The Tribune Democrat, Johnstown, PA

March 17, 2013

Small hospitals could gain from expansion of Medicaid

John Finnerty
CNHI Harrisburg Bureau

HARRISBURG — Officials at small hospitals across the state say they hope that Medicaid expansion will drive down the millions of dollars in costs they absorb each year in unpaid hospital bills from uninsured patients.

But Gov. Tom Corbett, beset by dismal voter approval in polls and increasing pressure to accept expansion as other Republican governors across the country have done, is still quietly trying to determine if there is a way to manage without adding between 500,000 and 800,000 people to Medicaid.

The weight of the discussion matters more to small rural hospitals because in many cases they are already struggling.

An analysis of data compiled by the Pennsylvania Healthcare Cost Containment Council found that at six of 13 rural hospitals examined for this story, expenses in fiscal 2011 exceeded patient revenue.

The largest hospital in the survey, Geisinger Medical Center in Montour County, had the strongest financial position with patient revenue exceeding expenses by $36 million. Evangelical had $4 million more in patient revenue than expenses, while Conemaugh Memorial Medical Center had $6 million more patient revenue than expenses.

Three hospitals essentially broke even and six reported that their patient revenue did not generate enough to cover expenses that year.

Two of the biggest problems now facing small hospitals are: An increase in the number of people seeking care who do not have medical insurance, and hospitals do not get paid enough through Medicaid to cover their costs for care.

Obamacare attempts to solve both problems. The question is whether Pennsylvania can find a way to help hospitals cope without making the kind of financial commitment that would be required to expand Medicaid.

The answer may just be yes.

Obamacare boosts Medicaid payment rates whether the state expands or not, according to health advocates and a spokeswoman from the state Department of Public Welfare.

And the governor is lobbying to see whether payments made to hospitals to help them cope with the costs of charity care can be saved if the state passes on expansion. Corbett has objected that despite the federal government’s assertion that the first three years would be fully funded, the state’s share of the cost would approach $4 billion by 2022. Corbett also has questioned whether the federal government would meet its obligation.

Initially, the state had been warned that the way the Affordable Care Act was crafted, because the number of uninsured people was supposed to drop as more were added to Medicaid, the payments for hospitals were going to dry up.

The anticipated loss of $580 million in federal government aid for hospitals statewide has been one of the key objections.  Corbett wants to see if there is a way to maintain the financial safety net for hospitals if the state does not expand Medicaid.

“That is one of things (Corbett) wants to talk to (Kathleen) Sebelius (about),” Donna Wagner, a spokeswoman in the state Department of Public Welfare, said Friday. The governor has asked for the meeting with the head of the U.S. Department of Health and Human Services to negotiate greater flexibility in determining how Medicaid expansion would take place. But the Corbett administration’s deliberations have been hamstrung by the lack of clear information from the federal government, she said.

At Sharon Regional Medical Center in Mercer County, the hospital had to absorb $3.8 million in the cost of providing care to Medicaid and Medicare patients, said Ed Newmeyer, a hospital spokesman. Cambria County’s Conemaugh Memorial Medical Center’s shortfall on Medicaid payments was around $9 million, said Amy Bradley, a hospital spokeswoman.

On top of that, cost of charity care at many small hospitals is in the neighborhood of $10 million.

It is money that could be put to use, hospital officials said.

“That’s why we need government help,” said James Stopper, chief financial officer at Evangelical Community Hospital in Lewisburg.

The recession has forced more people to accept low-paying jobs and go without medical insurance. People who cannot afford health insurance are generally in no position to pay their medical bill if they end up in the hospital, Stopper said.

“We have seen our bad debt increase,” he said.

As nonprofits, as almost all community hospitals are, revenue that exceeds expenses gets reinvested into the hospital, either through new services or by adding staff, Stopper said.

At the same time, when hospitals do not have the money to pay their bills, it is going to affect the quality of care.

“We are not saying we are reducing services, but this doesn’t help us,” Stopper said.

Newmeyer at Sharon Medical Center said that hospital officials are awaiting a report expected next month from the Hospital and Healthsystem Association of Pennsylvania that would explore in greater detail what the local impacts of expansion would be.

Advocates have suggested that expansion would lead to the creation of more than 40,000 jobs across Pennsylvania. None of the hospital officials indicated that they anticipated having to do substantial hiring.

“We are not anticipating a huge onslaught of patients,” if there is expansion said Bradley, at Conemaugh Memorial Medical Center.

And while the discussion of expansion has real financial implications, hospital officials said that the most important community benefit to providing more people with health insurance would be better quality of care as people get preventative care and do not postpone treatment.

“Research has shown that insured individuals are more likely to receive needed care at the right time and in the right setting, and to take advantage of preventive screenings which all lower the costs of health care in the future,” Newmeyer said.  

“Those who have chronic and complex illnesses who are insured also are more involved in managing their care which reduces future health care problems. Children who are healthy certainly enjoy greater success in school.”

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