Health systems are facing a year of uncertainty as they await the outcome of the Medicaid expansion plan in the Missouri General Assembly.
Last year, the U.S. Supreme Court upheld the Affordable Care Act, except for one item that requires states to participate in the expansion of Medicaid – the mechanism for achieving the law’s intent of extending health coverage to millions of uninsured people.
Key elements of the act are scheduled to take effect in 2014 and state legislatures must decide this year to adopt the Medicaid component, which would replace existing federal funding for uninsured patients.
If Missouri refused Medicaid expansion, hospitals statewide would face cuts totaling $4 billion in reimbursements through 2019, according to the Missouri Hospital Association. Cuts would include $2.67 billion in ACA Medicare payments; $704 million in ACA Medicaid payments for disproportionate share hospitals, who serve a disproportionate portion of uninsured patients; and $620 million from the 2 percent Medicare cut as a result of the sequestration specified in the Budget Control Act of 2011.
Missouri Gov. Jay Nixon has said in numerous settings opting into the Medicaid expansion would address the impact of the cuts, bringing $5.7 billion to the state and providing health coverage to an additional 300,000 Missourians during the next three years at no cost to the state. The state would begin to pay a share of the costs, starting at 5 percent in 2017 and rising to 10 percent in 2020.
“Thousands of new jobs and billions of dollars in economic activity will go to states that seize this opportunity,” Nixon said, during a Feb. 27 visit to Citizens Memorial Hospital in Bolivar. “I want to make sure Missouri does not get left behind. Otherwise, those jobs and those investments will go to other states; they’ll get the benefit, we’ll get the bill.”
Springfield-area outlookFour Springfield-area health system executives, facing varying circumstances based on their missions, said they were planning a range of austerity measures if the legislature refused Medicaid expansion and presented no alternative.
In addition to expanded Medicaid eligibility, the ACA specifies another step toward achieving nearly universal health coverage: the individual mandate requiring everyone to obtain health insurance. This component would help hospitals by increasing the base of patients with commercial insurance, which reimburses for services at much higher levels than Medicaid and Medicare. In a cost-shifting process, hospitals tend to rely on commercial-insurance payments, in varying degrees, to compensate for government payers and uninsured cases, area executives said.
At CoxHealth, a nonprofit system with revenue of $1.1 billion in 2012, CEO Steve Edwards said Medicaid services account for 12.5 percent of hospital revenues compared to 33.35 percent from commercial insurance and 43.74 percent from Medicare.
Without Medicaid expansion or an alternative, CoxHealth CFO Jake McWay projected the effect of the ACA and sequestration combined would reduce funding to the organization by $10 million in 2013. By 2019, the shortfall would increase to more than $50 million per year, he said.
CoxHealth could absorb some of the losses with reserve funds but also would have to look at reducing unprofitable service lines, Edwards said. He declined to identify possible services.
Refusing the Medicaid expansion would shift more of the cost burden to commercial insurance in the form of higher rates for employer-based coverage, Edwards said.
“That puts pressure on the relationship between hospitals and the business community,” he said. “That cost shifting becomes a hidden tax.”
Smaller rural hospitals with leaner reserves would be at greater risk if Medicaid expansion were refused, Edwards said.
Facilities such as Bolivar’s Citizens Memorial Hospital, with 2012 revenues of $100.7 million, would face a reduction of Medicaid reimbursements of $1 million annually, CFO Gary Fulbright said. CMH, a nonprofit, would consider a range of possible austerity measures including reducing services, shelving plans to expand services, reducing long-term spending on facilities and equipment, and cutting all areas of operations including the work force.
The hospital is proceeding with a two-story, 80,000-square-foot addition to the Kerry and Synda Douglas Medical Center.
“Being smaller and rural, we tend to have a higher percentage of Medicare and Medicaid population, so it does hit us harder than it does the urban hospitals,” Fulbright said.
CMH’s patient breakdown is 20 percent Medicaid, 50 percent Medicare, 5 percent uninsured and the remainder in commercial insurance, said Tim Wolters, director of reimbursement.
Ozarks Community Hospital, a for-profit safety-net hospital – who provides a significant level of care to low-income, uninsured, and vulnerable populations – relies completely on government payers, including 35 percent Medicaid, with 15 percent uninsured, CEO Paul Taylor said. OCH has projected 2013 revenue of $55 million-$60 million, he said.
In 2012, OCH treated 22,000 unique Medicaid patients. Without Medicaid expansion, the hospital would lose 10 percent of its reimbursements, and because the hospital does not work with commercial payers, OCH could not recoup any losses through cost shifting, he said.
The plans for a recently purchased 25,000-square-foot building – the former Joe’s Carpet – are on hold awaiting a decision by the legislature, Taylor said. Slated to become the OCH Evergreen Clinic, OCH Communication Manager Andrea Harp said the hospital purchased the building in August 2012. Initially slated to house two offices - Advantage Therapy and the practice of orthopedic surgeon Dr. Edwin Roeder, who specializes in occupational injuries, among others – Harp said final building permits from the City of Springfield are in the works, but infill plans hinge on the Medicaid expansion outcome.
Taylor also said the hospital’s efforts to establish six satellite clinics would mostly be shelved.
“If we begin to turn them away and downsize to the point where we can’t care for those folks, then other health systems are going to have to,” Taylor said.
