More broadly, the AHA suggested that the average community hospital spends $7.6 million annually on administrative costs to meet a subset of federal mandates that cut across quality reporting, record-keeping and meaningful use compliance.
Hospital executives understand that ensuring patients are getting the right amount of care in the right settings is ultimately in their best interest. However, the transition has been painful so far.
"Keeping people out of the hospital really is the right thing for our community, but it has reduced our fee-for-service volume," said John Bishop, CEO of the three MemorialCare Health System hospitals in Long Beach, Calif.
Catholic Health Initiatives, a not-for-profit health system with 100 hospitals in 17 states, has also been feeling the pressure of low Medicare margins. The struggle led, in part, to layoffs of 459 employees at its Texas hospitals and the decision to leave 161 vacant positions unfilled.
Like other health systems, CHI's aggressive move to value-based care has weakened margins for Medicare patients, according to Dean Swindle, the system's president and chief financial officer.
In 2015, the Obama administration announced it wanted 30% of payments for traditional Medicare benefits to be tied to alternative-payment models such as accountable care organizations by the end of last year and 50% by the end of 2018.
The first goal was met, but since the Trump administration took over in January, CMS officials have been coy about their own goals for the shift beyond noting they want the move to be voluntary.
Overall, hospital leaders believe they are getting mixed messages from the Trump administration over whether it still supports the move away from fee-for service Medicare, given that it has canceled or scaled back several new pay models created under the Obama administration.
"We went full speed ahead because we felt, as many did, that value-based was going to be put in place more quickly than it has," Swindle said. "You cannot underestimate the impact of the election last year."
As it refocuses strategic priorities, CHI has reduced investments in value-based care and population health by about 35% to 40%. Swindle said in the near term his system's focus is to ensure there is adequate staffing at the bedside to give patients the best quality of care possible.
"Moving forward, we felt it would be a better turn for us and our community if we redirected some of those investments to things like patient experience," he said.
With hospitals struggling at historic lows in terms of Medicare margins, perhaps the CMS should take this time to determine if the benefits of shifting to value-based care outweigh the cons, suggested Jeff Goldsmith, an adviser at Navigant Consulting. Like hospitals, the CMS has reaped limited rewards from value-based models.
For instance, under the Comprehensive Primary Care Initiative, which launched in 2012, the CMS and other insurers pay physicians a monthly fee for patient primary-care visits. The model aimed to improve health outcomes and lower costs not only for Medicare beneficiaries but consumers enrolled in commercial plans and other coverage options, such as managed-care Medicaid plans.
Over the first three years of the experiment, the CMS paid out $226 million in care-management fees for Medicare beneficiaries. However, over that same period, the program generated only $121 million in savings, according to a federal evaluation of the experiment. Final year spending and savings have yet to be released.
Testingers noted similar findings for a Medicare medical home model and another effort to reduce avoidable hospitalizations for nursing home patients. In those instances, the CMS' investments either nearly or entirely outpaced savings generated.
"The questions we've been asking in terms of alternative pay models are, 'Is it worth it to the federal government to pursue them? And if we don't generate savings for the government and they increase costs for doctors and hospitals, where is the benefit to society?" Goldsmith said.
Going forward, there are things Congress can do to stabilize and lessen the financial pressures hospitals now face. The Medicare recovery audit contractor program could be overhauled. Under the program, private companies audit the medical records of hospitals and doctors to find instances of improper billing or erroneous payment from the government.
Hospital executives argue that claims are often mistakenly flagged as being improper in some way. Of the claims that have completed the appeals process, 62% were overturned in favor of the provider, according to the AHA. The association found that 43% of all hospitals reported spending more than $10,000 managing the RAC process during the third quarter of 2016, 24% spent more than $25,000 and 4% spent over $100,000.
RACs "should face some sort of penalty if they are wrong most of the time," Linden at Grinnell Regional said.
CHI's Swindle said he would like RACs to be responsible for covering the cost of an appeal should their initial determination be overturned.
Despite those concerns, the program has scored big for the federal government. RACs have recouped $8 billion in improper payments since its inception in 2009, according to the CMS.
The other recurring request from hospitals is that Congress preserve the individual mandate in the Affordable Care Act. A proposal to repeal the mandate is included in the Senate version of tax reform legislation.
If that were repealed, access to coverage would be harmed. Many healthy people would likely flee plans, leaving only the sickest patients, which would make it financially unfeasible for some insurance companies to continue to offer insurance in some markets.
"No matter what, we continue to figure out how to take care of people, but you get to the point where there just aren't the resources," Linden said. "I do fear for the future."