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Health Tracking

FROM THE FIELD

Hospital Finance: Signs Of ‘Pushback’ Amid Resurgent Cost Pressures

But in the aftermath of the Balanced Budget Act (BBA) of 1997, the perennial difficulties of assessing hospital financial performance have only been compounded. Medicare prospective payment inpatient margins, the indicator traditionally used by Congress to guide payment decisions, reached an all-time high of 17 percent in 1997, fueling the perception that most hospitals were fat and happy and providing much of the political justification for the BBA’s spending reductions—although the actual budget targets were determined by deficit-reduction goals. The political equation was not particularly sensitive to the fact that the high inpatient margins had been achieved during the mid-1990s not by inflated payment increases but primarily by length-of-stay reductions, or that hospitals’ total Medicare margins in 1997 averaged just 3.4 percent, reflecting underpayment for most subacute services and including nonallowed costs that are not reimbursed.²

In 1999 and 2000, in an environment ameliorated by unforeseen budget surpluses, hospitals lobbied feverishly for two successive BBA relief bills, marshalling abundant evidence of fiscal distress to support their claim that the 1997 law had been unduly harsh. Total Medicare margins were approaching zero; total margins including Medicare and private payers were in the 2–3 percent range regarded as unsafe by the American Hospital Association (AHA); bond ratings were plunging; and averages masked an alarming proportion of hospitals with negative margins, rising from 26 percent in 1997 to 34 percent in 1998.³

Medicare margins had been negative in all but two years from 1980 to 1995, however, and the sky had not fallen. After passage of the Balanced Budget Refinement Act (BBRA) of 1999, some projected that these margins would turn positive again in 2001, when the rocky transition to new prospective payment systems for subacute care was further along. It was not a point that hospital lobbyists wanted much to emphasize, but disinterested analysts suggested repeatedly during debate on the two successive relief bills that the pressures faced by hospitals in 1999 were an effect of converging private and public payer austerities, not the unintended consequence of one unbalanced piece of legislation.

Medicare’s payment-to-cost ratio declined from 104 percent in fiscal year 1997 to 103 percent in FY 1998, while the private payer payment- to-cost ratio fell from 118 percent to 114 percent, according to the Medicare Payment Advisory Commission (MedPAC). Since these two sectors make up roughly equal shares of hospital revenue, MedPAC analysts concluded that private payers contributed three to four times as much as Medicare did to the 1998 drop in total margins, and they expected margins to decline from 3.9 percent in FY 1998 to 2.7 percent in FY 1999.⁴

After two years of BBA relief negotiations, most members of Congress now understand that inpatient margins are not an adequate indicator of hospitals’ financial condition. But policymakers also have to keep track of the relative impact of public and private payment trends on hospitals, as well as salient cost-trend factors, to make informed decisions about Medicare, Medicaid, and the overall balance of public policies affecting access, quality, and cost control.

Consolidation And Pushback

 
To the extent that average or median margins are a meaningful indicator, the sensitivity of net margins to the ebb and flow of private payer trends is as pronounced in scenarios for the next few years as it was in MedPAC’s analysis of FY 1998 and FY 1999.

For example, Kenneth Thorpe estimated the result of $9 billion in added Medicare payments to hospitals in the next five years, assuming that costs rise at the projected market-basket rate of 3 percent a year. Median hospital margins would sink to 0.09 percent in 2002 if private payer payment-to-cost ratios continued to decline at 2–4 percent annually, as they did from 1995 to 1998. But if the private payment-to-cost slide turned around after 1998 and the ratio rose by just 1 percent a year from 1999–2002, the median margin would rise slightly to 4.5 percent in 2002.⁵ This private payer trend line is "where the real game is," Thorpe said at a September 2000 meeting in Washington.

