Hospital CEO: Governor’s Budget Would Result in Cuts, Layoffs
25,000 Mainers at risk of losing health care coverage —
Thursday, March 02, 2017 10:38 AM
Gov. Paul LePage’s so-called “do no harm” budget could in fact result in major harm to midcoast hospitals, according to Mark Fourre, CEO of Coastal Healthcare Alliance, the nonprofit health care provider that oversees Waldo County General Hospital in Belfast and Pen Bay Medical Center in Rockport under the MaineHealth umbrella.
“We have no opinion on how they think they could pick up the pieces after they hit us with a wrecking ball.” — Jeff Austin, Executive Director, Maine Hospital Association
Fourre made the remarks last week in testimony before the Legislature’s Appropriations and Financial Affairs Committee, which is considering a measure that would cut MaineCare reimbursement rates to hospitals and eliminate MaineCare coverage for approximately 25,000 low-income Mainers.
“Pen Bay and Waldo are the primary employers of our communities,” said Fourre. “We have over 2,200 employees. They currently depend on us for their jobs, their benefits and their livelihood. These reductions would definitely threaten our ability to maintain those employees [at] their current status, and we would undoubtedly have to lay off employees, causing increases to the number of unemployed in the state of Maine.”
Fourre said that over the next two years the proposed budget would cut $5.8 million in funding to the health care provider, including nearly $2 million due to the MaineCare eligibility cuts, $1.7 million in reduced payments to Waldo County General Hospital, $1.3 million from the elimination of hospital-based facility fees and $679,800 in hospital tax increases. He noted that in the last fiscal year, Coastal Healthcare Alliance took a loss of over $3.2 million, yet provided over $44 million — 10 percent of the organization’s operating revenue — in care to patients that was not paid for. Fourre added that the budget plan could jeopardize the health care provider’s attempts to recruit more primary care physicians as well as a comprehensive opioid addiction treatment program currently in development.
“The biggest problem is that we do not have an adequate primary care base,” said Fourre. “Over the past couple of years Pen Bay has lost 13 primary care positions. It’s not a program that we would fully lose, but trying to build that into an appropriate part of our infrastructure is very difficult.”
The Absence of a Crisis
In a presentation before the Appropriations Committee, Department of Health and Human Services Commissioner Mary Mayhew said the cuts in MaineCare, the state’s Medicaid program, are designed to “refocus” funding to “our state’s neediest and most vulnerable,” increase access to preventative primary care for MaineCare members, and reduce the department’s budget to below current spending levels. She said the plan to cut reimbursements to critical access hospitals — a designation given to certain rural health care providers, including Waldo County General Hospital and LincolnHealth — are necessary because Maine is the only state in the country that reimburses critical access hospitals at a higher rate than that paid by Medicare. She said that even though the state is not facing a budget shortfall, the spending cuts are needed in order to prevent the program from accumulating a Medicaid debt, which occurred a number of years ago when the state shortchanged hospitals to the tune of $186 million. The governor signed a bill to repay the debt in 2013.
“It is imperative that we do not lose sight of the previous history of this program and the crisis management that drove previous budget proposals,” said Mayhew. “The absence of a crisis does not mean an absence of daily and ongoing financial pressures within the $2.6 billion program, but rather that we are constantly analyzing costs, trends and effectively managing the program with a focus on fiscal discipline, the priority needs of our elderly and disabled and improving the outcomes of the health care delivery system.”
In addition to cutting the reimbursement rates to rural health care providers by 8 percent, the LePage administration’s budget would eliminate MaineCare health coverage for low-income parents earning as low as 59 percent below the poverty level as well as 5,800 low-income 19- and 20-year-olds who are currently eligible for the benefit. Under current state law, low-income parents are eligible for MaineCare if they are at the poverty level, or $20,160 per year for a family of three. Under the governor’s plan that same family of three would have to earn no more than $8,064 per year to qualify for MaineCare and would be ineligible to buy private subsidized health insurance from the Obamacare exchanges because only households who are over 100 percent of the poverty level qualify for subsidies.
