The Affordable Care Act made changes to government payments for Medicareservices that are expected to save tens to hundreds of billions of dollars per year. This sounds like a good thing — and it very well may be — but only if those spending cuts don't cause harm. Research suggests they just might.
As any business would, hospitals often respond to reduced revenue by cutting costs. They especially tend to cut back on staff, according to a number of researchers.
Reductions in Medicare payments to hospitals between 1996 and 2009 were nearly entirely offset by cuts to operating expenses, and predominantly to personnel, Chapin White and Vivian Wu reported in Health Services Research in 2013. In other work, also published in Health Services Research, Ms. Wu and Yu-Chu Shen found that hospitals responded to lower Medicare payments in part by reducing staff and length of stays.
On the other hand, a study by health economists from Northwestern University's Kellogg School of Management found that hospitals responded to the market collapse in 2008, which reduced revenue through depressed returns on investments, not by cutting staff but by trimming back in other specific areas, including advanced medical records and less profitable services like those for substance use treatment or those provided in trauma centers.
Such cuts by hospitals may harm quality of care. For example, recent work suggests that cutting length of stays increases mortality for heart attack patients and those with pneumonia. Other work, published recently in the journal Medical Care, suggests that an 11.5 percent decrease in nursing staff per 1,000 inpatient days (a standardized measure of staffing levels) could increase adverse events — such as deaths, infections and surgical complications — by 1.2 percent. In their study, Drs. Wu and Shen found higher heart attack mortality rates in hospitals that had experienced larger Medicare payment cuts and had cut spending, "particularly among registered nurses," in response. For each 1 percent payment cut, heart attack mortality was 0.4 percent higher.