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Study: Hospital Cost Shifting Still a Financial Issue for Employers

Cost shifting continues to be a financial issue for the business community, which pays higher health care costs due to federal and state payments that do not cover the cost of providing medical services, according to a new study by HCTrends and BSG Analytics LLC.

The study, which analyzed hospital finances between 1995 and 2013, found that:

·        Wisconsin hospitals would have to lay off more than 10,000 employees and cut an additional $750 million in operating costs in order to remain financially viable at government reimbursement rates; this would severely impact the quality of care hospitals provide.

·       In order to offset the underfunding, hospitals must reduce operating costs and increase the revenue they receive from private payers more for the same medical services; this process is commonly known as cost shifting.

·        Because of additional Medicare cuts mandated by the Affordable Care Act and the budget sequester, Medicare will fail to meet its own inflation target in 2016; in order to offset this deficit, as well as a proposed zero percent increase in Medicare rates, hospitals will have to generate an additional 4.6 percent in revenue from the business community just to stay even with inflation next year 

·         Much of the existing cost-shifting research is focused on Medicare reimbursement rates; however, in Wisconsin, the Medicaid revenue shortfall is increasingly important as Medicaid is the most rapidly growing segment of hospitals’ inpatient and outpatient business. 

“Cost shifting affects employers ability to compete economically,” says Dave Jensen, editorial director of HCTrends. “It has a greater impact on smaller employers, which are the primary engine of job growth for the state.”

Click here to request a free copy of the study, “Hospital Cost Shifting: The Hidden Tax Employers Pay to Compensate for Government Underfunding."