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Hospitals cope with revenue cuts in absense of Medicaid expansion
SoVaNow.com / December 04, 2013
With the next phase of the Affordable Care Act (Obamacare) set to begin Jan. 1, hospitals in states like Virginia that have not expanded their Medicaid coverage stand to lose millions in federal payments for uncompensated care.
In South Hill, Community Memorial Healthcenter expects to lose nearly a quarter million dollars in Medicare payments in 2014, said hospital spokesperson McKinley Perkinson. In South Boston, Halifax Regional Health System (HRHS) projects a 14 percent reduction in payments for uncompensated care, around $300,000, according to HRHS marketing and public relations manager Olivia Epps.
In fiscal year 2013, Virginia hospitals received nearly $90 million in Disproportionate Share Hospital (DSH) payments. Out of that amount, CMH was allotted $1.2 million and HRH received approximately $2.1 million in DSH payments.
HRHS Chief Financial Officer Stewart Nelson points out that the reduction in the DSH payment will occur despite Medicaid expansion in Virginia due to the regulations of the program. However, hospitals in Virginia would not benefit from increased Medicaid revenue, which was designed to offset the DSH payments reductions, until the state agrees to expand Medicaid under the Affordable Care Act.
DSH (pronounced “dish”) is the extra money that Medicaid sends to hospitals to offset the bills of the uninsured. The allotment covers the costs of for qualifying hospitals that provide care to low-income patients not covered under Medicare, Medicaid, the Children’s Health Insurance Program (CHIP) or other health insurance.
Starting in 2014, these DSH payments are phased out, because of an underlying assumption on which the Affordable Care Act is based — since most Americans will have insurance coverage either through Medicaid or through personal insurance, hospitals will see a reduction in unpaid services and no longer need the supplemental payments.
The problem for hospitals that rely on these monies springs from a decision by the United States Supreme Court, which allows states to opt out of the Medicaid expansion. People whose income is too high to qualify for Medicaid, but too low to qualify for tax incentives through the new insurance market place will still need medical care, and lack the means to pay for that care. Simply put, hospitals will continue to see unpaid bills as their DSH dollars decline. By 2020, hospitals no longer have access to DSH monies.
For a hospitals, like CMH that posted a surplus of nearly $8 million in FY2012, the loss of $240,000 will have no immediate effect on their operations or services. Perkinson said, “CMH has been working on refining our operation to be more cost effective, and undertook a major analysis last year which resulted in additional efficiencies.” As a result, the hospital has no plans to reduce or change the services it offers, notwithstanding the reduction in Medicaid payments.
The loss of DSH money is, however, a big deal for other Virginia hospitals whose uncompensated care makes up nearly 6 percent of all expenses. CMH’s uncompensated care made up 7.7 percent of its expenses and HRHS reports that its uncompensated care was 5.9 percent of its expenses in FY2012.
Halifax Regional, which like CMH posted a net profit in FY 2012 — albeit only $5.9 million — is taking a wait and see approach to the pending reduction in DSH payments. Epps said, “Halifax Regional Health System has been through challenging times before and will adjust to the changing environment. There are no specific plans but we continue to focus on achieving savings and growth from merger integration process. We will continue to monitor reimbursement changes.”
But Epps made it clear that Sentara Healthcare — the owner of HRHS — as well as the Virginia Hospital & Healthcare Association supports Medicaid expansion in Virginia. “As we have done in the past, we will keep our employees, doctors, community and legislators informed on the impact of this and other changes,” said Epps.
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