Signals and speculation about the possibility of increased hospital "pushback" in health maintenance organization (HMO) contracting, on which a turnaround might hinge, began while the private payer downtrend was still at full throttle. The pushback theory rests in part on the probability that hospitals have increased their local market power as a result of a long period of consolidation and rising demand from payers and consumers for more inclusive provider networks. In its in-depth, longitudinal study of twelve representative markets, for example, the Community Tracking Study (CTS), sponsored by the Robert Wood Johnson Foundation, has found in site visits in 1996–97 and 1998–99 that "the emphasis on horizontal consolidation strategies and the pursuit of broad geographic scope continued" and that two to four systems were dominant in most study sites.⁶

Although generally pessimistic about hospitals’ prospects in 2000–01, Moody’s Investor Service also found consolidation paying dividends in an August 2000 report on nonprofits: "Many providers are reporting negotiating success with commercial payers, utilizing their leverage—measured by market share, continuum of services, specialty services, or multiple access points gained through mergers or acquisitions—to negotiate better rates. As many [insurers] across the country have increased premiums to their customers, many hospitals have garnered a portion of this increase through better reimbursement rates," the report added, although payment delays and denials may in some cases "neutralize the benefits of improved rates."⁷

Another Wall Street analyst who follows managed care also found rising hospital payments linked to rising premiums. "Hospitals are starting to get relatively good relief from managed care payers, now I think approaching the 4 to 5 percent per year level, which is a lot better than a year or two ago," said Norm Fidel, of Alliance Capital Management, at a June 2000 forum in Washington sponsored by the Center for Studying Health System Change. "Well-entrenched hospitals with large market concentration are actually getting double-digit rate increases for managed care this year, whereas stand-alone hospitals with no bargaining power are lucky if they are getting an increase" at all, said Fidel.⁸ Thorpe, too, said that reported health plan premium increases of about 10–11 percent in 2001 presumably reflect large increases in hospital payments.⁹ A decade-long downward trend in hospital pricing "reversed itself in late 1998," according to an October 2000 research report from Banc of America Securities. Beginning in 1999 and "accelerating" in 2000, investor-owned hospitals were negotiating commercial price increases averaging 5–7 percent and reaching double digits in some markets, B. of A. analyst Gary Taylor found.¹⁰

Walk-Aways And Volume Growth

Top Consolidation And Pushback Walk-Aways And Volume Growth Cost Factors Cost Management Varieties Of Experience BIPA And Beyond NOTES

 
Another indicator of a shifting balance of power between hospitals and health plans is an apparent increase in contract terminations or renegotiations initiated by hospitals. Anecdotal reports of these "walk-away" episodes began attracting notice with high-profile confrontations in 1998 pitting Blue Cross of California against two large nonprofit systems, Sutter Health and Catholic Healthcare West. In both cases, the hospitals’ threat of termination forced renegotiation and rate increases. More walk-away incidents were reported in 1999 in New Jersey, New Hampshire, Texas, Florida, and Ohio.¹¹

In October 2000, shortly before the resignation of its chief executive officer (CEO), PacifiCare Health Systems blamed expected third-quarter losses on another form of pushback: hospitals’ demands for new contracts replacing capitation payments with shared risk arrangements. The number of PacifiCare members under shared risk contracts jumped from 22 percent at the end of 1999 to 44 percent at the end of August 2000, as hospitals successfully fought to reduce their exposure to losses from rising costs.¹² A survey of 991 hospital CEOs by Deloitte and Touche released in June 2000 found that 30 percent of respondents had canceled HMO contracts in the twenty-four-month survey time frame and that among hospitals and systems with more than 500 beds, the number was 60 percent.¹³

Hospital revenues may be benefiting also from a surprising upturn in volume, according to several sources. "Volume didn’t fall from flu season as summer came" in 2000, said one hospital consultant. "Hospitals [in the consultant’s study] are really full. We’re wondering what that means. If volume is coming back to acute care hospitals, this business about excess capacity may or may not be right."¹⁴

In for-profit systems, "same-store" volume increases of 4–5 percent were recorded routinely last year, and volume growth reached the 6–8 percent level in some cases.¹⁵ Despite declining bond ratings, nonprofits, too, have been registering volume increases, according to Moody’s, although these data are not parsed in same-store terms and include specialty as well as acute care general hospitals. Moody’s attributes increasing admissions to an aging population "with more acute clinical ailments"; bad flu seasons in many areas in 1998 and 1999; and a relaxation of hospital utilization management in the face of the managed care backlash.¹⁶ All sources report continuing increases in use of outpatient services.

