John Mattessino

Louisiana’s hospitals generate more than $27.1 billion in economic activity, employ more than 99,350 people and continue to face the threat of federal and state healthcare budget cuts, according to a Louisiana Hospital Association study.

“Each legislative session, the hospital industry is faced with the same budget battle. The state needs to change the way it addresses its budget shortfall by creating more flexibility in the budget process,” Paul Salles, president and chief executive officer of the Metropolitan Hospital Council of New Orleans, said in a news release. “Cuts to hospitals have a serious and long-term effect on our communities. Although hospitals continually make strategic decisions to deal with these cuts so that they have the least impact on patient care, eventually there will be nothing left to trim or reduce except direct services and jobs.”

Hospitals and other healthcare providers face “an interesting dilemma” at the state level with Medicaid and at the federal level with healthcare reform, neither of which can be considered in any way revenue-increasing activities, LHA chief executive officer John Matessino said.

“The larger hospitals, the ones that do about the majority of the in-patient Medicaid business, have been cut almost 20 percent over the last couple of years,” Matessino said.

The private insurers negotiating the new Coordinated Care Network contracts are using those rates as their starting point, Matessino said. The managed care companies are also looking at moving work from in-hospital labs to outside labs already under contract to insurers, and that will mean a loss of revenue.

Every indication from Washington, D.C., is that cuts to Medicaid funding will continue while the Medicaid enrollment balloons to as much as 42 percent of Louisiana’s population, Matessino said. On the Medicare side, providers are waiting with “bated breath” to see what cuts come out of the Congressional Super Committee.

The committee, charged with cutting America’s debt, has considered a number of Medicare- and Medicaid-related cuts, including funding for rural hospitals, graduate medical education and bad debt reimbursement, Matessino said. If the Super Committee can’t reach an agreement, Medicare could be cut 2 percent.

“Now the problem with that is if you’re a healthcare provider in a hospital for example, you may say ‘I can live with a 2 percent cut in Medicare.’ Well that doesn’t necessarily mean they’re going to cut across-the-board 2 percent,” Matessino said. “It could be that hospitals are cut 10 percent, physicians are cut 3 percent …. So you just don’t know. It’s just really a crap shoot at this point as to how that’s going to come out.”

Medicaid and Medicare account for 71 percent of the hospital services delivered in the state and are the primary funding sources for hospitals in Louisiana, according to “Hospitals and the Louisiana Economy, 2011.”

When these programs are cut, the ripple effect negatively impacts hospitals, businesses and patients, the study, authored by LSU economist James Richardson, says.

For every 35 cents the state spends on the Medicaid program, Louisiana receives approximately 65 cents from the federal government.

If the state reduces direct Medicaid spending by $150 million, Louisiana loses $430 million of federal dollars, reducing overall funding by $580 million, the study shows. The cuts would also result in a loss of around 6,764 jobs statewide, personal earnings of $258 million, and $800 million in business transactions.

Matessino said the bi-annual study is an important tool in educating the public and the Legislature about hospitals’ value economically.

The study helps legislators see what happens in their own community’s economy when cuts are made at the legislative level to Medicaid, Matessino said. If the community hospital has to lay off employees, a car dealer may not sell as many vehicles.

Healthcare has been a pretty strong economic segment for the state but it’s feeling the pinch, he said.

The LHA surveys its members every year. In 2009, 38 percent of the hospitals that responded were losing money, Matessino said. In 2010, the percentage of hospitals in the red climbed to 43 percent.

“We’re concerned because those aren’t the numbers we saw a couple of years ago before the Medicaid dollars started to fall,” Matessino said.

Hospitals’ costs and expenses don’t drop just because Medicaid reimbursements do, he said.

North Oaks Hospital in Hammond, for instance, has the equivalent of 300 less full-time employees now than two years ago, largely as a result of cuts to Medicaid and changes to state employees’ group health plan, Matessino said.

“We’ll see how it comes out. We know this next couple of years are going to be very critical, not just for hospitals but for healthcare in general,” Matessino said.

The next legislative session is going to be interesting, because there will be new leadership in the House of Representatives and the Senate, he said.

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