More Medicare reductions

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Hospitals worry about long-term impact of continued cuts

Hospitals are scrambling to stem the effects of an additional 1.5 percent reduction in Medicaid reimbursements.
The cuts come on top of the 2 percent reduction in Medicaid payments that was enacted earlier this year.
“The cuts hit some hospitals pretty hard,” said Tom Nash of the Colorado Hospital Association. “Rural hospitals are barely hanging on — but some hospital systems have a payer match that they can make up the cuts.”
But even more troublesome: fiscal year 2010-11.
“Right now, we’re backfilling the budget with additional federal money from the American Recovery and Reinvestment Act,” he said. “But we only have six months of that in 2010-11. It could be that we’re going to see even further cuts.”
CHA is working with member hospitals to try to reduce the effects of the cuts, by finding ways to offer efficient care.
“We aren’t talking about administrative or staff cuts,” he said. “But we do want hospitals to provide the right care in the right setting — and not have Medicaid patients using the emergency room.”
While Penrose-St. Francis Health Services is awaiting word from its parent company, Centura, about final budget numbers and how they will be affected, Memorial Health System is preparing to face the cuts.
“It’s a big blow,” said John Suits, associate administrator for government affairs for Memorial. “It wasn’t unexpected; we all know that the governor has to balance the budget. And we know there’s a budget crisis. It is drastic, but it is what it is.”
Suits said the loss of money was compounded because a loss of Medicaid funding at the state level, also means a loss of federal matching dollars. But there is a silver lining.
“It’s the provider fees, passed last session,” he said. “That money, and the federal money associated with it, is going to offset some of this. They are still working out the details of how that’s going to work, however. And the Health Care Policy and Financing department at the state could take some of that money for operating funds.”
The provider fee and matching funds will generate revenue to increase hospital reimbursement rates under Medicaid and the Colorado indigent care program, which will reduce uncompensated care and cost-shifting. And during these tough economic times, offset other cuts to the Medicaid program.
Memorial lost money during 2008 for the first time in its history. This fiscal year isn’t looking quite so bad, Suits said, but the loss of Medicaid funding is troubling.
Nash estimates that the latest rounds of cuts will mean a loss of $8 million for the state’s hospitals, on top of the $11 million cut announced earlier this year.
But hospitals seem to have accepted the cuts as inevitable.
“We knew this was coming,” Suits said. “So we’re looking at our bottom line. We aren’t sure yet how we’ll be affected.”
The cuts are deeper than before, he said, because they affect areas of the state’s health care budget left untouched during past reductions — federally qualified health centers.
Peak Vista Community Health Centers is one of those clinics that serves the uninsured and underinsured residents of El Paso County. While its state funding has been cut, services won’t be.
Peak Vista issued the following statement about the budget cuts: “On August 18, 2009, the governor announced the budget cuts required to balance the state budget. Some of those budget cuts impact Peak Vista. In total, community health centers across the state have been cut over $31 million dollars this year. Peak Vista is awaiting details related to the cuts in order to calculate the impact. We anticipated cuts due to reports of Colorado’s growing budget deficits had implemented a conservative approach to Peak Vista’s 2009 budget. These proactive steps helped us mitigate the losses. Peak Vista sees no impact on current operations at this time.”
While hospitals and clinics are sure they can weather these cuts, it’s the future that they are worried about.
“We have about $68.5 million in bad debt, uncompensated care, un-reimbursed care,” Suits said. “We can’t take a whole lot more cuts. It takes about a million a day just to unlock the door, and we are the fourth largest Medicaid provider in the state. Right now, we’re holding our own — we’re happy if we have a 3 percent profit margin — but future cuts could really be a problem.”
Hospitals across the state could face the same problems, Nash said. The association is working to alleviate the pain of the cuts — but also is fearful of the future.
“As bad as ‘09-10 seems to be,” he said. “10-11 could be worse.”