But are cost increases outstripping revenue growth?

Cost Factors

Top Consolidation And Pushback Walk-Aways And Volume Growth Cost Factors Cost Management Varieties Of Experience BIPA And Beyond NOTES

 
At a September 2000 forum in Washington sponsored by Brandeis University’s Council on the Economic Impact of Health System Change, several speakers warned of impending increases in labor costs from a nursing shortage that many observers believe is distinctly different from and will be much more difficult to cope with than the largely cyclical shortages of the past. Structural changes in the health sector and the economy at large are involved, and wage pressures from a tight labor market are pervasive. The AHA’s James Bentley noted that expanded opportunities for women are draining the pool of potential nursing candidates. Bentley observed that the health sector is perceived less as a high-tech career field than it once was, as talent that was formerly drawn to nursing migrates toward rapidly expanding opportunities in computer applications and other new, technology-oriented careers. For nurses who are already trained, hours and workplace conditions in hospitals are often grueling, increasing the attractiveness of alternative employment in physician or insurance offices or utilization review firms.¹⁷

"Unlike past shortages, the coming RN shortage will be driven by fundamental, permanent shifts in the labor market that are unlikely to reverse in the next few years," and the long-term picture gets worse and worse, according to a June 2000 analysis in the Journal of the American Medical Association.¹⁸ Personnel executives surveyed by the American Organization of Nurse Executives in late 1998 reported that it was taking two to three months to recruit nurses for highly skilled positions in many categories from primary care nurse practitioners to surgical, emergency, intensive care, and medical-surgical units; enrollment in bachelor’s degree nursing programs fell by 4.6 percent in the fall of 1999, and another survey found that nearly one-third of hospital executives described staffing issues as their biggest worry in 1999.¹⁹ AHA testimony to the House Ways and Means Health Subcommittee in July 2000 stated that annual wages and benefits for registered nurses had risen 6 percent since 1998.²⁰

Rapidly rising prices for drugs, blood, and medical devices are another major worry. The rate of increase for these nonwage items has run near 30 percent annually in recent years, said James Mongan, president and CEO of Massachusetts General Hospital, at the Brandeis forum. These costs now consume half of his hospital’s nonstaff budget and represent a potential threat to quality of care as well.²¹ Average prices for new drugs are double the prices of existing drugs, and the Medicare update formula does not capture the growth in many of these input prices, according to the AHA’s Ways and Means testimony. As a result of improved screening techniques, the price of blood is expected to jump soon by $40–$50 per pint, a 50 percent increase, said AHA representative Don Richey, a Texas hospital administrator.²² Stents and defibrillators are among the devices rapidly improving in quality, cost, and frequency of use.

While many hospitals have tried to postpone expensive information technology upgrades, the security, privacy, and standardized format and data requirements in the Health Insurance Portability and Accountability Act (HIPAA) are expected to cost hospitals two to four times as much as Y2K compliance, which consumed about $8 billion. One consulting firm estimates that HIPAA costs will be $25 billion; the Blue Cross and Blue Shield Association says $43 billion.²³ The HIPAA deadlines will begin to arrive in August 2002.

