Louisiana's community hospitals face financial devastation if the state Legislature approves the Medicaid reimbursement rate cuts implemented for hospitals and other providers, industry members say.
Under the emergency rules, Medicaid reimbursements to providers were cut by 7 percent. The reductions are part of the state Department of Health and Hospitals effort to slash its budget by $445 million for the new fiscal year, which begins July 1.
"If we're in a downward spiral to begin with, this is going to be devastating if we have to absorb these gigantic cuts," said John Matessino, president and chief executive officer of the Louisiana Hospital Association. "I hate to say, 'Everyone is going to close services,' and I certainly don't want to issue any idle threats, but I'm getting very concerned."
In past years, hospitals have used cash reserves to fill gaps in operational funds, Matessino said. But with the meltdown of the financial markets, that option has been curtailed.
"I don't know how your 401(k) is right now, but I can tell you mine is pretty bad," Matessino said. "Hospitals … are in the same boat. Nobody is making money right now on cash reserves."
Medicaid is a state-and-federal program that pays for health care for the poor.
The program covered only 83 percent of hospitals' costs to provide care for the program's members, Matessino said. Hospitals will have a hard time providing the same services after the cuts – at below-1995 rates – than they did before them.
DHH undersecretary Charles Castille said the reimbursement reductions are not something the agency wanted to do. The reductions are something DHH, as Gov. Bobby Jindal indicated, had to do, he added.
"And this is not just a one-year problem. This is going to be a problem that's going to occur for at least another year or two years," Castille said of the budget shortfalls. "Bottom line is this is not something we want to do. It's something that cannot be avoided."
Louisiana's state revenues are expected to be $1.3 billion lower in the new fiscal year than the previous one. Jindal's proposed $26.7 billion budget would cut hundreds of millions of dollars from higher education and healthcare. The governor has said this is the first of three years of belt-tightening.
Castille said the state has tried in recent years to raise the reimbursement rates.
But Matessino said all of the cuts will lower Medicaid reimbursements to less than their 1995 levels.
"I understand all the budget problems but just to take this huge whack at healthcare and huge whack at higher education, and just leave everything else alone, it makes you wonder where the priorities are in the state," Matessino said.
Castille said DHH implemented the emergency rules effective May 1.
Waiting until the Legislature passed the appropriations bill, coupled with the lag time between the rules' publication and hospitals billing cycles and collections, would have meant the state would end up with only eight months of cuts, he said.
The emergency rule allows the state to achieve the full 12 months of cuts, Castille said. If the agency had waited, the reductions would have been compressed into a shorter period of time, making the cuts even deeper.
Matessino said the latest cuts, combined with a mid-year cut in February and the proposed reductions in the governor's budget will slash Medicaid reimbursements to less than they were in 1995.
Hospitals were already losing a lot of money caring for Medicaid patients even before the emergency rule reductions, Matessino said.
The Hospital Association has surveyed its members about their operations, Matessino said. The results are incomplete but of the more than 100 hospitals that responded, around half reported operations losses.
Hospital association members feel frustrated, Matessino said.
On the one hand, when the H1N1 Flu outbreak took place, DHH asked the hospitals to step up and act as collection points for samples from doctors' offices, Matessino said. So hospitals did that free of charge; DHH did not cover the providers' increased liability exposure.
"What's the state saying? 'Hey, hospitals. You are really important and…oh, by the way, we're going to cut the hell out of you because you're such nice people,'" Matessino said.
For now, the hospital association and its members are lobbying their legislators and everyone else they can at the capitol, Matessino said. The hospital association is also reminding legislators of a study that shows healthcare is the state's top economic engine in terms of employment and payroll, and hospitals account for half of those jobs and paychecks.
For every $1 million cut in Medicaid funding for hospitals, 70 jobs will be lost and hospitals will lose $3.3 million in revenue, the study says.
Matessino said hospitals have faced reimbursement cuts before, but nothing this bad.
Add in the onrushing and massive changes in healthcare legislation expected at the federal level, hospitals are in for a very difficult time, Matessino said.