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The Economic Force of Arizona’s Healthcare Industry Recent changes in healthcare reimbursements lead Arizona businesses in an uncertain dance by Bob Ryan “Economic recovery is just around the corner.” We’ve all heard it. Week after week, month after month, government agencies, pundits, pollsters and economic forecasters continue a two-steps-forward-one-step-back dance as businesses in the state of Arizona — and across the nation — lurch along toward a hazy future. The recovery has been slow and, even now, each movement in the dance seems critically dependent on taking the right steps at the right time. This includes our nation’s healthcare system — a sixth of our total economy. Over the past decade, Arizona’s healthcare community has shown itself to be an economic catalyst for the state, helping to shore up the overall economy even during downturns. The current recession is no exception. At a time when many industries have been cutting jobs or holding growth to a minimum, Arizona’s healthcare sector has been growing. Valley hospitals have continued to expand facilities, helping to bolster the state’s ailing construction industry. According to information made available by the Arizona Hospital and
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Healthcare Association, as Arizona’s jobless rate climbed over the last few years, the healthcare sector was adding jobs — some 6,400 in 2010. Beyond that, an economic impact study by Arizona State University’s L. William Seidman Research Institute credits Arizona hospitals with creating more than 80,000 jobs statewide due to facilities construction, purchase of goods and services, and new or expanded programs. The Patient Protection and Affordable Care Act of 2010 initiated the largest change in America’s healthcare system since the creation of Medicare and Medicaid. The intent, of course, is to provide more people with access to care. But with most states facing billions in budget shortfalls, funding the increase in care is problematic. Earlier this year, Governor Jan Brewer and Arizona lawmakers passed important legislation designed to revitalize Arizona’s economy, attract new businesses and recover some 300,000 jobs lost during the the recession. Many in the healthcare community, however, fear that aspects of the
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new plan could undermine those very efforts. Throughout the healthcare sector, it is believed that the changes attempt to resolve Arizona’s current fiscal woes at the expense of this vital portion of our state’s economic engine. The Senate budget passed on March 16 includes provider rate reductions for the Arizona Health Care Cost Containment System that could go as high as 10 percent. The legislation also eliminates all general fund support for AHCCCS coverage increases mandated by voter approval of Proposition 204 in the year 2000. Under the new Senate budget, hospitals would lose approximately $600 million in revenue during fiscal year 2012. This comes on the heels of $700 million in hospital payment cuts and rate freezes that the legislature has imposed since 2008. In addition, a plan to reform AHCCCS, put forward by Governor Brewer, includes an estimated $530.7 million in new cuts to hospitals during FY 2012. When federal matching funds of two dollars to every one contributed by the state are factored in — money culled from taxes that Arizonans are already paying and that will otherwise go to other states — the numbers begin to soar. Viewed in the light of total annual cost, the funding losses for the entire Arizona healthcare community could total more than $1.9 billion. The question arises as to whether these cuts are sustainable and what ultimate effect they will have not only on hospitals and other providers, but on Arizona business in general. In a letter to the secretary of the Department of Health and Human Services last April, AzHHA noted: “Arizona hospitals and economists predict these cuts will force widespread job losses that will begin in the healthcare industry and then ripple down to other sectors of Arizona’s economy.” AzHHA’s CFO, Jim Haynes, recently pointed out that hospitals alone account for roughly 10 percent of Arizona’s economic output. “Add to that private practitioners, nursing homes, independent health centers, surgery centers and other healthcare-related businesses throughout the state, and you have a significant segment of the economy that is immediately and directly affected by changes in compensation. “The Governor’s proposal is being reviewed by the Centers for Medicare and Medicaid Services in Washington as well,” he said. “CMS will take little issue with some parts of the proposal, but will find other portions more difficult to accept.” He also mentioned a
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