Hospitals cough it up for Medicaid programs

Hospitals cough it up for Medicaid programs

May 20th, 2010 by Emily Bregel in Health

Hospitals in Tennessee and Georgia are ready to ante up for a plan to bring millions of dollars in federal Medicaid funding into the states.

Under the hospital fee plans that legislators in both states passed, most hospitals will pitch in a percentage of their net patient revenues to stave off deep cuts to both states' Medicaid programs. Some hospitals are excluded.

"It really is about trying to help the states manage the difficulty of the economic climate we're all finding ourselves in," said Jim Hobson, president and CEO of Memorial Hospital in Chattanooga. "It's just not a perfect set of circumstances. Everybody just had to get comfortable with that."

The money generated from the hospital fees will be used to draw down federal matching Medicaid funding, which will go to bolster the federal-state health insurance programs for disabled and low-income people. That program is TennCare in Tennessee.

Staff photo by John Rawlston/Chattanooga Times Free Press - Registered Nurse Carolyn Anderson takes care of an infant in the nursery at Hutcheson Medical Center in Fort Oglethorpe on Wednesday morning. Georgia has approved a hospital fee program that aims to use a "tax" on hosptials to draw down more federal matching Medicaid dollars, ultimately benefitting hospitals who serve a high volume of Georgia Medicaid patients.

Staff photo by John Rawlston/Chattanooga Times Free Press...

In both states, the plan will save hospitals from proposed across-the-board cuts that would have driven some hospitals out of business, supporters say.

"We came to a decision that if any place had to take big cuts and close services, all institutions, all programming would be affected. That's why everyone's really in this together," said Jim Brexler, president and CEO of Erlanger hospital and chairman of the Tennessee Hospital Association. The association developed the fee plan in Tennessee.

About 25 other states have similar plans in place, according to the U.S. Centers for Medicare and Medicaid Services. The centers are reviewing Tennessee's plan and will consider approval, likely within a few months. Georgia's plan has not officially been submitted to CMS for approval, spokeswoman Mary Kahn said.


In Tennessee, the 3.52 percent fee should raise about $310 million from hospitals and would result in an infusion of more than $582 million in federal matching funds. The legislation prohibits providers from passing that fee on to patients.

Likely only 10 or 15 hospitals out of 154 in Tennessee will end up contributing more through the fee than they ultimately will get back through TennCare payments, said Craig Becker, president of the Tennessee Hospital Association. Those are mainly hospitals that serve a small portion of TennCare patients.

"There are still going to be winners and losers," Mr. Becker said. However, all hospitals "recognize the fact that they would really all get hurt badly if they didn't have that fee."

In Georgia, Kevin Bloye of the Georgia Hospital Association said some hospitals -- likely those that see fewer Medicaid patients -- could lose millions under the fee plan, and those losses may get passed on to patients in the form of higher charges.

"That's possible," he said. "It's certainly something some of these hospitals that lose the most money will probably have to look at."

In Georgia a 1.45-percent fee will raise an estimated $229 million in state funds.

The association does not yet have an assessment of how many hospitals in the state will win or lose under the new plan, Mr. Bloye said.

Hutcheson Medical Center in Fort Oglethorpe, Ga., actually will gain an estimated $700,000 to $900,000 under the new plan, taking into account the Medicaid rate increase, said Charles Stewart, president and CEO. Under the first plan pitched by the governor's office Hutcheson would have lost $937,000, according to state estimates. That estimate did not account for any rate increase in Medicaid.


Tennessee hospitals:

* 3.52 percent of net patient revenues

* State funding to be collected: $310 million

* Federal matching funds: $582 million

Georgia hospitals:

* 1.45 percent of net patient revenues

* State funding to be collected: $229 million

* Federal matching funds: $675 million

Source: Projections from the Tennessee General Assembly legislative analysis; Georgia Hospital Association; Gov. Sonny Perdue's press office

"We're fortunate," he said. "Some hospitals in the state it will have a negative impact on. Those that see fewer of Medicaid patients will be helping fund a program and paying for the increase of those that are seeing a high percentage."


Erlanger hospital and other hospitals that receive government funding or are deemed critical access hospitals are exempt from the fee.

Safety net hospitals such as Erlanger already contribute to a state fund used to draw down federal matching funds in the form of "certified public expenditures," based on a portion of how much free care the hospital provides to poor and uninsured patients, Mr. Brexler said. That donated care is considered spending that can bring in federal funding for TennCare.

Similar exemptions for critical access and government facilities are included in Georgia's fee plan, Mr. Bloye said, as well as a three-year sunset provision and the guarantee that the fee would not increase from 1.45 percent.

Georgia hospitals initially vehemently opposed the hospital fee plan, but when presented with the alternative of a Medicaid rate cut of 10.25 percent and a loss of hospitals' sales tax exemption, hospitals decided to get on board.

"After all this wrangling and hand-wringing we had to do, I think they will agree we've ended up at the best solution," said Bert Brantley, spokesman for Gov. Sonny Perdue's press office.

News in March of a severe revenue shortage changed the Georgia Hospital Association's position on the fee, Mr. Bloye said.

"They (revenues) were far worse than anyone had imagined," he said. "We went from ... ardently opposing this to becoming ardent supporters of it."

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