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iting tighter profit margins, the chief executive of the Mayo Clinic recently told his employees that the prestigious health system will prioritize the care of privately insured patients over those on Medicare and Medicaid.

That bold pronouncement by Dr. John Noseworthy — made in a speech to employees late last year — reflects the growing unease among hospital executives who are watching profits shrink due to steady increases in the number of government-insured patients. Medicaid, whose enrollment has increased dramatically under the Affordable Care Act, traditionally pays hospitals significantly less than commercial insurers.

“We’re asking … if the patient has commercial insurance, or [if] they’re Medicaid or Medicare patients and they’re equal, that we prioritize the commercial insured patients enough so … we can be financially strong at the end of the year,” Noseworthy said.

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The Minneapolis Star Tribune reported his comments Wednesday.

The policy is being implemented at an uncertain time for hospital finances, with many executives concerned that the GOP’s plan to replace Obamacare could cause people to lose both private and public insurance coverage, forcing hospitals to absorb more uncompensated care.

But those pressures — and Noseworthy’s statement — predate the current debate over the law.

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“There is this thought that hospitals treat whoever comes to their door, but this is a statement that lays out what happens,” said Christine Spencer, a health economist at the University of Baltimore. “It’s a surprise to hear it out loud like that, but hospitals, probably for decades, have engaged in these more subtle attempts to get privately insured patients over Medicaid or the uninsured.”

In a statement, Mayo Clinic representatives said that about 50 percent of their care goes to patients on Medicare and Medicaid.

“Balancing payer mix is complex and isn’t unique to Mayo Clinic. It affects much of the industry, but it’s often not talked about. That’s why we feel it is important to talk transparently about these complex issues with our staff. We will continue to discuss these complicated issues and work to find solutions that benefit our patients,” the statement said.

As a top hospital system, Mayo stands to lose big on the spread between public and private insurance reimbursement from those sources, said Harold Miller, chief executive of the Center for Healthcare Quality and Payment Reform. Mayo told STAT that it lost $546 million in indigent care and in unpaid Medicaid portions in 2016 and $1.8 billion in unpaid Medicare portions.

The health system’s market power gives it the ability to charge more for its services and command high payments from commercial insurers, a clout it can’t wield with the federal government. So, Miller said, in prioritizing those commercially insured patients, it is following the money.

“It’s a very lucrative thing for them to do,” said Miller. While it makes sense from business perspective, he said, it doesn’t help to solve the underlying problem of America’s sky-high medical costs. “True leadership would be to figure out how to deliver high-quality services at the lowest cost possible,” Miller said. “If institutions are simply going to say, ‘I’m not going to serve patients unless I get paid more,’ that’s only contributing to the problem.”

The hunt for higher-paying patients plays out in all sorts of ways, experts said. A medical center may locate its satellite offices and target its advertising in wealthier suburbs. Hospitals might reduce emergency room services so they do not have to handle the chronic yet untreated issues — such as diabetes or high blood pressure — that regularly bring people without insurance to the hospital.

Mayo’s policy would not apply to emergency care, and Noseworthy said that Mayo will continue to take all patients, regardless of their ability to pay. He said the change would affect only a small number of patients, and only in circumstances when government-insured individuals and those with private coverage are seeking care for similar medical problems at the same time.

Mayo operates facilities in Minnesota, Arizona, and Florida, and has reported increases in unreimbursed costs related to Medicaid patients in recent years. The disparity in payments between commercial and government insurers has grown wider under the Affordable Care Act, which reduced Medicare reimbursements and instituted penalties for readmissions and poor quality. It also changed the mix of patients hospitals see by increasing the number of Medicaid patients. In Minnesota, the Medicaid rolls have expanded by 300,000 people.

While having more paying patients is generally a good thing for hospitals, it can also exert financial pressure on hospitals that serve high numbers of Medicaid patients, because government reimbursements are lower and do not cover all billable costs. Experts said the gap between public and private reimbursement is ripe for public discussion.

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Noseworthy said in his comments to employees that a recent 3.7 percent increase in Medicaid patients was a “tipping point” for Mayo. “If we don’t grow the commercially insured patients, we won’t have income at the end of the year to pay our staff, pay the pensions, and so on,” he said, “so we’re looking for a really mild or modest change of a couple percentage points to shift that balance.”

Even if Noseworthy’s statement was a moment of honesty, Daniel Polsky, a health economist at the University of Pennsylvania, said it doesn’t mean he and Mayo should be chastised for their strategy.

“I don’t think they should be shamed for saying it,” he said. “I think there should be some public discussion about whether elite systems such as Mayo should provide equal access to all payer types. I don’t know the answer to that, but it’s a reasonable debate.”

Despite the increase in publicly insured patients, Mayo has still generated significant profits. Its income jumped to $612 million in 2013. Last year, however, income dipped to $475 million, translating to an operating margin of 4.3 percent.

