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.”

I’ve been arguing that the states suing the federal government over the constitutionality of health care reform or nullifying reform through the state legislature are home to Americans who are most in need of health care coverage. These populations have the most pronounced instances of chronic disease and live in states that simply don’t have the tax base or political will to invest in public health care programs. Thus, they often go uninsured and their conditions only worsen.

In the newest issue of Health Affairs, Leighton Ku also points out that “paradoxically, the opposition in these states appears to run contrary to the economic and health interests of their residents”:

On average, 39 percent of the Medicaid-eligible adults in the twenty-one “opposing states” were uninsured, compared to 26 percent in the rest of the nation. Because opposing states have relatively more eligible-but-uninsured adults, their residents have much more to gain form the Medicaid expansions, and these states would draw down far more federal funding.

Look:

Given that many states are interpreting the Medicaid expansion as an unfunded mandate, Ku argues that “some states’ projections of new costs appear to be overstated,” as governors have “not accounted for factors such as the reduced costs of serving the newly eligible.” Not only would the federal government be picking up the tab for most of the expansion (meaning that states would be covering more residents at little direct and will be able “reduce payments they make to support uncompensated care costs”), but Ku says that “most economists expect the economy and employment to brighten by 2014, so there should be fewer income-eligible people and higher state revenues than today.”

Of course, the expansion and increase volume of patient needs will require plans to expand networks and states will have to take steps “to design simple application forms and procedures, including online systems, that can operate across multiple points of enrollment; to develop systems to enroll applicants in the right programs; and to share date securely across programs.”

States will have to face their share of challenges in implementing reform, but in choosing to challenge the law rather than accept it, they are placing politics ahead of sound policy, kicking the can down the road and undermining the interests of their residents.