The fine calculus on cost and revenue projections goes well beyond these few factors and leads eventually to many of the variables that define differences in financial performance among different types of hospitals. Among other things, CEOs must worry about declining declining investment income, competition from specialty hospitals, payment delays and denials, nonallowed Medicare costs, uncompensated care, the continuing challenge of seven new prospective payment systems, and a raft of other Medicare and Medicaid changes in the BBA. Even before a second relief bill, the Health Care Financing Administration (HCFA) and MedPAC saw signs that the new prospective payment systems will offer adequate payment, after a rocky transition.²⁴

Cost Management

Top Consolidation And Pushback Walk-Aways And Volume Growth Cost Factors Cost Management Varieties Of Experience BIPA And Beyond NOTES

 
While a nursing shortage and increased admissions have widened the gap between licensed and staffed beds and filled hospitals in some markets, aggregate occupancy rates remain anemic. Empty beds indict the system for inefficiency, but they also represent a hope that productivity gains may not yet have run their course. "Every year we would say, ‘We wonder if the decline in length-of-stay has really played out.’ And every year we would find out that there was another year of decline in length-of-stay," said former MedPAC analyst Stuart Guterman.²⁵ A new survey being conducted for the AHA by the Lewin Group found that Medicare length-of-stay declined 4.5 percent in 1999 and length-of-stay for all payers fell 1.8 percent, prompting MedPAC to infer in June 2000 that length-of-stay "may not yet be stabilizing."²⁶

In theory, the trend toward consolidation of hospital ownership should enhance the opportunities for increases in efficiency. Indeed, for-profit institutions have practiced the requisite disciplines and in 1998 had median total margins of 11.7 percent, more than 7 percent higher than the median of 4.3 percent for all hospitals, according to Thorpe’s reading of AHA data.²⁷ Guterman sees competition increasing in many markets, which helps to explain the productivity increases of recent years. "You couldn’t have had a government edict that would declare that Medicare inpatient costs would fall for four consecutive years. Congress would never have passed it; HCFA never would have even thought of it," he said. "Whatever happens, competition is at a much higher level than it ever was, and that’s going to put pressure on hospitals to keep their costs down," although competition also could lead in the direction of cut-rate health services.²⁸

But the failure of vertical integration has attenuated promised efficiency gains. The CTS, for example, found that "there is still little evidence that hospitals are making the ‘hard decisions’ to close facilities, reduce beds or eliminate duplicative services....Rather, the desire to maintain a full spectrum of services across a broad geographic area to attract managed care contracts and draw in referrals has worked against closing duplicative services in neighboring markets. Moreover, in some instances it appears to be creating incentives to expand existing services and excess capacity."²⁹ So while consumers’ demand for choice has increased hospitals’ bargaining leverage with plans, it has hampered their own efficiency strategies as well.

Another study based on CTS data concluded that "hospital mergers may have centralized centralized finance and administration, but typically they have left the medical staffs and clinical programs untouched."³⁰ More pessimistically, Moody’s cautioned that "many merged entities were unable to integrate back-office systems and reduce staff" in 1999, while concurring on "the inability to execute clinical integration."³¹

Notwithstanding declining lengths-of-stay, hospital consultant Jeff Goldsmith said that summary data from the AHA suggest that staff-to-patient ratios rose continuously throughout the 1980s and 1990s and that he believes most of the growth has been on the administrative side, not in clinical personnel, reflecting increased staffing for marketing, public relations, and information technology. "If you reduce length-of-stay but you don’t reduce your workforce, productivity declines," Goldsmith admonished.³² He cited a 1996 California study that found that "integrated hospital systems are more likely than their nonintegrated hospital counterparts to have unusually high administrative costs."³³

Administrative overload was exacerbated by hospitals’ abortive experiments with integration, especially physician practice acquisitions. The emerging multihospital systems "were not capable of making choices," Goldsmith said. "When they had to actually shrink—reduce overhead and duplicative operations —they couldn’t deal with it because there was not enough governance strength to handle the political crosscurrents and backlash from that."³⁴ Similarly, Linda Kohn found "excessive duplication" in the clinical operations of merged systems: "It almost seemed as if every hospital, physician group, and health plan was developing its own practice guidelines and profiling systems. The same was also true for information systems."³⁵

Varieties Of Experience

Top Consolidation And Pushback Walk-Aways And Volume Growth Cost Factors Cost Management Varieties Of Experience BIPA And Beyond NOTES

 
The decisive influence of private-payer margins observed by MedPAC and others in 1999 does not hold up across all types of hospitals —or rather, it works in reverse for small, rural, and public hospitals with a relatively small share of revenues from private insurance, limited market leverage, and little or no freedom to walk away from unfavorable managed care contracts. Rural and government-owned hospitals received less of their total revenues from private insurance in 1998 and will continue to suffer declining margins even if private payment-to-cost ratios begin improving, according to Thorpe’s projections.

