Maine hospitals awaiting nearly $500M from state

Maine hospitals this month will feel relief when they receive nearly $500 million from the state, but the payments don't provide a remedy for higher taxes that hospitals are paying and lower reimbursements they're receiving for medical services, hospital officials say.

Half a billion dollars sounds like a lot of money and hospitals are certainly grateful for it, but it doesn't mask that they're paying more in other ways, said Jeff Austin, vice president of the Maine Hospital Association.

State hospital taxes have gone up, costing hospitals about $20 million a year, he said, and the Legislature cut outpatient reimbursement rates for Medicaid by 10 percent, costing them an additional $15 million to $20 million a year. On top of that, mandated federal budget cuts that went into effect this year cut Medicare reimbursement rates by 2 percent, costing another $20 million or so annually, he said.

Some hospitals are also losing other federal Medicare payments they've had for years.

"It's not all roses," Austin said.

Maine officials announced last week that they had sold the state's liquor revenue bond, allowing it to repay $183.5 million in Medicaid reimbursement debt it owes to 39 hospitals. The payment triggers a federal match of nearly $307 million, for a total payment of more than $490 million.

The governor's office said hospitals can expect to receive their payments this month.

The payment will allow the 65-bed Franklin Memorial Hospital in Farmington to improve its cash flow, make capital improvements that have been put on hold and possibly pay down debt, said Rebecca Ryder, its president and CEO.

But the hospital is losing millions of dollars a year in other ways, she said. A Medicaid outpatient reimbursement cut approved by the Legislature in June will cost the hospital about $1 million, she said, and higher hospital taxes will add to the figure.

The hospital is losing about $2 million annually because of mandated federal spending cuts and another $2 million from a Medicare provision that Congress didn't renew in December, she said. She expects to be losing an additional $280,000 a year in federal funds for the hospital's ambulance service this December.

Ryder said the $16.6 million the hospital is getting from the state provides a little cash-flow breathing room.

"But at the same time we have all these other reductions happening in the health care world at a time we all acknowledge that the cost of health cost is too high," she said. "This, if you will, 'windfall' for Maine hospitals is in no way offsetting these changes."

Blue Hill Memorial Hospital, which is due $743,000 from the state, will feel many of the same cuts as Franklin Memorial Hospital but on a smaller scale, Chief Financial Officer Ed Olivier said. For a small hospital with 25 beds and revenues of about $36 million a year, it stings to lose about $300,000 a year from higher taxes and lower reimbursements.

To make it up, the hospital is considering raising prices for the first time since 2009 and is looking to boost revenues by attracting people who now go to other hospitals, he said.

"The debt payment is in no way a cure," he said.

Since the checks are one-time payments rather than a source of recurring revenue, they won't be used to create new hospital programs or services, Austin said.

"It will definitely help hospitals that are borrowing from banks. Maybe they won't have to," he said. "Or hospitals that have five days' cash on hand and are always sweating out whether they can make payroll, now they have 15 days' cash on hand. Certainly capital investments are something that can be done because they're one-time kinds of things."