Most rural hospitals seeking disproportionate-share money must be certified by a state agency and demonstrate that they have incurred uncompensated-care costs treating the indigent and uninsured.
But not necessarily in Louisiana, a state with a reputation for doing things its own way.
Last summer, the state Senate's president, physician Donald Hines, spearheaded a bill requiring any Louisiana rural hospital seeking disproportionate-share reimbursement to first get certified by a nongovernmental organization, the Rural Hospital Coalition. To receive that certification and reimbursement, hospitals would have to agree to pay the coalition, a 48-member, not-for-profit trade organization that lobbies for Louisiana's rural hospitals, $5,000 in annual dues and 5% of their disproportionate-share funding in the form of a "supplemental fee." The law passed unanimously in the Senate and overwhelmingly in the House and was signed by the governor on July 5, 2004.
The law, known as a state plan amendment, must be approved by the CMS before taking effect. The CMS' decision is expected by late spring or early summer. In the meantime, the federal agency is hearing from some incensed rural hospitals.
It's not the dues that rankle the hospital executives. They said the Rural Hospital Coalition and Hines are proven allies of rural healthcare. It's the coalition's mandatory cut, the 5% supplemental fee requiring them to fork over a share of the $54 million paid this year to the state's rural hospitals, that angers them. The fee, which translates into some $30,000 to $100,000 per year for each rural hospital-and about $2.6 million for the coalition-is too steep a price to pay, according to hospitals. The coalition has accumulated $4.5 million in reserves.
Some executives also object to paying what they consider excessive consulting and administrative fees to the organization's four principals: Executive Director Linda Welch; Christopher Pilley, Welch's partner in the consulting firm Health Care Solutions; accountant John Wells; and general counsel Jack Stolier. Together, the four were paid an average of $785,000 annually by the coalition over the last two years.
"I've never heard of any arrangement like this in America, wherein any kind of a nongovernmental organization was empowered to certify on behalf of someone for state and federal funds, and that organization received a percentage back of those funds for the purpose of lobbying," said American Hospital Association spokesman Richard Wade. "That is unique."
CMS spokeswoman Mary Kahn said the agency is reviewing Louisiana's arrangement. While she said it is not unusual for the CMS to contract out certification to nongovernmental agencies, she conceded that she had not heard of anything else like the Louisiana situation.
Keith Mueller, past president of the National Rural Health Association and a professor who directs rural health research at the University of Nebraska Medical Center, Omaha, said he's unfamiliar with a similar mandate in any other state.
"Only in Louisiana," Mueller said. "I don't see how CMS can stand for an arrangement like this. This is bad policy."
Hines and Stolier said the grumbling comes from a small percentage of Louisiana rural hospitals that have reaped the benefits of the coalition's lobbying efforts but have refused to help pay the cost of achieving those goals.
Hines, who successfully obtained disproportionate-share funding for rural hospitals for the first time in his Rural Hospital Preservation Act of 1997, said the law limits the definition of rural hospitals to those with 60 beds or fewer in parishes-Louisiana's version of counties-of less than 50,000. He said once that bill passed, other hospitals sought to downsize their bed counts to become eligible for the reimbursement.
"One hospital ended up getting $2 million in (disproportionate-share) money the coalition lobbied for years to get but refused to pay its dues," Hines said. That's why he pushed for the bill this summer, "to make sure everybody who enjoys the benefits of the Rural Hospital Preservation Act contributes the same amount."
The coalition was founded in 1994 after six rural hospital executives met and concluded that the Louisiana Hospital Association was controlled by larger, urban hospitals and no longer met their needs, Stolier said.
But some rural hospital executives question the coalition's need for its growing lobbying and advocacy efforts.
Only a few rural hospital executives agreed to be publicly identified by Modern Healthcare. They said the coalition's leadership exerts plenty of clout in the state capital and they fear endangering their institutions and funding by challenging powerful leaders like Hines; Pilley, former secretary of Louisiana's Department of Health and Hospitals; Stolier, a political insider; and Wells, a certified public accountant representing a number of Louisiana hospitals.
John Matheson, owner and chief executive officer of 19-bed, for-profit DeQuincy (La.) Memorial Hospital, objected to the mandatory membership and supplemental fees. "To me it's like the Teamsters Union telling every truck driver that no one can drive a truck in Louisiana unless they're Teamsters," Matheson said. "That's un-American, and I don't think it will pass any constitutional test."
Matheson, however, praised the coalition and Hines for the Rural Hospital Preservation Act and their advocacy. "They do wonderful work," he said. "But I believe that every healthcare dollar we get should go to healthcare."
Matheson said in 2004 DeQuincy received $700,000 in disproportionate-share money, of which the coalition is seeking $35,000 plus another $5,000 in dues.
Robert Davidge, president and CEO of 626-bed Our Lady of the Lake Regional Medical Center in Baton Rouge, said he hasn't seen anything like this in his 25 years as a hospital executive. "I am concerned about the fees that we pay to the Rural Hospital Coalition," said Davidge, whose system also owns and operates a critical-access hospital, 15-bed Assumption Community Hospital, in Napoleonville. "I admire the work they have done. But I worry about the cost of the supplement and the (coalition's) accumulation of $4.5 million."
Welch said she isn't surprised by the reaction of some rural hospital executives. "Obviously there are some disgruntled hospitals," she said in a written statement to Modern Healthcare. "However, it is my understanding that for each disgruntled hospital there are two or three rural hospitals that give the coalition their unqualified support."
Welch said the rural hospital administrators who founded the coalition recognized that if Louisiana's small rural hospitals were to remain viable, they would need to organize and establish a constant presence focused exclusively on rural hospital issues.
"The alternative, in their view, was to watch these hospitals close or reduce services," she said.
The coalition's successes include obtaining Medicaid disproportionate-share payments that reimburse 100% of uncompensated costs and enacting "any willing provider" legislation that guarantees participation in managed-care plans for rural hospitals and their physicians, she said. The coalition also has been able to exempt rural hospitals from statewide budget cuts.
Welch said the coalition grew from just six members in 1994 to 30 by 1997. That year the board began assessing members the 5% supplemental fees, but only 22 hospitals signed the agreements. She pointed out that the coalition has twice authorized rebates to members totaling $1.4 million.
Welch said her firm, Health Care Solutions, is an independent contractor that provides consulting services to the coalition. The $4.5 million the coalition holds in reserve will defray operational expenses if Medicaid disproportionate-share funding dries up and should sustain the coalition for two years, Welch said. She said the coalition logged total expenses of $882,143 in 2004.
Charles Castille, undersecretary and former general counsel for the state Department of Health and Hospitals, said the state did have some concerns about the Hines legislation when it was introduced but that the bill is an expression of the state's legislative will.
"This is a situation in which DHH finds itself in the middle," Castille said. "We are mandated to submit the state plan amendment to CMS and we have gathered the information CMS has requested. This is a decision CMS will have to make."
John Matessino, president and CEO of the Louisiana Hospital Association, said his group is caught in the middle, too. "While we are very supportive of the Rural Hospital Preservation Act and support the continued funding of rural hospitals, we recognize that our rural hospitals are having a very difficult time," he said. "But we have not been asked to get involved in this discussion. When an association's members are split, it can't advocate for one side or the other."