Hospital Consolidation as One Potential Solution to Financial Impact of ACA

While some have looked at financial issues related to the ACA and called for its repeal, others are taking a different tack. One example is Toby Cosgrove, President and CEO of the Cleveland Clinic, one of the largest and most respected medical centers in the world.

While Dr. Cosgrove will be stepping down later this year from CEO to an advisory role at Cleveland Clinic, Cosgrove has a big idea for how to address rising health care costs in the U.S., and it is not to repeal Obamacare.

His idea? Hospital consolidation.

“We have to realize that not all hospitals can be all things to all people,” he said at an event in Washington, DC in April.

He would know; the Cleveland Clinic has been experiencing financial strain, along with many other hospitals across the country. The struggles have been attributed in part to some of the new regulations resulting from the ACA. The Cleveland Clinic recently reported a steep 70% drop in operating income, from $480.2 million in 2015 to $139.3 million in 2016.

Cosgrove said consolidation would not only improve financials, but would also increase efficiency and help decrease the burden of disease.

Looking further at ACA-related financial impacts, every sector of the health care industry is concerned about the stability of the ACA-related insurance exchanges. In mid-April, several organizations wrote a letter to the Trump administration asking for a commitment to fund cost sharing reduction (CSRs) for 2018. CSRs provide assistance to low- and modest-income consumers earning less than 250 percent of the poverty level to help reduce deductibles, co-pays and/or out-of-pocket limits.

“A critical priority is to stabilize the individual health insurance market,” the letters read. “The window is quickly closing to properly price individual insurance products for 2018.”

Signatories to the letter include not only the two main hospital associations – the American Hospital Association and the Federation of American Hospitals – but also several of the large physician, insurance, and employer groups: the American Medical Association, the American Academy of Family Physicians, America’s Health Insurance Plans, BlueCross BlueShield Association, the American Benefits Council and the U.S. Chamber of Commerce.

Without funding of the CSRs, U.S. consumers will be “dramatically impacted,” the groups say; for example, they predict there will be more limited choices for consumers; premiums will be higher for 2018 and beyond; if more people are uninsured, providers will give more uncompensated care, which will raise costs across the system; and taxpayers will pay more than they would otherwise, as premiums grow and tax credits for low-income families increase.

Regardless of the ultimate fate of Obamacare, and whether changes are made at the federal or state level, some truths about the U.S. health care delivery system remain. Technology is improving, as we explored in a recent blog post on telemedicine and knee pain treatment, for example, and the care that works best for patients is less likely to be hospital based, as we noted in this recent blog post highlighting that sometimes “less is more” when it comes to breast cancer treatment.

At this point, if one of the largest health care systems in the U.S. is arguing that fewer hospitals are needed, it is certainly time to pay attention to what true change in health care will look like.