According to Pifer, health care reform will force government-run health insurance systems, such as Medicare, to run more efficiently, and in turn, drive private insurance companies to follow suit in an effort to compete.
"Quite simply, reimbursements from private insurance companies and Medicare are going to go down," Pifer said.
Pifer expects to see a rise in the number of insurance policies offering flat-rate reimbursements to hospitals. These flat-rate policies bundle categories of ailments together into what are called "diagnostic related groups," offering predetermined reimbursements for each group. This is much more cost effective compared to negotiating reimbursements for individual patients, Piefer explained.
"Hospitals need to think about how to get by with more modest payments and still achieve the very best outcomes possible," Pifer wrote in an e-mail. Exactly how El Camino will create the best "value for the health care dollar" is yet to be seen.
At the state level, the governor has called for "a tough budget for tough times." Brown's budget proposes deep cuts to services across the board, and with Medi-Cal making up 15.4 percent of California's general fund — the second largest general fund expenditure — he has said "significant reductions" need to be made to the service.
"Further cuts to Medi-Cal will not have a substantial impact on El Camino from a business perspective," Pifer wrote. "However, Medi-Cal can be an effective way of funding certain types of primary-care and community-based clinics" and could have a large impact on the overall quality of health care offered throughout Mountain View and the surrounding Bay Area.
Another item in Brown's proposed budget — the extension of the Hospital Fee through June 30, 2011 — could also put a squeeze on El Camino's books, although Pifer wouldn't speculate how much, saying only that the hospital is "continuing to watch it closely."
The Hospital Fee is a tax that draws money from all California hospitals in order to increase the state contribution to Medi-Cal, thus increasing the federal matching funds.
The pressure the hospital is feeling from health care reform and the state's budget crisis — however severe — comes on top of the damage done by the recession, which caused patient volumes to drop significantly at El Camino. People lost health coverage, decided to put off elective surgery and became more frugal with their trips to the doctor.
It has all come rather suddenly to the organization, which had enjoyed a long stretch of prosperity.
"We have been a hospital that, for at least the past 10 or 15 years, has been a very profitable business," Pifer said. "In the last year we had some challenges to our profitability as a business entity."
Pifer said he believes all of these challenges will ultimately make the hospital stronger by encouraging El Camino to run a tighter ship. "It turns out that efficient care is often the best care," he said.
He rejects the notion that by forcing hospitals to make tough decisions, the government will create an environment rife with sub-par care.
"Good health care providers will always recognize that there is an art to medicine and that guidelines for care are just that — they're guidelines," he said.
Without a nudge from government, insurance companies would have no incentive to end their "Cadillac" plans and hospitals would have no reason to stop ordering unnecessary and redundant tests.
"It is more comfortable for the patient if they don't need to have their blood drawn the second and third time and since the care does not improve beyond the information gathered from the first test," he said. "The traditional fee-for-service form of insurance does not create an incentive for efficiency."
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