NASHVILLE -- The state's hospitals could lose a half billion dollars under the cumulative effect of Gov. Phil Bredesen's proposed TennCare cuts, the president of the Tennessee Hospital Association said today.

"If these cuts go through, we'd be looking at Armageddon," said Craig Becker, who warned that some hospitals such as the Regional Medical Center at Memphis could be forced to close.

The combined impact of TennCare cuts approved last year by legislators as well as those outlined by the governor this week in his proposed 2010-2011 budget could cost hospitals alone as much as $526 million in state and federal funding, Mr. Becker said.

Other providers such as doctors also face cuts.

After persuading lawmakers to slash recurring state funding for TennCare by $170 million last year, Gov. Bredesen now is proposing cutting another $200 million in state funding. The cuts affect more than just hospitals.

TennCare is the state's version of Medicaid, which covers about 1.2 million people and is jointly funded by the state and federal governments. The federal government normally provides an additional $2 for each $1 the state puts into TennCare, so the loss of state dollars has much larger impact. As a result of the recession, the match is now $3 for every $1 the state puts in.

Erlanger Medical Center President Jim Brexler, who is chairman of the Tennessee Hospital Association, said proposed cuts would be "devastating" for hospitals statewide as well as for Erlanger.

"We cannot sustain the delivery of care across the state at the same level with that kind of a cut," Mr. Brexler said. "There's just no way that can happen. You've got to augment that with cuts to physician payments as well, so the network for many (in) the most at-risk population is greatly going to be really affected."

The possible combined impact on Erlanger could reach $26 million, Mr. Brexler warned, noting that would wipe out the $10 million the public hospital was hoping to add to its bottom line next year.

Last year, the state used federal stimulus funds to delay the impact of cuts until July 1, when the 2010-2011 budget goes into effect. The latest round of proposed cuts would take effect at the same time, dealing a double whammy to providers including physicians.

Among the new proposed cuts is a $10,000 limit on what the state will pay for a TennCare patient's hospitalization over the course of a year. The governor says that will save $51 million in state dollars. Combined with federal funds, that could cost hospitals a total of about $150 million.

House Minority Leader Gary Odom, D-Nashville, said preliminary information from hospitals indicates most patients' hospitalizations would exceed the $10,000 cap.

"That cap is going to cover a very small percentage of hospitalizations," he said.

The governor has said TennCare cuts should have little impact on patients themselves. Hospitals and other providers will pick up the costs, he said, although he acknowledges it will hurt them.

"And I'm sorry for that," he told reporters during a conference call this week. "But the TennCare costs are such a huge piece of the budget that you can't possibly balance the budget without dealing with some of these TennCare issues."

In what Mr. Becker characterized as a "last resort," hospital association officials have been discussing having the state impose a "fee" on hospitals that the state could use to obtain federal matching dollars.

In the 1980s and 1990s, states and providers used such measures to obtain federal dollars with all institutions getting back at least what they paid in. But the federal government ended such "funny money" games years ago and now requires there be some actual "losers" among institutions, officials said.

But it is not clear whether the Tennessee Hospital Association will reach a consensus or whether lawmakers will go along.

Earlier this week, Gordon Bonnyman, executive director of the Tennessee Justice Center, which advocates for TennCare enrollees, said Gov. Bredesen, a one-time health care entrepreneur, "continues to run TennCare the way he ran his private HMO, by focusing on how much surplus it can generate."

"There are rural communities that will lose their hospitals if these cuts go through," Mr. Bonnyman warned, later contending Gov. Bredesen's policies "endanger a hospital infrastructure that all Tennesseans count on."

WHAT'S NEXT

Tennessee Hospital Association President Craig Becker speaks today at noon during the Rotary Club of Chattanooga luncheon in the Convention Center.