CBO reports on financial pressures facing hospitals

The Congressional Budget Office yesterday released a report examining hospital finances over the next decade under several scenarios that incorporate key provisions of the Affordable Care Act and other factors. The analysis focuses on about 3,000 hospitals that provide acute care to the general population and are subject to scheduled Medicare payment cuts. CBO estimates that the average profit margin for those hospitals was 6% in 2011 and would fall to 3.3% if they were able to improve their productivity by an average 0.8% per year through 2025; 1.6% if they were able to improve their productivity by an average 0.4% per year over the period; and negative 0.2% if they were unable to increase their productivity. Under those three scenarios, CBO estimates that the share of hospitals with negative profit margins would increase to 41%, 51% and 60%, respectively, by 2025. “This report clearly illustrates what we’ve been saying all along,” said Tom Nickels, AHA executive vice president of government relations and public policy. “Future cuts to Medicare and Medicaid payments for hospital services on top of the reductions that have already occurred will have a profound impact on hospitals already grappling with razor-thin margins. We must stop the bleeding.”