Rhode Island hospitals will see a $16 million increase to Medicaid reimbursements in the state budget this year, marking the first year-over-year increase in five fiscal years.
“Delightfully, the state this year agreed to increase the funding for reimbursements,” said Dr. James Fanale, executive vice president and chief clinical officer at Care New England Health System. “We take care of a lot of Medicaid patients, especially at Women & Infants [Hospital] where we do the largest share of deliveries for women in the state. But with costs outstripping reimbursements, it’s tough to financially succeed.”
Gov. Gina M. Raimondo signed the state budget into law on Aug. 3.
The $9.2 billion tax-and-spending plan included an additional $28.3 million from what Raimondo originally proposed for hospitals, as state legislators decided to augment spending.
State lawmakers this year grappled with passing a balanced budget after revenue fell short of projections, but could nonetheless increase Medicaid rates by leveraging hospital fees for more federal dollars. Indeed, the state increased hospital licensing fees and used the funding to boost state contributions to Medicaid rates. The state increase was subsequently matched by the federal government and hospitals will theoretically get back that money through reimbursements.
The hospital increase included an extra $16 million for Medicaid reimbursements, meant to help assuage the squeeze Rhode Island hospitals have been feeling on the bottom line. And while it helps, long-term financial stability remains a concern among advocates.
‘While $16 million is certainly a help … a significant shortfall will remain.’
AMANDA J. BARNEY, Hospital Association of Rhode Island senior vice president
“While $16 million is certainly a help … a significant shortfall will remain,” said Amanda J. Barney, senior vice president at the Hospital Association of Rhode Island.
HARI estimates Rhode Island hospitals lose about 23 cents on every dollar of care provided through Medicaid. In 2015, Medicaid losses alone totaled $130 million for all Rhode Island hospitals, according to HARI, and it’s taking its toll.
Indeed, Care New England, the state’s second-largest hospital system, reported a
$6.5 million operating loss for the third quarter ended in June. Year-to-date, the nonprofit reported a $46.4 million loss.
Citing financial constraints, the organization in April laid off an unspecified number of full-time employees from Women & Infants Hospital in Providence, and staffing reductions were also made at Kent Hospital and Butler Hospital.
The losses, paired with uncertainty surrounding the fate of Memorial Hospital and the nonprofit’s proposed affiliation with Partners Healthcare of Massachusetts, led Fitch Ratings Inc. on Aug. 10 to downgraded
Care New England’s credit rating for two of its bonds.
Fanale attributes much of the downward pressure to a shift in how hospitals are delivering care, noting that providers are actively admitting less patients who may not necessarily need to be there. A fall in inpatient volume, he points out, simultaneously drives down revenue.
But he sees a light at the end of the tunnel, and says the state’s decision to increase reimbursements only helps.
“It’s taking a great deal of effort to get back to a break-even basis, but we’re certainly [anticipating] a remarkable improvement in fiscal 2018,” Fanale said. “It’s going to be a challenge, but we’ll get there.”
Likewise, Lifespan Corp., the state’s largest hospital system,
ended last fiscal year with a $500,000 loss. And while the health care provider thus far has delivered positive operating results this year, financial stability remains a concern.
“Clearly, an increase in revenue is critical in an industry that operates on razor-thin margins,” said Jane Bruno, senior vice president of marketing and communications.
After the Affordable Care Act, known popularly as Obamacare, was signed into law in 2010, states were given the option to expand Medicaid coverage to include single, childless adults aged 19 to 64 years old that make less than 138 percent of the federal poverty level.
Rhode Island participated in the program, known colloquially as “Medicaid expansion,” and the number of people enrolled in the program has increased by roughly 70,000 people. Today, about one in every three Rhode Islanders is covered by the program.
The expansion was originally pitched as a potential windfall for hospitals, as more individuals with coverage would drive down the cost of providing care to individuals without health insurance.
Uncompensated care subsequently plummeted, as promised, but other changes in federal and state regulations somewhat muted the financial benefits. Yearly increases in Medicare funding, for instance, froze, and hospitals were no longer allowed to negotiate rates with private insurers above a capped increase of 2-3 percent each year.
The new dynamic, along with an estimated 7 cents lost on every dollar of care provided through Medicare, and 23 cents lost on every dollar of care delivered through Medicaid, has put downward pressure on operating budgets.
“It’s not sustainable for an organization to lose money on every dollar of care provided,” Barney said.
Eli Sherman is a PBN staff writer. Email him at Sherman@PBN.com, or follow him on Twitter @Eli_Sherman.
