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CBO report: Hospitals need to raise productivity to stave off big losses

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Tourism statue in the Netherlands, of a nameless boy plugging a dike to stop a great flood.

A new analysis from the Congressional Budget Office (CBO) has recognized that changes in laws and regulations, prompted primarily by the ACA–notably reduced Medicare payment updates and expanded insurance coverage–can be expected to significantly impact hospitals’ future finances.

Things look tough!

The researchers noted “substantial uncertainty” around the predictions.

The CBO’s  predictions included:

If hospitals improved their productivity  only in line with the overall economy — by an average of about 0.8 percent a year through 2025, the share of hospitals with operating losses would rise to 41 percent and hospitals’ average profit margin fall to 3.3 percent.

If hospitals boosted their productivity by 0.4 percent a year, the share with operating losses would rise to  51 percent and their average profit margin fall to 1.6 percent.

If hospitals can’t increase their productivity or otherwise reduce cost growth, the share with operating losses would rise to 60 percent.

“Consequently, if those hospitals were not able to increase their productivity by enough to fully offset those reductions in payment updates or did not use those productivity gains to reduce the growth of their costs then Medicare’s payments would not keep pace with their costs of treating those patients, and profit margins for those hospitals would decline,” the  CBO researchers concluded.

To read the CBO report, please hit this link.

To read a HeathcareDIVE review 0f it, please hit this link.

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