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  • I was told by Mayo in Florida that since I had Medicare as my primary insurance carrier they would not accept it nor would Medicare allow me to pay out of pocket. So basically I could not have there services since they would take Medicare or my BC/BS, or allow me to pay out of pocket. In other words I was SOL.

  • This is a prime example of why medical care should not be for profit. Dr. Mayo would most likely be appalled. Hippocrates definitely would be.

    • Ron is right! I AM appalled. I am also appalled at the federal and state regulations that attempt to control the practice of medicine and make it safer for the public, the hundreds of thousands of dollars of debt that students must incur in order to become physicians, and the discontinuation of many of my sacred practices such as bloodletting, trepanation, and Mercury ingestion. Finally, I resent it when it is said that people who invoke my name in modern discussions of health policy are only showing their ignorance! -H

  • Thank You for sharing the true example of what I have tried to articulate and experienced in my diverse and personal experience of health care system and how it is managed and delivered. I ask people to look at the history of the establishment and how quality and priority has always had a profit plan in place and insurance, Medicare and Medicaid are all a Ponzi scam and medical students and providers are soldiers that are educated in school that is the link that history needs to be researched and rewritten to understand how the cartel and monopoly of organized heath care is branching out into a market that is using power and privilege to attract people who want the privilege and power that money can not buy if you are not as privileged or powerful as the MAN who is behind you or ahead of your need for care. If you think this is new it is not it is like the way the AAA American Automobile Association tried to monopolize new car maker Henry Ford to manufacture transportation for all, Not just the privileged, He had a design and ability to give same privilege better quality and for a affordable cost to anyone. The same with Rothschild control over oil and he shows deception and manipulation that we see in health care and business practices changing names and ownership titles to mislead government and people to think they just created shareholders and investors to pay him for use of privilege and power but not full control. He bought Government to establish standards and guidelines associations that claim are to protect people and quality of product is guidelines set up by board that Foundations like carnage and Rothschild control, They are a cartel protected by government funded by the people for privilege for basic needs welfare and charity is a market place mayo clinic used to establish foundation of trust and environment to educate and publish same technic and procedure practice of medicine and know that insurance and health care are established for profit they are first to open the true nature of the intent and priority investors used to create establishment. We demanded what we never were getting with the funds provide by Government and premiums from private insurance. This is a fact that medical students have a suside rate of 400 death per year, Why? They are bullied and made to follow a practice that you think follow oath to do no harm, I would think wanting to practice medicine is a calling and hope to heal the sick. Yes wealth and respect are what is glamorized. This is not true, Wealth and respect is promoted and exploited by policy and privilege to preform and practice by intentional desire to work for program designed for profit, Imagine work and dedication along with student loan the are another question to answer, is a stress and situation with power given that teaches you need to follow procedure, you owe us for future connection and practice you have no choice or credit, Government public do not see you or witness deception and compaction is the practice.performance and quality is not welcomed profit then quality is key to career choice. Live with choice to question duty expected follow you will not be accreted or develop connection to practice debt and bills need to be managed. Suicide is committed as a solution and direction I have been healing and understanding my fear and situation is more dangerous and insidious I can not even articulate the evil and corruption as a patient and human it kills me to accept a future for a illness is something even if I had money or welfare for service. I would ask myself is my care with do diligence, or denied because power or privilege, is agenda, compaction is the connection I noticed was connected your future to mine. My story my situation made see motive is reason to realize neglect and promotion of quality rises but money or privilege give justice to cover the virus that is spreading and infecting, it`s target, and people who work around it friends and family faith healers and patient in a bed in same hospital the visitors, regardless of desired profit and service MRSA is one secret I witnessed the lies and cover up. Helpless and hopeless is scary to a person regardless. I can relate to suside by a student who want to heal and give service. Debt and the obvious is endless. God says he will not give you more than you can handle. This is my conclusion and understanding of a senseless loss of good, And this is evil past and present you see in this message from mayo clinic. It is because people are aware of is taught and expected understanding is a view denied and established it is a this can not be true moment. Not a to good to be true.

  • Completely agree with the Mayo Clinic. It’s simply a matter of survival, and Mayo and other health providers cannot be expected to take on all patients
    regardless of insurance reimbursement or lack there of. The original intent of the ACA was to destroy the private practice of medicine, and no one can convince me otherwise

    • What is your medical specialty, Dr. Emmer? Are you Internal Medicine, Oncology, Surgery, Cardiology, Anesthesiology, Obstetrics? When was the last time you saw or knew of an Adverse Event that resulted in Serious Harm or Death? Did you report it? If not, why not? When was the last time you or one of your colleagues “doctored” a patient’s medical record in order to ameliorate the chance of liability? These are all questions that I am far more interested in than whether the Mayo Clinic cooks their books to stay alive. They can survive or not, but do they kill people in the process without reporting the event?

  • I think that it is good that Dr. John Noseworthy said this. At least this is out in the open. The medical community has been denying care to the poor and elderly for a very long time. At least now that this is out in the open maybe just maybe they can find a solution to the problem. I can only pray.

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