The Affordable Care Act (aka Obamacare) was designed with the expectation that families earning up to 138 percent of poverty level would qualify for Medicaid, but since the LePage administration has refused to expand Medicaid, parents in deep poverty would likely be forced to rely on free hospital charity care. The LePage administration attempted to eliminate MaineCare coverage for 19- and 20-year-olds in 2012, but the Obama administration rejected the governor’s request. However, Mayhew expressed optimism that the Trump administration will be more amendable to kicking young adults off Medicaid rolls.
Budget Cuts Shift Costs to Maine’s Hospitals
Testifying on behalf of the Maine Hospital Association, Executive Director Jeff Austin said that although the plan might save the state some money, the budget effectively shifts the costs onto Maine hospitals, which would lose about $66 million per year due to state cuts, including the loss of federal Medicaid matching funds.
“First of all it is important for you to keep in mind … that when there is a [state] savings of $1 in Medicaid, it is a $3 loss to us,” said Austin. “Medicaid carries with it the automatic and irrevocable loss of that $2 associated with the dollar loss in Medicaid.”
Austin said Maine hospitals have already lost over $200 million since 2013 due to state cuts. He noted that while the state’s MaineCare budget stabilized after it eliminated coverage for thousands of low-income Mainers in 2011, the burden for covering all of the uninsured low-income Mainers has fallen on hospitals, which by state law are obligated to provide free charity care to anyone below 150 percent of the poverty level.
“This action did indeed help fiscally stabilize the state budget and the Medicaid program. It helped improve the Department’s balance sheet,” said Austin. “But it significantly hurt hospitals and their balance sheets. The people who lost coverage didn’t all leave Maine. Many remain here and are uninsured and now rely on hospital charity care.”
He added that critical access hospitals receive higher reimbursements because they serve economically disadvantaged communities and to offset the hospital tax, which LePage’s budget proposes to increase. Austin said the proposed cuts would “devastate” half of the critical access hospitals that are already operating in the red and “wipe out” the margins of the other half currently in the black. As it stands, Maine hospitals only receive about 75 cents in reimbursement for each dollar of care provided to Medicaid patients, according to the Maine Hospital Association.
“This is not being done to address revenue shortfall,” said Austin. “This is not being done to address unexpected spikes in enrollment. This is not being done to address unexpected rises in costs. This is an artificial crisis that throws us off the path that we’ve been on.”
Putting Hospitals Out to Bid?
In response to concerns about the financial fallout of such drastic budget cuts, Commissioner Mayhew, who used to lead the Maine Hospital Association before Austin, said that critical access hospitals have “a number of perverse incentives that incentivizes cost increases in order to maximize that funding.”
“It is not defensible to continue to support higher reimbursement rates that are not reflective of costs, that are above cost or have created an unfair playing field between private physician practices and those that are owned by hospitals,” said Mayhew.
Mayhew suggested that hospitals need to improve efficiency in delivering health care services and blamed some of the financial difficulties hospitals are facing on the Affordable Care Act. She noted that the ACA reduced Medicare payments to hospitals, which represents 50 percent of an average critical access hospital’s payer mix compared to between 14 and 20 percent that is typically from Medicaid. She said that despite the decision to eliminate MaineCare coverage for thousands of Mainers in 2011, the uninsured rate has decreased.
“Charity care increased when the state expanded Medicaid from 2000 to 2010,” said Mayhew. “So the argument that expanding coverage to Medicaid necessarily equates to a reduction in charity care did not bear out over those years.”
Austin said that although it’s true that many of the low-income people who lost MaineCare were able to buy subsidized insurance from the ACA exchange, the insurance deductibles are so high that they aren’t able to pay the out-of-pocket costs. So while the level of free hospital charity care has remained flat, he said hospital bad debt has “exploded” due to the number of people not able to pay their medical bills. He said Maine hospitals have absorbed about $125 million in bad debt and provided another $125 million in charity care since 2010. There are now 92,000 fewer people on MaineCare than there were in 2012.