For-profits lie outside the worry zone in these estimates and would continue to enjoy their current, double-digit margins in 2002 even if private margins continue to decline, he found. To account for the 34 percent of hospitals that MedPAC says had negative margins in 1998, one must assume that the median of 4 percent or more for all nonprofit and nonrural hospitals represents a sprawling distribution that runs the gamut from prosperous metropolitan hegemonists to stressed-out survivors in small markets and competitive urban areas. "Small urban hospitals showed particular weakness" in an analysis of a huge database on FY 1997 performance.³⁶

Regional variations represent an important set of patterns that help to explain differences in performance from market to market and among individual hospitals and systems. The Lewin Group, for example, found a range of more than 18 percent in its regional breakdown of total projected Medicare margins in 2004. In Kentucky, Tennessee, Alabama, and Mississippi the margin forecast was 8.4 percent, while in the Rocky Mountain states and Upper Midwest, negative margins of more than 7 percent were predicted.³⁷ Relative concentrations of for-profit and rural hospitals in these areas probably correlate with these variations.

So an inferential sketch of the bottom third identifies them as rural or otherwise smaller than average; public or nonprofit; lacking in leverage with private payers; typically less able to control cost growth than larger hospitals; more dependent on Medicare and Medicaid; and harder hit by outpatient prospective payment and other BBA changes. Pressure on these hospitals has increased because payers have been squeezing down on undeclared cross-subsidies, especially for uncompensated care. But the predicament of the bottom third suggests that it is partly the ad hoc and irrational way these subsidies are allocated that created such a confusing picture of excess and deprivation during the BBA relief debates and made the hospital community appear disingenuous.

"It could be argued that the historical system of cross-subsidies is incredibly inefficient," Guterman said in an interview. To the extent that they still pay above cost, private payers lavish the residue of their overpayment less on the safety-net hospitals that provide more free care and more on the market heavies that do less. In Medicare, he said, "as we talk about dumping more money into the system, we ought to think about what it is that we want our money to buy." In the second BBA relief bill, for example, a large portion of the money awarded to hospitals was channeled through improvements in the annual PPS update factor, which go to all hospitals equally, regardless of how well they’re doing or how much free care they’re providing.

Much of the $20 billion a year that Medicaid and Medicare pay to hospitals with a disproportionate share of uninsured patients also is spent in skewed and inefficient allotments, said Guterman. Rededicating disproportionate-share hospital (DSH) dollars to a distinct fund that would pay hospitals directly for uncompensated care might not only improve the targeting of public subsidy dollars, but also make it easier for both public and private payers buying insured services "to negotiate with providers based on the true costs of patient care, instead of all these other things that are wrapped up in the package. It’s just easier to get an efficient price" if the cross-subsidies could be factored out, Guterman said. But DSH reform would entail a massive redistribution of funds and run afoul of the balance of state and federal interests in Medicaid, Guterman added. "There’s no way that could happen. So you have to figure out ways to approximate it."³⁸

BIPA And Beyond

Top Consolidation And Pushback Walk-Aways And Volume Growth Cost Factors Cost Management Varieties Of Experience BIPA And Beyond NOTES

 
Is it possible that rationalizing subsidies, rather than simply increasing them, is the key to protecting the public’s legitimate interest in a viable environment for endangered hospitals?³⁹ "Sure, if you think about it," Thorpe said. Uncompensated care "is a very big issue. It’s not been a growing share of costs, but it sits there as a constant 6 to 7 percent of costs. [Hospitals] are losing a lot of money through uncompensated care that historically they’ve been able to pick up through profits they generate through private health plans.

