Those political decisions are complicating life for hospital leaders serving communities with sizable low-income and uninsured populations. Nearly half the uncompensated care provided by hospitals goes to patients with incomes at or below 138% of the poverty level, according to a March report by the liberal-leaning Urban Institute. According to the report, expanding Medicaid in all states would provide hospitals with an additional $294 billion from 2013 to 2022, and reduce the U.S. uninsured population by 10.2 million people by 2022.
The story plays out differently at these hospitals in states including Nebraska, Idaho, Texas, Louisiana and Florida. But the thread connecting them is a focus on finding ways to stay fiscally strong without skimping on patient care.
“It complicates the world that we live in,” said Jeanette Wojtalewicz, chief financial officer at Catholic Health Initiatives Nebraska, where the Republican governor and GOP-controlled Legislature have turned down the expansion, leaving 75,000 Nebraskans without Medicaid coverage. “We have to be more creative in meeting the needs of our community.” Still, her system continues to serve as the area's safety net. “It's getting a little weak, but we're still committed to it because that's what we do.”
Xiaoyi Huang, assistant vice president for policy at America's Essential Hospitals, which represents public hospitals and safety net providers, said that “from the hospitals' perspective, it will be hard to forecast their financial bottom line because they won't know until after the expansion happens the extent to which their patient mix may change or remain roughly the same.”
Last month, researchers at the Urban Institute issued a report for the Kaiser Commission on Medicaid and the Uninsured that examined the cost of not expanding Medicaid. According to the report, 24 states are moving ahead with the expansion, 21 are not and six are still debating the issue. As many as 6.4 million uninsured Americans will not be covered if all those 27 states opt not to expand their programs. The 21 states definitely not moving forward with the expansion will be turning away about $35 billion in federal funds in 2016 and about a total of $345.9 billion between 2013 and 2022. The six states still considering the option would forgo $15.2 billion in 2016 and $151 billion over the 2013-2022 period.
The July report also highlights a point repeated by hospital administrators in these states: Under the healthcare reform law, hospitals in all states face reductions in both Medicare and Medicaid disproportionate-share hospital payments—which subsidize care for low-income and uninsured patients—on top of lower Medicare payment rates. That will exacerbate the financial hit of states not expanding Medicaid.
“When the ACA came out and we agreed to Medicare reductions, that was with the understanding that we would have the expanded Medicaid program,” Wojtalewicz said. Her system knew it would take in less from Medicare payments, counting on getting “some additional dollars to reduce that charity-care conundrum.”
But those additional dollars aren't coming in Nebraska, where Republican Gov. Dave Heineman opposes the Medicaid expansion. As part of its mission, CHI Nebraska—which includes three general acute-care hospitals, a specialty heart hospital and a critical-access hospital spanning the eastern to the midwestern part of the state—will continue its obligation of providing care for all who need it, Wojtalewicz said. For the year ended June 30, Wojtalewicz said CHI Nebraska spent about $19.8 million of its $753 million in expenses on charity care to serve about 12,800 people who either were uninsured or underinsured. The system spent another $16 million on bad debt.
In that environment, CHI Nebraska has implemented a number of initiatives to lower costs and improve quality. For instance, it centralized its financial services and cut back on the number of accountants it employs, and it also outsourced some of its health information technology services offshore. Also, CHI Nebraska has added advance practice nurses, health coaches in physician clinics, medication management tools and care managers to reduce hospital readmissions.
Another hospital feeling the strain is Steele Memorial Medical Center in Salmon, Idaho. It's another state that is not expanding Medicaid, leaving 75,000 people without coverage. Steele, a critical-access hospital, is located 95 miles from the closest hospital. It served 588 uninsured individuals in about 2,300 uninsured patient visits last year. For fiscal 2012, the hospital's $15.3 million in expenses included $100,000 in charity care and another $1 million in bad debt.
CEO Jeff Hill said he's “baffled” why Idaho isn't moving forward with the Medicaid expansion, which he said would go a long way in helping hospitals provide more coordinated care for the medically indigent. A coalition called Right Medicine for Idaho—the Idaho Hospital Association is a member—estimates that federal dollars from the Medicaid expansion would allow the state to redesign its Medicaid program and save about $85 million over 10 years.