Traditionally, the cost of providing coverage to low-income, uninsured patients is passed on to private insurance companies, which then raise their customers’ premiums. However, Austin said that the commercial insurance market is “increasingly unwilling to absorb the costs.” But he said he couldn’t provide details because it’s illegal for hospitals to discuss commercial negotiation rates publicly.
Austin also blasted Mayhew for informing the committee that between 2012 and 2013, MaineCare reimbursement rates for hospitals increased by 30 percent after the LePage administration paid off its MaineCare debt to hospitals.
“That is categorically untrue,” Austin told legislators. “In the past ten years, the state has not increased the hospital reimbursement rate. It has only cut them. You now pay us in a timely fashion, but the rate of payment did not increase. So the rate was roughly 75 cents on the dollar, but you only paid about 60 cents. The rest was an IOU which you eventually paid.”
When asked what will happen if hospitals can’t stay in business due to the LePage administration’s budget initiatives, Mayhew said she believes “it’s unfair to lay it solely on a couple of initiatives in this budget.” But if hospitals were to fail, Mayhew said one option would be to put health care services out to a competitive bidding process.
“One of the areas that we could contemplate, using the Certificate of Need Act and consider whether or not we would look to secure an entity that could replace the failing entity, much as we do today with the competitive procurement process,” said Mayhew.
The Certificate of Need law requires hospitals to present plans for program and building expansions to the state for approval with the aim of controlling health care costs. The Department of Health and Human Services has put a number of state programs out to bid, including the ill-fated MaineCare ride brokering contract with Coordinated Transportation Solutions that left hundreds of low-income elderly people stranded three years ago.
In response to Mayhew’s suggestion that she could simply put health care services out to bid, Austin said his organization had “no particular response.”
“We have no opinion on how they think they could pick up the pieces after they hit us with a wrecking ball,” wrote Austin in an email. “We’re hopeful that the Legislature is going to reject all of the unnecessary cuts proposed in the budget that would destabilize hospitals. There is no crisis forcing the cuts, there is no justification for the cuts and we hope there will be no cuts.”
Meanwhile, as the Legislature considers the proposals, thousands of low-income parents and young adults across the state fear they will soon be unable to access medical care, mental health counseling and opioid addiction treatment. Testifying in opposition to the proposals, MaineCare recipient Kathy Collins Faunce, a mother of three girls from Wilton, told the committee that her family lives paycheck to paycheck.
“My partner is a three-time cancer survivor,” said Faunce. “Without MaineCare we would not have coverage, and we can’t afford insurance. We couldn’t afford to bring him to his oncologist. He would go without treatment. It is because he has medical care that he is still with us. That is the decision you are taking up today. This proposal could take my children’s father away from them.”
Brunswick resident Sheila Demers, a 39-year-old single mother of three, said she needs MaineCare to help cover the cost of an EpiPen for a tree-nut allergy and for her asthma medications as a doctor recently diagnosed her with decreased lung capacity.
“There’s no way I could afford private insurance. That frightens me,” said Demers. “It’s no exaggeration to say that, with a severe allergy, my life depends on access to an EpiPen and the emergency health care services that I hope I will not need. I work hard, but my income still leaves us about $300 short each month. I go to the food pantry to make up the difference to put food on the table. Health care isn’t provided through my work even for full-time positions.”
She added that MaineCare helped cover the cost of her addiction treatment, which has helped her maintain sobriety for four years.
When asked about what all of these newly unsinsured people will do without health care coverage, Mayhew, who receives $12,176.28 in state health insurance benefits through her job as DHHS commissioner, said they’ll just have to go out and get a better job with benefits. And if they can’t?
“Well,” said Mayhew, “if we live in a defeatist world, we’ll never [realize] the economic vitality that this state can have.”