Ten­nessee hos­pi­tals’ fund­ing of Med­i­caid ex­pan­sion is about sur­vival

Modern Healthcare - - NEWS - By Vir­gil Dick­son

Ten­nessee hos­pi­tals’ decision to help fund Med­i­caid ex­pan­sion un­der Repub­li­can Gov. Bill Haslam’s new waiver pro­posal was driven by hos­pi­tals’ fi­nan­cial sur­vival as well as their de­sire to ex­tend cov­er­age to 200,000 low-in­come Ten­nesseans, hos­pi­tal lead­ers there say.

The cur­rent fi­nan­cial pic­ture for the state’s hos­pi­tals is grim, made worse by the health­care re­form law’s re­duc­tion in dis­pro­por­tion­ate-share pay­ments, which were ex­pected to be off­set by Med­i­caid ex­pan­sion. But Ten­nessee hos­pi­tals faced a dou­ble whammy when their state’s Repub­li­can elected lead­ers did not ac­cept ex­pand­ing Med­i­caid to adults earn­ing up to 138% of the fed­eral poverty level. Hos­pi­tals in the state pro­vided more than $2.4 bil­lion in un­com­pen­sated care in 2012.

Three ru­ral hos­pi­tals—Hay­wood Park Com­mu­nity Hos­pi­tal, Brownsville; Gib­son Gen­eral Hos­pi­tal, Tren­ton; and Hum­boldt (Tenn.) Gen­eral Hos­pi­tal— closed in 2014, and sev­eral other hos­pi­tals have cut staff and ser­vices. “Get­ting more peo­ple cov­er­age is crit­i­cal to the sur­vival of Ten­nessee hos­pi­tals,” said An­thony Spezia, CEO of Knoxville, Tenn.-based Covenant Health. “You can’t con­tinue to have de­clin­ing re­im­burse­ment and in­creas­ing costs.”

Be­fore Haslam last week an­nounced his al­ter­na­tive model for ex­pand­ing Med­i­caid, called In­sure Ten­nessee, he met with Ten­nessee Hos­pi­tal As­so­ci­a­tion lead­ers to dis­cuss hos­pi­tals pay­ing the state’s por­tion of the cost for cov­er­ing the Med­i­caid ex­pan­sion pop­u­la­tion after 2016; states will have to pick up 10% of the cost by 2020. The state would re­ceive an es­ti­mated $5.6 bil­lion in new fed­eral Med­i­caid funds over 10 years if it ac­cepts the ex­pan­sion.

Haslam’s two-year waiver pro­posal would give em­ployed ben­e­fi­cia­ries the op­tion to re­ceive a voucher to help them buy into their em­ployer’s health plan, which would pay providers higher com­mer­cial rates. For the un­em­ployed or those who de­cline the voucher, a Med­i­caid man­aged-care plan would be of­fered.

Ben­e­fi­cia­ries with in­comes above poverty would re­ceive in­cen­tive pay­ments placed in a health sav­ings ac­count to cover out-of-pocket costs if they demon­strated healthy be­hav­iors. Ad­vo­cacy groups, how­ever, ex­pressed con­cern about whether the plan would of­fer full Med­i­caid ben­e­fits and whether out-of-pocket costs would be af­ford­able.

After sur­vey­ing mem­bers, the THA

“Get­ting more peo­ple cov­er­age is crit­i­cal to the sur­vival of Ten­nessee hos­pi­tals. You can’t con­tinue to have de­clin­ing re­im­burse­ment and in­creas­ing costs.” An­thony Spezia CEO Covenant Health

board agreed to Haslam’s pro­posal. The plan must still be ap­proved by the Repub­li­can-con­trolled state Leg­is­la­ture and the CMS, though ex­perts say the chances of CMS ap­proval are good.

The im­pli­ca­tions of the ex­pan­sion would be ma­jor for Ten­nessee hos­pi­tals. “We could see a re­turn of $1 bil­lion an­nu­ally in ad­di­tional re­im­burse­ment to the health­care in­dus­try,” said Joe Lands­man, CEO of the Univer­sity of Ten­nessee Med­i­cal Cen­ter, Knoxville.

LifePoint Hos­pi­tals stands to ben­e­fit the most, as it has 14.1% of its beds in Ten­nessee, said JP Mor­gan An­a­lyst Justin Lake. Other ben­e­fi­cia­ries would in­clude Com­mu­nity Health Sys­tems, which has 9% of its beds in the state, and HCA, which has 5.9% of its beds there.

Of­fi­cials at Franklin, Tenn.-based Capella Health­care, which owns or op­er­ates hos­pi­tals in six states, tout the ben­e­fits of Med­i­caid ex­pan­sion. Un­com­pen­sated-care costs de­creased 59% at Capella’s hos­pi­tal in McMinnville, Ore., where Med­i­caid was ex­panded, while un­com­pen­sated-care costs rose 3% in 2015 at its fa­cil­ity in McMinnville, Tenn. “Hav­ing hos- pitals con­trib­ute a small por­tion of the cost when the fed­eral fund­ing drops be­low 100% sim­ply makes sense for pa­tients, providers and com­mu­ni­ties through­out our state,” said Mark Med­ley, pres­i­dent of hos­pi­tal op­er­a­tions for Capella who also serves as board chair of the Ten­nessee Hos­pi­tal As­so­ci­a­tion.

For the past four years, hos­pi­tals in Ten­nessee have been pay­ing an as­sess­ment fee to help fund the state’s cur­rent Med­i­caid pro­gram, known as Ten­nCare. Un­der the ar­range­ment, pri­vate hos­pi­tals give the state 4% of their rev­enue, and the feds match those funds. To date, hos­pi­tals have pro­vided $452 mil­lion to fund Ten­nCare through th­ese as­sess­ments, help­ing the pro­gram avoid more than $1 bil­lion in ser­vice cuts and re­im­burse­ment re­duc­tions. Thirty-eight states use hos­pi­tal as­sess­ments to help main­tain their Med­i­caid pro­grams, ac­cord­ing to the Kaiser Fam­ily Foun­da­tion.

Haslam plans to seek fed­eral per­mis­sion to use the ex­ist­ing as­sess­ment to fi­nance Med­i­caid ex­pan­sion, and the fee likely will in­crease. Fed­eral law lets states im­pose a hos­pi­tal as­sess­ment of up to 6% of pa­tient rev­enue. He hasn’t said how much he would raise the rate.

Ari­zona re­ceived CMS ap­proval in Jan­uary to im­pose a fee on hos­pi­tals to fund its Med­i­caid ex­pan­sion, and the state col­lected $75 mil­lion be­tween Fe­bru­ary and Oc­to­ber.

Hos­pi­tals in the state have seen a ben­e­fit. Fol­low­ing the Med­i­caid ex­pan­sion, un­com­pen­sated care dropped to $170 mil­lion for the first four months of 2014, com­pared with $246 mil­lion dur­ing the same pe­riod of 2013, ac­cord­ing to the Ari­zona Hos­pi­tal and Health­care As­so­ci­a­tion.

Bill Car­pen­ter, CEO of LifePoint, which op­er­ates hos­pi­tals in both Ari­zona and Ten­nessee, said it’s well worth it for hos­pi­tals to pay an as­sess­ment to make Med­i­caid ex­pan­sion pos­si­ble, and it’s prob­a­bly the best strat­egy to win over Repub­li­can law­mak­ers.

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