With the state facing a $1 billion-plus deficit, Louisiana’s hospitals are marshalling economic arguments to support the governor’s budget flexibility proposals, which include cutting 10 percent of dedicated funds.

“We’ve been really trying to educate the public, and the legislators as well, what’s going to happen under national health reform and how that’s going to impact not just hospitals but the economy in the state of Louisiana,” said John Matessino, president and CEO of the Louisiana Hospital Association.

In 2014, people who earn 133 percent of the federal poverty income level will become eligible for Medicaid coverage, Matessino said. Depending on whose estimate is used, half of the state’s population or more could qualify for coverage.

“When we think about trying to balance those things out, and balance the flow of dollars out to support healthcare, it’s a little frightening,” Matessino said.

According to a 2009 survey of hospitals in Louisiana, 43.8 percent of revenue comes from private insurers, 35.7 percent from Medicare, 13.3 percent from Medicaid, and 7.2 percent from self-pay and the uninsured.

However, hospital payments from Medicare, Medicaid and uninsured/self pay patients do not cover the cost of the care, according to the LHA. Private insurance subsidizes these costs.

This level of cost-shifting results in higher insurance premiums, which in turn creates more uninsured citizens, according to the association. A big influx of Medicaid patients is expected to place even more pressure on the current system.

Matessino said the way the state constitution is written, lawmakers have little choice except to make cuts in higher education and healthcare.

But hospitals and other providers are already struggling with a recent series of cuts to Medicaid reimbursements, Matessino said. While community hospitals haven’t made any huge layoffs, all of them have probably begun eliminating jobs through attrition in an effort to reduce expenses.

And any cuts the hospitals make ripple through the local and state economies.

For several years now, the LHA has commissioned LSU economist Jim Richardson to analyze hospitals’ economic impact in the state. The latest edition of that report is due later this year.

The report has shown and is expected to show again that healthcare is the top employer in the state, he said.

In 2006, the latest figures available, Louisiana’s 11,179 healthcare businesses employed 252,970 Louisiana residents and had a payroll of $8.3 billion, the LHA report shows. The state’s 212 hospitals provided jobs for 95,352 people and had an annual payroll of over $3.62 billion.

Hospitals’ total spending, including payroll and purchases of supplies and equipment, amounted to $12.9 billion, the report shows.

The report found that every dollar spent by a hospital supports $1.12 of business activity, resulting in a total economic impact of $27.4 billion, Matessino said. Each hospital job supports roughly 1.5 other jobs in the community.

In addition, the economic activity supported by hospital spending leads to $794 million in state tax collections – about 7 percent of all taxes and fees collected by the state – and $598 million in local tax collections, according to the report.

The bi-annual report has had “a big impact” in helping to educate the public, legislators and policymakers, Matessino said.

“Hospitals obviously provide healthcare, but they are absolutely an economic driver in every community,” Matessino said.

Hospitals’ impact may be even greater in rural communities, where the hospitals are usually either the top employer or the next-largest, Matessino said.

He points to the example of Newellton, a community in Tensas Parish, to demonstrate the importance of a hospital in a small town.

Many years ago, Newellton’s hospital closed, Matessino said. Not long afterward, the few doctors in town left, then the drugstore closed and the grocery store.

“Before you knew it, Newellton was almost a ghost town,” Matessino said.

Matessino said the economic impact reports and hospitals’ outreach efforts have helped legislators understand the economic importance of hospitals.

Although it was little too early at publication deadline to say what the legislators would do to balance the budget, the LHA will be supporting the governor’s budget flexibility proposals, Matessino said.

Gov. Bobby Jindal has proposed a constitutional amendment that will allow the state to cut dedicated state funds by 10 percent during financial crunches. The constitution now allows dedicated funds to be cut by 5 percent.

Jindal has also proposed allowing state government to spend some of the money set aside in trusts for healthcare and higher education. At present, spending in those trusts is limited to the interest.

“We’ll see where that goes,” Matessino said. “If those kinds of proposals are going to pass, this is the year to pass them.”

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