"If it’s in Medicare’s interest, and if it’s in big employers’ and Aetna’s interest to try to continue to control the growth of premiums... by negotiating tougher margins with hospitals, we should not have the hospital in the position of trying to be the payer of last resort for the uninsured," Thorpe said. "I don’t think we should be in a position of trying to minimize the variance in hospital margins, either, because some hospitals are more efficient, some less efficient; some better negotiators, some worse negotiators. That’s just part of the market. But to the extent that different hospital margins are traced back to...variations in uninsured patients and charity care caseloads, that is a public policy issue," said Thorpe, who believes that expansion of insurance coverage would be the most effective subsidy channel.³⁹

Demographics and technology will continue to push up relentlessly on costs, and hospital leaders all across the distribution curve will have to find their way amid the smoking ruins of the failed model of vertical integration. "Uncertainty remains for providers who are finding difficulty in extracting the savings or achieving strategic successes from their integration plans and have begun rethinking, restructuring or dismantling their integrated delivery systems," said Moody’s.⁴⁰ "The central issue is, can you reconcile professional and managerial values in these places in a way that permits you to govern, let alone manage," Goldsmith said. "Mechanically disentangling yourself from the ownership of practices doesn’t solve the larger problem of clinicians... feeling disenfranchised," he continued.⁴¹

The Beneficiary Improvement and Protection Act (BIPA) passed in December 2000 allocated about $11.5 billion to hospitals and will relieve many of the most distressed institutions. But it leaves in place a system of irrational subsidies for uncompensated care and other public goods, which inevitably results in approximate payment measures that give too much to some and too little to others. Since Medicare began, the onus for correcting imbalances bounces back from public to private payers from year to year. The BBA and two successive BBA relief bills have continued this pattern. Until leadership at both ends of Pennsylvania Avenue musters the political will to rationalize subsidies, debate about payment policy will continue to revolve around surrogate issues.

Meanwhile, as much recent analysis (summarized above) suggests, the financial condition of the health care system lies largely beyond the control of public policy. While hospitals may have increased their bargaining power somewhat vis-à-vis health plans, price increases can only increase the tension between providers and payers in the long run. Some efficiency gains may lie with in the ready reach of hospitals and hospital systems that have not yet tackled obvious administrative reforms or data system improvements. But the higher goals of clinical integration and true coordinated care will require excruciating efforts.

Demographics aside, the greatest challenges to the health system’s sustainability seem sure to come from advances in biotechnology that have only begun to be felt in the form of rising drug and medical device expenses. Hospitals alone cannot contain these costs. Government policies on research funding, technology transfer, and patent protection have stoked the fires of innovation and created a pipeline full of advances for which demand, once created, cannot be quenched. How much more of this kind of progress we can afford is a question policymakers cannot put off for long.

Editor's Notes

 
Rob Cunningham was writer and editor of Medicine and Health Perspectives from 1995 until March 2000, when he joined the staff of Health Affairs as a senior editor.

NOTES

Top Consolidation And Pushback Walk-Aways And Volume Growth Cost Factors Cost Management Varieties Of Experience BIPA And Beyond NOTES

 

