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Medicare, Medicaid cut deep into health care IT

As insurance subsidies such as Medicare and Medicaid continue to tighten the reins, midmarket health care IT departments are being forced to streamline operations.

CIOs in the health care industry say looming Medicare and Medicaid cutbacks remain one of the top challenges facing their industry, at a time when many of them are already being forced to trim their IT budgets.

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Ten percent of CIOs and IT leaders at American hospitals and health care systems expected their 2008 IT budget to be smaller than last year, according to a recent survey of 307 IT leaders by the Healthcare Information Management and Systems Society (HIMSS). Another 12% expected to work with the same amount of cash.

Of those working with less, 36% blamed "deteriorating financial conditions," an increase from 28% last year. And 43% of CIOs surveyed called impending Medicare and Medicaid cuts one of the major business issues facing the health care industry as a whole, down from 52% last year.

The past year has seen Medicare funding shift slightly to favor health providers that submit reimbursement records electronically, stop reimbursement for in-hospital infections and face a decreased physician reimbursement rate, said Tom Leary, senior director of federal affairs at HIMSS. Meanwhile, Medicaid faces federal cuts that could place a higher burden on states to fund the program.

"All of those things are adding up to hospital-based folks getting anxious," Leary said. "They're not anticipating as high a reimbursement of Medicare."

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Medicare and Medicaid are government programs that provide health insurance to the elderly and the poor, respectively. Both were created in 1965. In both cases, hospitals provide services to program recipients and are reimbursed by the programs.

The HIMSS survey comes as President Bush asks Congress to pass legislation that would shave $3.2 billion off the nation's Medicare costs starting in 2013. Bush and many Republicans believe Medicare costs are out of control and hurting the government's bottom line. Both Democrat candidates for president have expressed interest in expanding subsidies to Medicare recipients.

Meanwhile, new regulations will soon take effect that restrict Medicaid payments to the cost of providing care. The regulations would not allow hospitals to use Medicaid to offset the cost of treating uninsured patients.

The cuts, should they go through, come as the IT role at hospitals continues to expand. Nearly 75% of CIOs expecting to increase their budget this year said that's due to an overall growth in the number of systems and technologies they're managing. Leary said hospitals are also trying to implement the electronics-based records system they need to pick up 1.5% more in Medicare reimbursements. And they struggle, as well, with security concerns. Nearly 25% of CIOs surveyed said their departments had been victims of a security breach in the past year.

All of these things are adding up to hospital-based folks getting nervous.
Tom Leary
senior director of federal affairsHealthcare Information Management and Systems Society

Michael Jones, corporate vice president and CIO at Children's Hospital and Health System in Wisconsin, is one of the lucky ones. He has seen his operations budget increase slightly this year and even saw a bump in his capitol budget when the 4,500-employee health care system pulled money from the main capital budget to fund IT projects.

But should he ever be forced to reduce the IT budget, Jones said he would have tough decisions to make.

"We would have to identify what services were least important and then identify where we would make cuts to do that," he said. "That would be both probably new things in capital and also in personnel. I'm sure we would establish a hiring freeze."

Jones, an HIMSS member who participated in the survey, said about 35% to 40% of the Children's Hospital and Health System business comes from Medicaid.

Jennifer Horowitz, senior director of research at HIMSS, said researchers are conducting a new survey to explore more in depth the 26% of survey respondents who said they had a security breach last year.

"If they did have a security breach, we dove a little deeper," she said, adding that she expects the results in a few weeks.


Let us know what you think about the story; email: Zach Church, News Writer

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