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Second Opinion

Learn about policy issues important to medical schools and teaching hospitals, with Executive Vice President Atul Grover, M.D., Ph.D.

Something’s Got to Give...

October 11, 2012

A perfect storm is brewing—the implementation of the Affordable Care Act (ACA), the private insurance market responses to times of fiscal restraint, and impending sequestration may occur all at once. The ongoing budget deficit negotiations and the resulting cuts will have negative effects on many Americans. For communities that rely on medical schools and teaching hospitals, this tempest threatens the capacity to continue all of their unique missions including  education, highly advanced clinical care, research, and community service. At some point, something’s got to give, and patients are at risk.

ACA Implementation

Because they care for the most vulnerable patients, teaching hospitals face multiple impending payment cuts as well as potential penalties including reductions to Medicare bad debt and disproportionate share hospital (DSH) payments to academic medical centers. These payments help cover the costs hospitals incur from treating large numbers of patients unable to pay for the care they receive.

Though many of these patients were expected to gain insurance coverage through the ACA Medicaid expansion, a number of states may opt out of the expansion as a result of the Supreme Court’s decision in July. The Congressional Budget Office expects that, as a result, up to six million fewer people will be eligible for public insurance in 2022. That means that a single person who earns up to $14,856 annually will remain uninsured unless he/she purchases private health care coverage. For such a person, and the rest of the estimated six million, teaching hospital emergency departments will likely continue to be the only means of health care as other facilities turn them away because of their inability to pay. By 2022, it’s estimated that 27 million people still will not have health insurance and will continue to rely on teaching hospitals and their physician faculty for care.

Though major teaching hospitals treat the poor, disabled, and/or highly complex patients whom others are not willing to admit, these hospitals are at risk for financial penalties under the Readmissions Reduction Program. Under this program, the heaviest penalties will fall on teaching hospitals that treat most of the low-income and dual-eligible Medicare patients who have limited financial and social resources to maintain their health after they are discharged.

Market Responses

At the same time that severe cuts in public funding are occurring, private insurance plans are starting to block patients from getting the most advanced care available from medical school and teaching hospital doctors. For example, Anthem Blue Cross excluded Cedars-Sinai- and UCLA-affiliated physicians from the health plan for employees of the city of Los Angeles. The city cited that this move would result in annual premiums savings of $7.6 million over the next year. And yet, as noted by Thomas Priselac, the chief executive of Cedars-Sinai Medical Center, these exclusions “don’t reduce costs in the health care system overall,” for two reasons: First, doing so just pushes the costs onto those who continue getting care at the facilities, and second, it doesn’t recognize the reason that care at teaching hospitals may be more expensive than others in the first place. Services at teaching hospitals are costlier because their missions include training new physicians and conducting research, as well as providing care unavailable elsewhere in the community including trauma, transplant, and burn care.

Teaching hospitals and medical schools have been forced to sustain their public missions with fewer public funds and increasing burdens on privately insured patients; however, almost all payers seem less willing to share in the cost of ensuring that the sickest patients will have access to care both today and for years to come. Meanwhile, increasing numbers of individuals are qualifying for government insurance, but about one-third of physicians won’t accept new Medicaid patients in light of the low reimbursement.

For patients, the limited-network private insurance plans deprive them of access to the cutting-edge, world-class care that teaching hospital physicians provide. Patients value the freedom to seek out the providers best suited to their needs—this is why Los Angeles city officials now are looking to restore the city workers’ access to UCLA and Cedars’ doctors. A new study shows that rural patients in Tennessee often bypass their closer community hospitals for desired inpatient care 22 miles away.

Equally important, for those privately insured in the limited-network plans who are no longer able to seek care at academic medical centers, what will happen when they need to see the specialists, or utilize the care only available from medical school and teaching hospital physicians? Will those patients be stuck with out-of-network bills they are unable to pay? In the end, access to critical health care services will diminish.

Sequestration and the Doctor Shortage

Finally, while up to 32 million previously uninsured are awaiting their 2014 insurance card and 10,000 baby boomers are turning 65 daily, the federal budget cuts scheduled to occur Jan. 2, 2013 through sequestration will further undermine the missions that are core to academic medicine. The $2.5 billion in NIH cuts will halt or curtail scientific research and disease prevention programs, while the recent Tripp Umbach report estimated 766,000 health care and related jobs will be lost by 2021 as a result of the Medicare cuts in the Budget Control Act of 2011. As Congress considers alternatives, some have proposed even steeper cuts to physician training —a misguided strategy as the nation grapples with an impending physician shortage.  As a new AAMC print ad running in the election debate cities warns, “By the time you notice America’s doctor shortage, it will be too late.” Congress needs to take action today to lift the 15-year cap on federally supported residency training positions.

Until now, academic medical centers have always demonstrated incredible resilience in the wake of trying times, continuing to train the next generation of physicians, pursuing  discoveries for a healthier tomorrow, and offering the highest quality care to anyone in need. But this time, all at once, the government’s funding cuts to education, research, and care, in addition to the cold shoulder from private insurance providers, makes things different.

Something’s got to give.

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About the Author

Atul Grover, MD, PhD AAMC Executive Vice President

Atul Grover, MD, PhD
AAMC Executive Vice President

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For More Information

Peters Willson
Sr. Specialist, Policy and Constituency Issues
Telephone: 202-862-6029