Managed Healthcare Executive - November 2008 - (Page 20)

{ S P E CI AL RE PO RT} they are seeing fewer patients, they may also see rate cuts as payers seek to reduce expenses. Medicaid programs in New York, Nevada and South Carolina have already cut rates for providers for 2009, and those cuts “may be a harbinger of things to come,” says Vern Smith, a principal with Health Management Associates (HMA). Almost two-thirds of Medicaid directors surveyed recently by the Kaiser Commission on Medicaid and the Uninsured and HMA indicate the chance of a Medicaid shortfall in the coming year is about 50-50. Hospitals and health systems are feeling the pinch even more. “Hospitals are very capital-intensive businesses,” says Whetsell. “We have some clients that have had to put their capital projects on hold because this is no time to go to the bond market to fund a $50 million or $100 million capital improvement project.” What’s more, Whetsell says, “a pretty high percentage of hospitals have money for their pension funds and endowment money invested. A lot of hospitals report a large share of their non-operating income comes from investments, and right now that’s going to be negative or non-existent.” That, of course, has a trickle-down e ect, with healthcare’s nearly 15.3% piece of U.S. gross domestic product. As patients, service providers, hospitals and others tighten their purse strings, it ripples out to related businesses, such as equipment vendors and pharmaceutical companies. A survey by D2Hawkeye on behalf of the Wall Street Journal found patients are already forgoing healthcare services for non-acute conditions. From March 2007 to March 2008, knee replacements per 1,000 fell 18.6%, pap smears fell 6%, and dispensed prescriptions for antidepressants dropped 29%. For their part, employers continue to shift healthcare costs to employees in the 20 NOVEMBER 2008 form of higher copays and deductibles, says Alain Enthoven, professor of management emeritus at the Stanford Graduate School of Business, and they’re likely to cut jobs, which translates to fewer members for managed care organizations. “There will be layo s,” Enthoven says. “We’ve already seen a lot of jobs lost, and I expect we will see more of that in the next six months.” The laws of physics dictate that for every action there is an equal and opposite reaction. As employers cut jobs, expect Medicaid enrollment to increase. Medicaid enrollment rose 2.1% in scal 2008 while spending grew 5.3%. State Medicaid o cials surveyed by the —Alain Enthoven Kaiser Commission on Medicaid and the Uninsured say the trend will accelerate At this point, to understand the fu- in 2009. State o cials forecast a 3.5% inture of healthcare, executives don’t need a crease in enrollment and a 5.8% increase healthcare economist, they need someone in spending during scal 2009. who can forecast employment, he says. But even in responding to survey questions, o cials allowed that those GOOD LUCK projections might have to be revised With near daily triple-digit swings in the upward: If rising costs and enrollment stock market, forecasting has gone from translate to budget shortfalls, states may art to alchemy. In early September, before be forced to make mid-year changes to the market’s nosedive, seasonally adjusted control costs. data showed six of the 10 industry sectors “The priority facing us for the next two surveyed would decrease hiring slightly years is to try and preserve as much of during the fourth quarter, according to the core program as possible,” says Doug the most recent Manpower Employ- Porter, assistant secretary of the Medical ment Outlook Survey. That represents Assistance Administration for the state of the continuation of a downward trend: Washington. “We’re in survival mode.” During the 12 months ending September Porter says he’s been given a mandate 30, the unemployment rate climbed by to cut his budget by 15% over the next “ ere will be layoﬀs. We’ve already seen a lot of jobs lost, and I expect we will see more of that in the next six months.” 1.4 percentage points to 6.1%, according to the U.S. Bureau of Labor Statistics. At the same time, the number of people who worked part time for economic reasons—a category that includes people who are unable to nd full-time jobs or have had their hours cut—increased by 1.6 million. That climate is going to make it much harder for employers to rationalize investing in “fringe bene ts,” such as wellness programs whose positive impact could be years down the road, says Whetsell. “It’s too hard for employers to see the cause-and-effect payo of paying for health club memberships,” he says. “If you’re trying to nd a way of cutting costs rather than cutting employees, that’s likely to be one of the things that goes.” MEDICAID SURE TO RISE Purestock/Getty Images

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Managed Healthcare Executive - November 2008 For Your Benefit Editorial Advisors Contents News Analysis State Report Politics &�Policy Letter of the Law Affordable Access Economic Ripple Effect Hospitals &�Providers Technology Managed Care Outlook Desktop Resource Ad/Edit Index

Managed Healthcare Executive - November 2008

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