Is Obamacare to Blame for Hospital Layoffs?

Hospitals are cutting costs and laying off employees, citing Obamcare as the main reason. But is health care reform really to blame?

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Cleveland Clinic trimmed $300M from its 2014 budget, citing Obamacare as the main reason.

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Cleveland Clinic officials announced this week that they would be offering 3,000 buyouts in an effort to cuts costs, citing financial pressures from health care reform as one of the reasons for their decision. More than a dozen hospitals across the country are taking similar measures, due in part to health care reform requirements, but also because of the $9.9 billion in government sequester cuts to Medicare, hospital debt and states' refusal to expand Medicaid, the government's health insurance program for the poor.

[READ: Obamacare Affect Medicare: Myths and Facts]

"For hospitals in general this is kind of the new normal," says Eileen Sheil, executive director of corporate communications for the Cleveland Clinic. According to most recent estimates from the Bureau of Labor Statistics, the hospital sector lost about 4,400 jobs in July. In May, hospitals shed 9,000 jobs, the worst month for the industry in a decade.

[READ: Hospital of Tomorrow: How the Industry is Facing the Future]

Ron Stiver, senior vice president of engagement and public affairs for Indiana University Health, which plans to cut 800 employees, says the assertion that health care reform is the reason behind hospital cuts is "overly simplified." IU Health is making cuts partially because of the health law, he says, but also because the state has not expanded Medicaid, the hospital system has fewer inpatient volumes, and payment rates for its services have been declining.

Vanderbilt University Medical Center in Nashville, Tenn., plans to cut 1,000 positions, citing an aging population, lower reimbursement rates, a reduction in National Institutes of Health grant funding and a lack of Medicaid expansion in Tennessee.

In 2012 the Supreme Court ruled that state legislatures could opt out of increasing the number of people who are eligible for Medicaid, and North Carolina is one of 22 states that has done so, a decision that resulted in Vidant Pungo Hospital in Belhaven, N.C., closing down, according to hospital officials.

Democratic Congressman Charles Rangel from New York, the main sponsor of the health reform bill, says organizations have several other tools they could use to reduce costs, and that many businesses are blaming health reform for actions for which they don't want to take responsibility. "U.S. health costs have been the highest in the world, yet our quality measures were middling at best," he says. "While there is no doubt that [health reform] has helped slow health care cost growth, which is beneficial to both national and household budgets, there is nothing in the law that tells hospitals to reduce staff. The fact is that patients are paying less, not more, as a result of the [health law]."

The Office of the Actuary for the Centers for Medicare & Medicaid Services predicted that decreases like these would occur, stating in a 2010 memo that by 2019 it expected hospitals, skilled nursing facilities and home health agencies would undergo a 15 percent reduction.

For a sector that employs more than 5.5 million people, according to the American Hospital Association, the numbers are likely to get worse. The pattern of layoffs and buyouts has already begun. SouthCoast Hospital Group in Florida cited federal health reform when it laid off 100 employees in mid-September. John Muir Health in California is offering staff voluntary buyouts. NorthShore University HealthSystem in Illinois will lay off 1 percent of its workforce, and Covenant Health in Texas laid off 49 employees.

The requirements that hospitals must meet in order to receive full Medicare reimbursements are having a large impact. Hospitals once were able to bill insurance companies and the federal government for services rendered, but now they have to demonstrate that those services help keep patients healthy.

The government is capping reimbursement rates for specific diagnoses and having hospitals pay to fix their own medical errors, including hospital-acquired infections. The plan is to lower inefficiencies, thereby lowering costs. "We want hospitals to do things more efficiently," says Dr. Ross Koppel, professor of sociology and affiliate professor of medicine at the University of Pennsylvania. "We don't want to redo tests or subject people to hideous radiation because exam records have been lost, for example. There may be some inefficient practices that were money makers, but with a more efficient system hospitals can't get away with them."


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Affordable Care Act
health care reform