The state, Hill said, has developed “no real systematic approach for the medically indigent or Medicaid-covered lives to have coordinated care. There's been a push toward medical home design and infrastructure development throughout the state, but that's been met with mixed reviews. A Medicaid redesign, if done correctly, could actually create an integrated care network.”
Critical-access hospitals already face political pressure for receiving enhanced Medicare payments, which HHS' Office of the Inspector General recently said most don't qualify for under the original standards for the program. That's one more worry for these facilities in states choosing not to expand Medicaid. Washington County Memorial Hospital, with 25 beds, in Potosi, Mo.—a state that's not expanding Medicaid—said it's writing off more than $400,000 a month in bad debt for patients without any insurance.
Texas is another state where Republican leaders have refused to expand Medicaid under Obamacare, leaving 1.5 million people without coverage who otherwise would have had it. A Medicaid expansion would help taxpayers in Bexar County, said Leni Kirkman, vice president of strategic communications and patient relations at University Health System in San Antonio, an academic medical center owned by the county. Kirkman said 26% of the system's operating revenue comes from property taxes, all of which goes to pay for uncompensated care.
In 1996, the system established its CareLink program for residents who earn under 200% of the federal poverty level. Those residents receive a monthly bill for services, based on a sliding scale. According to Kirkman, the system's total charity care for 2012 was $490.6 million, including what it paid for CareLink, on total operating expenses of $967.9 million. “We've got about 55,000 members in our CareLink program now,” Kirkman said. “Had Medicaid expanded, about 26,000 of those would have qualified for the Medicaid expansion, which would have saved Bexar County residents $52 million a year. So we could have looked at lowering the property tax rate.”
Florida is another state with a large uninsured population that has refused to expand Medicaid despite the Republican governor's effort to do so, leaving 1.1 million people without coverage. There, Tampa General Hospital—a private, not-for-profit institution that has leased its hospital from Hillsborough County since 1997—was hopeful for the expansion.
“We felt that money is there and we should take advantage of it when it is there,” said Steve Short, executive vice president and CFO at Tampa General.
Of its approximately $1 billion in total expenses for 2011, Tampa General spent about $76.3 million on charity care. Tampa General works with patients who don't qualify for Medicaid to determine if they're eligible for the Hillsborough County Health Care Plan, which is administered by the county and is funded by a one-half cent sales tax on all sales. Of Tampa General's $1.1 billion in revenues, about $250 million comes from Medicaid and $23 million comes from the HCHCP program, according to Short.
According to Huang of America's Essential Hospitals, the differential impact of a state's decision to expand or not expand Medicaid won't be reflected in the CMS' proposed methodology for determining DHS payment reductions in 2014 and 2015.
Short said Tampa General leaders “were hopeful that (Florida lawmakers) would choose to expand. We certainly are sympathetic to the dilemma that you could get into a program where federal dollars are available and then years from now they pull it and the state is left to go through the pain” of managing the program on its own, he added.
That concern explains why Evalyn Ormond, CEO of Union General Hospital, a critical-access hospital in Farmersville, La., said she supports the position of Republican Gov. Bobby Jindal not to expand the state's Medicaid program, which will leave 336,000 people without coverage.
“There's so much abuse in Medicaid now,” Ormond said. “We need to clean that up before we add all of these other people on the roll.” She worries about whether the federal government will follow through on the ACA's commitment to have the federal government pay for most of the Medicaid expansion—though the government has not reduced its share of Medicaid funding in the past. “How do I know they are going to stick to their word?” she said. “What if they don't pay 90% and we add 400,000 to 600,000 people and they only give us 40%?”
Ormond's concern is a real one for hospital administrators in all regions of the country. But the primary worry for hospital executives in states not planning to expand Medicaid is how they will manage in an environment of declining public and private reimbursement that shows no signs of letting up.
“You're continually asked to do more with less,” said Hill of Steele Memorial in Idaho. “And that ultimately affects how we deliver care to our patients.”
Follow Jessica Zigmond on Twitter: @MHjzigmond