Banner Health, a 21-hospital system based in Phoenix and one of Arizona's largest employers with 10 hospitals there, instituted in late December a salary freeze for all 35,000 employees, of whom 28,000 work in Arizona. The move is expected to save about $40 million this year.
And the John C. Lincoln Health Network, a two-hospital Phoenix system, announced last month that it would close its birthing center at North Mountain Hospital on Feb. 5. In 2010, the center lost $1.6 million in direct costs and $5.4 million in total costs. More than two-thirds of the system's obstetric patients are covered by Medicaid, which is known locally as AHCCCS, or the Arizona Health Care Cost Containment System.
Arizona lawmakers have already approved a 5% Medicaid rate cut to providers, which takes effect in April. This equals an estimated $236 million in lost provider revenue in fiscal 2012. Brewer's proposed budget summary suggests further Medicaid provider rate cuts may be necessary. The state is facing a nearly $2 billion budget shortfall, including $1 billion in the AHCCCS program. AHCCCS reimbursements today are about 70 cents on the dollar.
“Certainly, we are bracing ourselves for lower reimbursement,” said Ron Bunnell, chief administrative officer of not-for-profit Banner Health.
Arizona has gained national attention for its harsh Medicaid cuts. In October, the state cut funding for some bone marrow, liver, lung and other transplants. About 100 people suddenly became ineligible for these life-saving operations. Two people have died after being denied transplant coverage because of the cuts, according to local media reports.
State Senate Minority Leader David Schapira (D-Tempe) has introduced a bill that would restore funding to the transplant program, using $1.2 million in federal stimulus dollars and $3 million in other federal funds.
But a spokesman for Brewer said those funds are already spoken for, and he does not expect the program to be restored. Arizona received $4.8 billion in total federal stimulus dollars. “Not a penny of that was committed to organ transplants,” said Paul Senseman, Brewer's spokesman. Some 30% of the state's general fund goes toward Medicaid today, compared with 18% in 2007, Senseman said.
Brewer, a Republican, sent a letter in December to incoming U.S. House Speaker John Boehner (R-Ohio), asking the new Congress to consider repealing a provision in the Patient Protection and Affordable Care Act that requires states to uphold a “maintenance of effort” in Medicaid programs to keep receiving any federal funding. This month, she joined 32 other governors and governors-elect in a similar letter to the White House and congressional leaders.
Last spring, the state attempted to reduce the Medicaid program and eliminate KidsCare, the children's health insurance program, but was thwarted when told the cuts would cost the state more than $7 billion in federal funds because of the maintenance-of-effort provision.
Senseman said Brewer also is interested in obtaining a waiver from HHS to forgo a requirement in the reform law to expand Medicaid eligibility to all residents up to 133% of the federal poverty level by 2014. Arizona is party to a state-led lawsuit to repeal the law.
In 2000, Arizona voters approved a proposition expanding Medicaid eligibility to those at or below 100% of the federal poverty level. About 20% of state residents are in the AHCCCS program, or about 1.3 million people. “This is precisely why we are $1 billion in the hole in the program now,” Senseman said.