A healthcare finance executive believes the American 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 on HFMA Annual Conference in National Harbor, Maryland. Multicare operates 13 hospitals and more than 300 care facilities throughout the Pacific Northwest, primarily in Washington state.
“If we go back to 1997, when the Balanced Budget Act was passed in Congress almost 30 years ago, Medicare began paying healthcare organizations less than cost. Fast forward to now, and we are paid about 80% of our cost; that’s for Medicare. For Medicaid, depending on the state, we are paid between 50% and 70% of our cost. Fundamentally, our government does not believe that healthcare organizations should be paid fair,” he commented.
No other government contractor operates under those terms: No defense company, construction company or IT provider is paid less than what they charge, Lee said. But hospitals do, and the rest of the market has spent decades absorbing that gap, he explained.
Hospitals have historically made up for government underpayments by charging more to commercial health plans, but Lee noted that employers are increasingly less willing to fund this.
Research shows that American products are becoming uncompetitive globally in part because health care costs are included in their price, he added. Because American companies have to include expensive health benefits in the price of their products, they lose ground to foreign competitors.
Lee said these cost pressures are driving suppliers to a breaking point.
“I think it’s a fundamental problem. If this continues, I guess we’re going to end up creating a two-tier system: one for commercial payers and those who can pay out of pocket, and a different system for Medicare and Medicaid patients,” he stated.
He envisions a future in which health systems will “start to create some sort of prioritization” for patients with commercial coverage, meaning patients covered by CMS will have to wait longer for care.
Lee said for-profit taxpayers have little incentive to change that trajectory. For payers, leaving an unprofitable market may be as simple as a quarterly decision, but providers don’t have that option.
“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 said.
It’s getting harder and harder to make the numbers work, but walking away is not an option.
Photo: Crezalyn Nerona Uratsuji, Getty Images
