Up to 12,000 union nurses will go on strike tomorrow morning in Minnesota, after failing to reach a contract agreement with 14 Twin Cities hospitals. The two sides are at odds over wages, benefits, and patient-to-staff ratios, with the nurses proposing “some of the strictest staffing rules in the country.” But the hospitals “call the plan a nonstarter, saying it would add hundreds of millions of dollars in unnecessary costs” during a period of economic recession and uncertainty following the passage of health care reform.
In an email from Park Nicollet Health Services CEO David Abelson, obtained by the Wonk Room, the hospitals argue that the end of the fee-for-service system and the reduction in government payments for uncompensated care, have presented the industry with “very harsh realities”:
The changes in health care present very harsh realities. The current fee-for-service business model of health care is faltering and will become a thing of the past. A new business model has not yet emerged. The future of health care is uncertain as state and federal government drastically reduce health care reimbursements in a time of dramatically escalating need. The percentage of our business from government programs on which we lose money is increasing. And we still don’t know the long term costs and implications of the parts of federal health care reform that won’t take effect until years from now.
The economic recession and the shrinking of safety net programs — particularly given Gov. Tim Pawlenty’s cuts in health care services — have certainly placed greater financial strain on Minnesota hospitals, but Abelson’s claim that health care reform will present hospitals with “very harsh realities” is an exaggeration. Throughout the reform debate, hospitals and their lobbyists argued that the influx of insured patients could yield a return of $16 billion dollars and supported the final law since it “delays most of the industry’s cost givebacks until the second half the agreement’s 10-year year period — well after the hospitals have enjoyed some of the benefits of the new money they’re expecting from expanded insurance coverage.” Health reform also protects hospitals from cuts under the Independent Payment Advisory Board through 2019, guaranteeing a stream of profit that’s far stronger than hospitals can hope for under the current system.
Several hospital systems can also serve as “a new business model” for facilities transitioning away from the fee-for-service system. As CAP’s Ellen-Marie Whelan and Lesley Russell argue in this paper, “there are many ways to decrease the cost of health care while ensuring quality care and there are many examples of this underway in the United States right now.”
For instance, Geisinger Health System is a physician driven system that has led the nation in delivery and payment reform. In the latest issue of Health Affairs, Geisinger president and CEO Glenn Steele estimates that its advanced medical home model for the care of chronically ill Medicare patient has “bent the cost curve and lowered projected spending by up to 7 percent.” That system, along with other prominent examples like the Cleveland Clinic, has successfully adopted many of the new law’s delivery reforms without sacrificing profits. As Steele observes, “We don’t know if the Geisinger experience is scalable or generalizable through U.S. health care, but we do think that the way our country pays for and delivers health care nationally will need to move to something that looks a little bit more like Geisinger in a relatively short period of time.”