign competitors.
Lee said these cost pressures are pushing providers to a breaking point.
“I think that’s a fundamental problem. If this continues, my guess is that we’re going to end up creating a two-tier system: one for commercial payers and those who can afford to pay out of pocket, and a different system for Medicare and Medicaid patients,” he declared.
He foresees a future in which health systems will “start creating some type of prioritization” for patients with commercial coverage, which means CMS-covered patients will have to wait longer for care.
Lee said for-profit payers have little incentive to change that trajectory. For payers, leaving an unprofitable market can be as simple as a quarterly decision, but providers don’t have that choice.
“Multicare has been here for 140 years, and guess what? We’re not going anywhere. While these national payers can come to Washington and leave Washington, we can’t — Washington is our home,” Lee stated.
It’s getting more and more difficult to make the numbers work, but walking away isn’t an option.
Photo: Crezalyn Nerona Uratsuji, Getty Images
