Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors
Search in posts
Search in pages

Go Home

Acute and Rehab Hospitals May Be Viable Under Medicare Cuts

Nov 5, 2020 | Cases, Health Policy

The Issue You Tackled

The Affordable Care Act (ACA) mandates Medicare payment growth rate reductions to acute and rehab hospitals and home health providers. CMS/OACT initially calculated that these reductions would cause most such providers to become unprofitable by 2040, likely leading to widespread hospital closures and adverse impacts for patients. But this calculation was simplified and ignored several dynamic factors.

What You Actually Did

During 2012-2014, we developed an SD model that addressed the dynamic factors. One of them was population aging, which along with increased insurance coverage under the ACA, may help boost provider profits by increasing volumes and revenues.

If profits still decline, then provider reactions, such as downward adjustments in their breadth or availability of services, would help providers protect themselves in terms of costs, but at the same time may hurt patients and lead to more hospital readmissions and even deaths.

The model was tested with respect to multiple uncertainties and simulates several outcome metrics of importance to taxpayers, patients, providers, and communities.

The Results

Most acute and rehab hospitals will likely maintain healthy profit margins in the coming decades despite the Medicare cuts and without the need for service cutbacks–due to the aging population, ACA insurance expansion, and the ability of most hospitals to reasonably handle somewhat higher bed occupancies than they have today. But home health agencies will not fare as well, and some will close. A worst-case scenario could start to hurt hospitals by the 2030s; but in this case the rate cuts could be phased out, and the system could be stabilized.

Name How Medicare Payment Rate Reductions Will Affect Hospitals and Patients
Modelers Jack HomerGary Hirsch
Client/Participant Centers for Medicare and Medicaid Services, Office of the Actuary (CMS/OACT)
Client Type Government

Do you want to know more?

INFORMS Annual Meeting

This case was presented at the INFORMS Annual Meeting in November of 2014 in San Francisco, California. Please find the slides that were used during the presentation here.

OTHER SUCCESSFUL APPLICATIONS

RSC Uses System Dynamics to Increase HVACR Sales Against the Tide

RSC Uses System Dynamics to Increase HVACR Sales Against the Tide “Using the proven Strategy Dynamic process focused our limited resources on organizing strategic issues, identifying the critical resources, and developing the insight to more rapidly create intuitive...

Achieving a Polio-Free World Through System Dynamics Simulation

Achieving a Polio-Free World Through System Dynamics Simulation EXECUTIVE Summary This System Dynamics model underpinned a 192 country resolution to eradicate polio globally and led the Bill and Melinda Gates Foundation to give Rotary International $100 million to...

MasterCard Halts Market Share Slide With Scenario Planning

MasterCard Halts Market Share Slide With Scenario Planning The Problem MasterCard, a major credit card company, once held a dominant market position US Market Share with only one primary competitor, Visa. They woke up one day and realized that, after six years of...

Upcoming Events

Recent Posts

Data & Uncertainty in System Dynamics

Data & Uncertainty in System Dynamics Jay Forrester cautioned that “fitting curves to past system data can be misleading”. Certainly, that can be true, if the model is deficient. But we can have our cake and eat it too: a good model that passes traditional System...

Modeling for Improved Organizational Staff Diversity

Modeling for Improved Organizational Staff Diversity We cannot all succeed when (more than) half of us are held back. This slightly modified quote is from Malala Yousafzai, the courageous young woman who stood up for her right to be educated. It summarizes the ethos...

Join us

LET US BE PART OF YOUR JOURNEY

Do you want to lead your organization into the future by overcoming paradigms and creating change? With Systems Thinking and System Dynamics you will enable powerful decision-making and find the leverage points to improve profits, strategy, efficiency, sustainability, and more.

Rebecca Niles

Talk with Us

The most efficient way to align your needs with our offerings is to schedule a meeting with our Executive Director, Rebecca Niles

Engage a Systems Consultant

Looking for a Systems Consultant? Fill out this form and we will follow up with a call and, soon enough, the right person for the job.

Experience Systems Thinking

Bring in a facilitator to unleash the power of Systems Thinking in your organization. Fill out this form for a Beer Game facilitator and join the companies, and graduate and MBA programs that play this game all over the world. Contact us if a facilitator for a different game is needed.

WPI System Dynamics Fundamentals micro-course 1

Start Learning

Join the WPI Sytem Dynamics Fundamentals Course to understand the causes of dynamic behavior at a basiic level and much more! The course is self-led and self-paced.

System Dynamics Admins
System Dynamics Admins