Here's a healthcare reform riddle: When is a certificate of need not a certificate of need?
When it's a "demand-reduction assessment-approval permit."
That's the bureaucracy-inspired term debated last week during the Louisiana Legislature's special session.
Proposed by three state senators as one way to shore up a $600 million shortfall in Medicaid funds next year, the bill as originally written proposed a CON-type process for hospitals, rural health clinics, home healthcare agencies, psychiatric and rehabilitation facilities, and non-emergency healthcare transportation.
Louisiana does not have a CON law (See related story, p. 24), although it has a moratorium on new home healthcare agencies.
"We spotted it right away," said Clark Cosse, vice president of legal and government affairs for the Louisiana Hospital Association, when asked about the CON euphemism used by state legislators. However, by midweek, the bill had been pruned in committee so that home healthcare agencies were the only providers left.
Even so, the Medicaid problem-dubbed the "dispro hole" by legislators and providers alike-continues to plague the state. "They wanted to stop the hole in the budget by stopping the growth of providers," Mr. Cosse said about the CON bill.
Congress has capped the amount of reimbursement that Louisiana will receive as Medicaid disproportionate-share funds, effective with the 1995 fiscal year. Disproportionate-share funds are given to hospitals that serve large numbers of the poor and uninsured.
The program has been a windfall for some states, particularly Louisiana. However, under new rules in the disproportionate-share program, some states will see a drastic reduction in the payments. For example, in the past, Louisiana providers received as much as 400% of costs for Medicaid patients. Under the new rules, the limit is 200% of costs.
State officials believe this will lead to a $600 million shortfall in Medicaid funds for the state, or about half the $1.3 billion in disproportionate-share funds the state is receiving from the federal government for the fiscal year that ends June 30.
Louisiana received 7% of the total disproportionate-share funds allocated to states in 1993; only California, Texas and New York received more.
Of the $1.3 billion in disproportionate-share funds, about $900 million went into the budget of the state's hospital system. Louisiana is the only state that owns its own charity hospital system, which has nine hospitals with 2,051 beds.
However, Louisiana isn't expected to feel the cuts until October, when the payments-or lack thereof-are made to the states.
John Jurovich, the state hospital association's vice president of finance, predicted that Gov. Edwin Edwards will call a special session in October solely to deal with the Medicaid-funding dilemma.
Under Louisiana's matching program, the federal government has been funding 75% of the state's Medicaid program. The disproportionate-share program was a "conduit to change federal dollars into state dollars," Mr. Jurovich said, noting that state cuts in the program will diminish federal dollars "exponentially."
That could have dire consequences for small, struggling hospitals such as 10-bed Merryville (La.) General Hospital. In May, the hospital had its first profitable month in years after a restructuring.
Medicaid disproportionate-share money "has been extremely helpful this year," said Robert Hicks, the hospital's fiscal administrator and one of eight administrators that the hospital has had in the past three years. Of the hospital's $1 million in patient revenues for the fiscal year that ends June 30, about $42,000 came from Medicaid disproportionate-share money.
"In a hospital this size, that could spell the difference between positive and negative cash flow," Mr. Hicks said. The hospital is expected to report a profit this year of about $100,000, but that's primarily due to a one-time adjustment from prior-year Medicare reimbursement.
The parish hospital was in such dire straits that in 1993, the state exercised a rarely used law to get court approval to assign a fiscal overseer to straighten out Merryville's problems.
Since then, the hospital leased 21 of its beds to a physical rehabilitation center, opened a rural health clinic and certified its 10 acute-care beds as swing beds-all to increase reimbursement.
Mr. Hicks said he believes the hospital may now be back on its feet financially, but a cut in disproportionate-share money could change that.
As insurance to ensure a reasonable flow of Medicaid funds, the Legislature last week was considering legislation to fund abortions. The federal government has ordered all states to use Medicaid money for abortions in rape and incest cases. The state has balked because it has a law prohibiting government-funded abortions except to save a woman's life.