Budget squeezes hospitals
Some New Hampshire hospitals say state’s spending plan will force them to shift costs, shutter programs
Hospitals in New Hampshire are facing millions of dollars in cuts in disproportionate share payments as a result of the state’s budget, which went into effect July 1.
The budget is expected to generate $258 million in revenue for the state over the next two years by cutting $230 million in DSH payments and $28 million in other payments, including suspending graduate medical education payments, catastrophic payments and deferral of outpatient cost settlements.
The Medicaid enhancement tax required hospitals to pay 5.5% of net patient services revenue to the state. The payments were matched by the federal government and the money was refunded to the hospitals, allowing New Hampshire to pocket the difference.
Now, large hospitals will not receive DSH payments for care provided to Medicaid recipients and the uninsured, allowing the state to keep a greater share of the tax proceeds.
Of the 24 acute-care hospitals in New Hampshire, 13 critical-access facilities are expected to continue to receive DSH payments, although the reimbursement rate for treating Medicaid and uninsured patients may be reduced if there are insufficient funds, said Steve Ahnen, president of the New Hampshire Hospital Association.
Also, Ahnen said, the tax may yield significantly less revenue. “It’s not quite clear that the tax will generate all the revenue that the state assumes it will,” he said.
As a result of the changes, hospitals in New Hampshire argue that the cuts will force them to shift costs and shutter programs and services. They also say they may increase rates for insurers.
Rick Elwell, senior vice president and chief financial officer for Elliot Hospital in Manchester, N.H., said the tax will have a “significant impact” on the 264-bed facility.
Last year, Elliot Hospital paid $15 million and received about $17 million back from the state in DSH payments.
This year, Elwell said, the hospital will be expected to pay about $15 million in September and cut $ 15 million in costs because it will not receive the state’s reimbursement.
According to Elwell, $15 million makes up roughly 5% to 6% of the hospital’s controllable expenses. Elliot executives are expected to present cost-cutting suggestions to the board this month. Elwell said the effect of the cost-cutting will carry over to patients and the community.
“The community and patients are probably going to have more access issues getting into the system,” Elwell said.