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An Unlikely Consequence

The Affordable Care Act (“ACA”) took a big leap forward this month with the opening of the federally-facilitated and state-operated Exchanges. Here in Kentucky, 70,467 people reportedly participated in pre-screenings to determine qualifications for subsidies, discounts, or programs like Medicaid on the Health Insurance Exchange’s first enrollment day, October 1, 2013. The ACA is eventually expected to provide health coverage to as many as 30 million additional Americans. So, why are hospitals across the nation slashing jobs?

In August, King's Daughters Medical Center located in Ashland, Kentucky laid off 148 workers in support, administrative, and supervisory positions. According to outplacement firm Challenger, Gray, and Christmas, health care providers announced more layoffs than any other industry in September, which were largely due to hospital reductions in workforce. Cleveland Clinic recently announced an offer of 3,000 employee buyouts in an effort to cut costs. Vanderbilt University Medical Center plans to cut 1,000 positions. Indiana University has already laid off about 900 workers, again in an effort to trim their budget.

Many health care industry insiders are saying “I told you so.” A 2010 memo by The Office of the Actuary for the Centers for Medicare & Medicaid services predicted that hospitals, skilled nursing facilities, and home health agencies would undergo a fifteen percent (15%) reduction by 2019.

The cuts cannot be attributed to any one factor, but instead are the result of many factors. Perhaps one of the largest reasons for the layoffs is that hospitals must now meet new ACA-required standards in order to receive full Medicare reimbursements. Before the era of health care reform, hospitals were able to bill insurance companies and the government for services rendered, with little regard to the quality of those services. Now, Medicare payments are tied to fixed quality standards, such as readmission rates or hospital acquired infections. Lower quality services mean lower reimbursement rates.

For more reasons why hospitals are cutting staff in the wake of the ACA, check back on Thursday.

This article is intended as a summary of newly enacted federal and state law and does not constitute legal advice.

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