The American Hospital Association (AHA) is pushing back against the Medicare Payment Advisory Commission’s “one-sided, inaccurate and misleading” portrayal of hospitals’ finances in its latest report to Congress.
Earlier this month, the independent panel advised lawmakers to adopt a modest 2024 Medicare reimbursement bump (1% increase over market basket) for most hospitals.
The group wrote in the report that it “is acutely aware of how providers’ financial status and patterns of Medicare spending varied in 2020 and 2021 from historical trends, as well as the higher and more volatile increases in input costs for several healthcare sectors that occurred during 2022.”
However, based on its data and projections, MedPAC said hospitals’ prior pandemic relief funding and strong investment returns have blunted much of their losses during 2022.
In a write-up posted Thursday afternoon, AHA Senior Vice President of Public Policy Analysis and Development Ashley Thompson contested MedPAC’s interpretation of hospitals’ finances in early 2023.
She stressed the “limitations” of the cost reports MedPAC uses for its recommendations, which are submitted by hospitals after the close of their own specific fiscal years and therefore “don’t necessarily provide a fully accurate picture of the financial reality in 2021.”
Thompson acknowledged that hospital finances benefited heavily from federal relief and a robust stock market in 2021 but pointed to proprietary analysis data from Kaufman Hall and reports from credit rating agencies indicating a severe downturn in 2022 and “tremendous pressure” from inflation and expense pressures going into the new year.
“The picture for hospitals in 2023 looks very different than 2021,” Thompson wrote. “… The fact that massive numbers of hospitals are not currently closing due to financial pressures should be seen as positive for patients and communities. Instead, some observers seem to be disappointed that more hospitals are not failing financially.”
MedPAC’s resulting payment recommendation to Congress, she wrote, “is totally insufficient and out of touch with reality, given the rise in costs for hospitals. The increase is simply not enough for the many hospitals and health systems that are in distress and struggling to keep their doors open.”
The AHA and other state-level hospital organizations have spent the past several months warning of treatment delays, service closures and full-fledged shutdowns resulting from the financial pressures of 2022. Several major health systems reported year-end operating incomes and net incomes deep in the red.
Other critics, however, concurred with MedPAC’s position and noted that the largest systems’ recorded losses were dominated by the poor returns of their investment portfolios rather than rising expenses or plummeting operating revenues.