NYC Health & Hospitals proposes changes to charity-care payments

A fight over which hospitals bear the brunt of federal cuts to Medicaid disproportionate-share hospital payments could linger throughout the year if Congress doesn't restore billions in funding that is set to be reduced Oct. 1.

NYC Health & Hospitals on Wednesday told the City Council why a state formula that determines how the state distributes disproportionate-share hospital payments needs to change. The program is intended to offset costs incurred by hospitals that treat large numbers of Medicaid and uninsured patients.

Previous cuts to the program brought NYC Health & Hospitals to the brink of being unable to pay its workforce on time in fall 2017; Congress restored the funding in February 2018.

The municipal health system and several researchers have said voluntary hospitals that provide a small amount of charity care are overcompensated. The state administers the $3.6 billion in federal DSH funding, including $1.1 billion that is part of its indigent care pool.

Because of the way funding is distributed, NYC Health & Hospitals has lower priority than voluntary and other public hospitals, the Citizens Budget Commission explained in a report last year. As a result NYC Health & Hospitals would suffer the first $700 million in DSH cuts, which are expected to total $1.3 billion starting Oct. 1 if Congress does not act, according to testimony from NYC Health & Hospitals CEO Dr. Mitchell Katz.

"With such large reimbursement cuts looming on the horizon, New York State should move towards driving more DSH funding to hospitals that provide the most care to low-income and uninsured patients," Katz said.

A study from researcher Roosa Tikkanen found public hospitals provided 58% of care to the uninsured but received only one-seventh of funding from the indigent care pool.

"The current methodology continues to utilize a problematic structure that arguably doesn't take uncompensated care into account as heavily as it should," Councilwoman Carlina Rivera, chairwoman of the council's hospitals committee, said Wednesday.

Statewide, 88% of hospitals received some payment from the indigent care pool. A 2012 change to the funding formula aimed to direct more money toward hospitals that care for a greater share of Medicaid and uninsured patients. The state created a transitional period to avoid stripping hospitals of a revenue source too quickly. But that transition, which will have lasting effects through 2050, has perpetuated a system that rewards hospitals that provide a small share of charity care and punishes facilities serving the neediest, said Elisabeth Benjamin, vice president of health initiatives at the Community Service Society of New York.

"We're one of the few states that spreads DSH money around like peanut butter," Benjamin said. "It's really unusual, and it's got to stop."

A proposal by a coalition led by NYC Health & Hospitals would eliminate the transitional period and provide enhanced Medicaid payment rates to public hospitals.

Elisabeth Wynn, executive vice president of health economics and finance at the Greater New York Hospital Association, said the trade group's board has not taken a stance on changes to the funding formula. She said getting Congress to delay the DSH cuts is GNYHA's top priority in Washington.

Wynn cautioned that private hospitals serving poor patients, such as Jamaica Hospital in Queens and Brookdale Hospital in Brooklyn, could lose more than $5 million every year if the state abandons its so-called transition collar and redistributes funds.

"The issue of eliminating the collar is really complicated," she said, "and any solution needs to recognize these unintended consequences."

The state Department of Health created an indigent care work group last year to examine how the money should be distributed. Its findings have not yet been released.

"NYC Health & Hospitals proposes changes to charity-care payments" originally appeared in Crain's New York Business.