1. See, for example, HCIA-Sachs and Ernst and Young, "The Financial State of Hospitals: Post-BBA and Post-BBRA" (Baltimore: HCIA-Sachs, May 2000), 2.
2. S. Guterman, "Putting Medicare in Context: How Does the Balanced Budget Act Affect Hospitals?" (Washington: Urban Institute, July 2000), 9.
3. Medicare Payment Advisory Commission, Report to the Congress: Selected Medicare Issues (Washington: MedPAC, June 2000), 122.
4. Ibid., 123.
5. K.E. Thorpe, "Projected Hospital Revenues, Expenditures, Margins: 1998–2002" (Prepared for the Council on the Economic Impact of Health System Change, Washington, D.C., September 2000).
6. C.S. Lesser and P.B. Ginsburg, "Update on the Nation’s Health Care System: 1997–1999," Health Affairs (Nov/Dec 2000): 213–214.
7. Moody’s Investors Service, Not-for-Profit Health Care: 2000 Outlook and Medians (New York: Moody’s, August 2000), 9.
8. Center for Studying Health System Change, "Fifth Annual Wall Street Comes to Washington: Market Watchers Evaluate the Health Care System," Conference Transcript, 21 June 2000, <www.hschange.org/CONTENT/250/transcript.html> (27 October 2000).
9. Kenneth Thorpe , Rollins School of Public Health of Emory University, interview, 24 October 2000.
10. G. Taylor, Hospital Management Industry Overview (New York: Banc of America Securities, October 2000), 3.
11. S. Selis, "Just Say No," Healthcare Business (Jan/Feb 2000).
12. Conference call with PacifiCare CEO Rob O’Leary and other company officials, 11 October 2000.
13. Deloitte and Touche, U.S. Hospitals and the Future of Health Care: A Continuing Opinion Survey, Eighth Edition 2000 (Orlando Fla.: Deloitte and Touche, June 2000), 20.
14. Off-the-record interview, 12 October 2000.
15. Taylor, Hospital Management Industry Overview, 2.
16. Moody’s, Not-for-Profit Health Care, 14.
17. Council on the Economic Impact of Health System Change, "The Future of the American Hospital: The Financial Outlook," Conference Summary, 6 September 2000, <ihp.brandeis.edu/council/html/hospfinsum.htm> (23 October 2000).
18. P. Buerhaus et al., "Implications of an Aging Registered Nurse Workforce," Journal of the American Medical Association 283, no. 22 (2000): 2953.
19. HSM Group, Ltd., "Research on Nursing Staff Shortages," for the American Organization of Nurse Executives (Scottsdale, Ariz.: HSM Group, November 1998), 14; and S. Selis, "Where Have All the Nurses Gone?" Healthcare Business (June 2000): 68.
20. Don Richey, for the American Hospital Association, testimony before the House Ways and Means Subcommittee on Health, 106thCong., 2d sess., 25 July 2000, <waysandmeans.house.gov/health/106cong/7-25-00/7-25rich.htm> (23 October 2000).
21. Author’s notes.
22. Richey, testimony.
23. Moody’s, Not-for-Profit Health Care, 10; and B. Kirchheimer, "Report Predicts Huge HIPAA Price Tag," Modern Healthcare (2 October 2000): 48.
24. MedPAC, Report to the Congress, 119–121.
25. Stuart Guterman, Urban Institute, interview, 23 October 2000.
26. MedPAC, Report to the Congress, 117.
27. Thorpe, "Projected Hospital Revenues."
28. Guterman, interview.
29. Lesser and Ginsburg, "Update," 214.
30. L.T. Kohn, "Organizing and Managing Care in a Changing Health System," Health Services Research 35, no. 1, Part I (April 2000): 48.
31. Moody’s, Not-for-Profit Health Care, 6.
32. Jeff Goldsmith, Health Futures, interview, 9 November 2000.
33. D. Dranove et al., "Are Multihospital Systems More Efficient?" Health Affairs (Spring 1996): 102.
34. Goldsmith, interview.
35. Kohn, "Organizing and Managing Care," 48.
36. K. Matherlee, "Margins as Measures: Gauging Hospitals’ Financial Health," Issue Brief (Washington: National Health Policy Forum, March 1999), 6.
37. Lewin Group, The Impact of the Medicare Balanced Budget Refinement Act on Medicare Payments to Hospitals (Falls Church, Va.: Lewin Group, 1 February 2000), sec. 2, 1. Among other differences, these projections do not incorporate estimated effects of the second BBA relief bill—passed as the Beneficiary Improvement and Protection Act in December 2000—and so do not compare with Thorpe’s estimates.
38. Guterman, interview.
39. Thorpe, interview.
40. Moody’s, Not-for-Profit Health Care, 6.
41. Goldsmith, interview.

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