Hospitals say budget cuts look far worse in historical context

Hospitals face the single-largest cut in the tentative plan crafted over the past week by the administration of Gov. Dannel P. Malloy and legislative leaders from both parties.

But they are hoping that some historical perspective will persuade officials to spare them from deep cuts.

The chief lobbying agency for the state’s 29 acute care hospitals also warned Tuesday that the anticipated $103 million mid-fiscal-year cut in state funding would eliminate jobs and “critical community programs” and services.

“While we are still trying to piece together all the specifics, the picture emerging suggests hospitals and the patients they serve will bear the brunt of the latest round of cuts,” Jennifer Jackson, president and chief executive officer of the Connecticut Hospital Association, wrote in a statement released Tuesday afternoon.

Lawmakers, who were scheduled to meet in special session late Wednesday, are working with the governor to wipe up to $365 million in red ink off the books for this fiscal year. That figure represents the entire deficit for 2013-14 as estimated by the Malloy administration. State Comptroller Kevin P. Lembo projects the shortfall at $415 million.

Sources said the tentative deficit plan involves reducing both supplemental Medicaid payments to hospitals, as well as funding given to help these facilities treat uninsured and underinsured patients.

But if the state reduces payments in this area, it would keep only about half of the $103 million savings. That’s because reducing this spending, in turn, would trigger the loss of roughly $50 million in federal assistance sent to Connecticut through the Medicaid program.

The Malloy administration has said in the past that hospitals have gained significant revenue since mid-2010 when the state brought its health care program for adults without minor children under the federal Medicaid umbrella.

Enrollment in the Low Income Adults (LIA) program has shot up over the past two years from about 47,000 to more than 83,000. LIA serves adults who earn less than 56 percent of the federal poverty level.

But hospital officials argue that change was just one positive note over a past decade otherwise marked by deteriorating state assistance.

The forerunner of LIA, State Administered General Assistance, largely operated outside of the Medicaid program. But even without the federal aid, the state used to pay hospitals for serving SAGA patients at a level largely equal to federal Medicaid rates.

That all changed in 2004 when the state capped annual SAGA spending. As program enrollment grew from 27,500 in 2004 to 44,700 in 2010, hospitals saw state payments per SAGA patient steadily erode.

Converting State Administered General Assistance into LIA and moving it under the federal umbrella brought those payments back up to Medicaid levels two years ago. But hospital officials say that only eased the damage of the prior six years, rather than helping facilities gain fiscal ground.

And even while the 2010 conversion also helped the state leverage about $50 million in new federal assistance for hospitals, Connecticut simultaneously cut $80 million in aid to help facilities treat the uninsured.

“Today, Connecticut hospitals are losing more than $1.6 million a day caring for the uninsured and Medicaid patients,” Jackson said. “… This plan to address the budget shortfall by enormous cuts to hospitals must be reconsidered.  Proceeding as planned risks changing the face of health care services in Connecticut.”

But Malloy’s budget chief, Office of Policy and Management Secretary Benjamin Barnes, said the industry has benefited much more from the LIA conversion than officials have acknowledged.

The LIA caseload roughly has doubled since 2009, surpassing 86,000 patients this year. But over the same period, Barnes noted, hospital revenues have shot up from about $70 million annually to $373 million.

“We’re paying four times as much for a population that may be 50 percent larger,” he said. “Things have changed in the health care universe.”

Because of much broader eligibility rules, LIA attracts other needy patients who may not have participated in the former SAGA program.

Barnes also said the tremendous growth in the LIA caseload means a much larger population is receiving regular care from physicians, is staying healthier, and has reduced the uninsured population that hospitals must deal with.

“The LIA program is a remarkably effective piece of our safety net,” he said.

Barnes added that the administration is concerned about the proposed cuts to hospitals, and acknowledged that some facilities would be affected more than others.

“We don’t take this action lightly,” he said. “But we have an extraordinary hole to fill this year and we have an even more extraordinary hole to fill next year. We have to take some actions that are regrettable and this is one of them.”

Children’s Medical Center

One hospital that hasn’t benefited from the creation of the Medicaid program for low-income adults is Connecticut Children’s Medical Center, since it doesn’t treat adults. Even so, the hospital is slated to lose $7.5 million in the deal, the hospital’s President and CEO Martin J. Gavin said Tuesday.

“It’s a big hit,” he said. “I was stunned, actually, by that.”

Gavin said the hospital loses more than $30 million a year treating Medicaid patients because the program does not cover the full costs of care. The hospital has tried to shift the costs onto private insurance as much as possible. Earlier this year, it was engaged in a protracted contract negotiation with Anthem Blue Cross and Blue Shield, the state’s largest private insurer, and left the company’s network before the two agreed on reimbursement rates. At the time, Anthem cited the hospital’s efforts to get it to help cover shortfalls in funding from public insurance.

Fifty-seven percent of the children’s hospital’s patients are covered by Medicaid.

Gavin said he appreciates the challenge the state is facing, but said the cut raises public policy questions. About half the people in the state on Medicaid are children, but only about 15 percent of the program’s costs cover their care, he said.

“What they have is an adult funding problem, and [they’re] asking kids to pay for it,” he said.

Gavin said he’s not sure how the hospital will handle the cut, and he said he’s worried about the next two fiscal years, when the projected budget deficits are far greater than the funding gap lawmakers are trying to fix Wednesday.

“What would you have me do?” he said he wants to ask. “We don’t want to impact the kids.”

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