Hospitals stand to lose millions in federal payments

Officials at Grady, other Georgia facilities push Congress to act.

Officials at Grady Memorial and dozens of other Georgia hospitals breathed a sigh of relief when the GOP plan to scale back Medicaid recently failed in the U.S. Senate.

But now, they say, they face a different threat.

If Congress doesn’t act by early October, dozens of so-called safety

net hospitals such as Grady will lose tens of millions of dollars in federal reimbursements for care they provide to Medicaid patients and charity care for the uninsured.

Grady alone could lose more than $10 million next year. By 2025, hospitals across Georgia would be out perhaps $200 million annually. The hospitals affected are by their nature the least well-off in the state; executives say they would at the very least face difficult cuts, and some, the possibility of closure.

Gliann Travick, a newly diagnosed diabetes patient at Grady, told a reporter that she wasn’t surprised to hear of yet another health care funding threat looming over her hospital and others across the nation.

“They could work together and solve these things,” Travick said

of members of Congress, shaking her head.

But whether lawmakers ultimately do so is an open question.

Republicans and Democrats have in the past worked together to keep the hospital payments afloat. But cooperation now is at a low ebb as President Donald Trump looks to dismantle the Democrats’ biggest policy advances from the Obama years.

The Affordable Care Act, with both its flaws and its benefits, is the law of the land for the foreseeable future after several GOP health care proposals were rejected on the Senate floor.

That leaves congressional Republicans in a tough spot as they’re forced to grapple with what they see as some of the undesirable features that have been baked into Obamacare, including the expiring hospital payments.

In the weeks ahead, they will face a stark choice. Do they follow Trump’s lead and let Obamacare fail but risk weakening hospitals at home? Or do they work to prop up a law they loathe in the name of helping their constituents?

Slow phaseout

Hospitals in the U.S. have ethical and legal responsibilities to care for every patient who comes through the doors of an emergency room, whether they have insurance or not.

It can sometimes take the government months to repay hospitals for care given to Medicaid patients. And for the people who are uninsured, those hospitals sometimes never get paid.

That’s where the Disproportionate Share Hospital program, or DSH, comes into play. DSH money is set aside for hospitals that care for a disproportionate share of patients on Medicaid or without insurance. The idea is to help defray the costs that aren’t getting reimbursed on time or at all.

Since Georgia has higher levels of uninsured than the 31 states that expanded Medicaid, those payments are considered critical.

The authors of Obamacare sought to eventually phase out the DSH payments, however, with the logic that all states would expand Medicaid and eventually the program wouldn’t be needed.

But then came the U.S. Supreme Court decision that said states didn’t have to expand Medicaid. So states such as Georgia didn’t. But that also increased Georgia’s reliance on DSH as an incentive to hospitals to treat poorer patients.

Congress delayed an initial cut to DSH payments until this year, and the GOP’s failed Obamacare replacement bill sought to cancel that cut and send more money to non-expansion states such as Georgia. But now that the ACA remains in place, the phaseout is about to begin.

The federal office that runs DSH has proposed its calculations for winding down the payments, and it will consider public reaction until Aug. 28. Under the calculations, Georgia hospitals would receive $36 million less in the first year of cuts alone. By 2025 the vast majority of the $295 million subsidy to Georgia would be gone.

Georgia hospitals are already having a tough time, especially rural ones. One of their worst problems is insufficient reimbursement through Medicaid and Medicare, and people who use the emergency room like their personal clinic. Seven rural Georgia hospitals have shut their doors since 2010.

Grady estimates that its portion of that $36 million next year will be a cut of perhaps $10 million to $13 million. By 2025 Grady, which currently gets $84 million a year, expects to lose more than $50 million of that.

“At the end of the day that’s a $10 million to $13 million hit Grady would take,” said John Haupert, Grady’s CEO, who is credited with a business turnaround at the hospital. Haupert would try to insulate front-line patient care from the impacts as much as possible, he said. But Grady would have to look at options such as scaling back mental health care support or reducing some service hours.

“Medicaid doesn’t come near covering the cost” of caring for those patients, he said. “Grady is already the lowest-cost provider in the market. We’re pretty bare bones to begin with.”

Grady is no different than other hospitals in its desperation for DSH.

America’s Essential Hospitals, a nationwide association, said in a statement that “our hospitals simply can’t sustain cuts of this magnitude without reducing services or scaling back their workforce.”

Closer to home, Earl Rogers, the president of the Georgia Hospital Association, said that DSH is “essential” to the state’s hospitals, which provide more than $1.7 billion in uncompensated care each year.

“Cutting this program by tens of millions of dollars will force many hospitals in the state to reduce essential health care services to all patients,” Rogers said. “For hospitals in rural areas, which treat a high percentage of uninsured and underinsured patients and are struggling just to stay open, these cuts will be especially devastating.”

Fate unclear

Just because hospitals want the money, though, doesn’t mean all taxpayers think it’s right.

“In some respects, it’s a version of corporate welfare,” said Jason Pye, a Georgia resident who is vice president for legislative affairs at the libertarian-leaning advocacy group FreedomWorks.

Pye said government should stay out of health care, with the exception of acting as a safety net for the country’s most vulnerable. He said hospitals have used the upcoming DSH cuts as a way to pressure states into expanding Medicaid.

Congress has the power to either levy the cuts or lift them.

Georgia’s Republican lawmakers are conflicted. They desperately do not want to see DSH payments cut, but they are also wary of bolstering a health care law they despise. Many pointed to the fact that some of the GOP health care proposals would have bolstered the payments to states such as Georgia and stopped the upcoming cuts.

“This is yet another example of how Obamacare has not lived up to its promises,” said Amanda Maddox, a spokeswoman for U.S. Sen. Johnny Isakson. “This is exactly the issue Senator Isakson worked to address during debate on the Senate health care efforts.”

He sought changes to the formula for divvying up DSH money to favor states such as Georgia that didn’t expand Medicaid.

U.S. Rep. Buddy Carter, R-Pooler, the only Georgian on the House Energy and Commerce Committee, which has jurisdiction over health care matters, noted that if the House version of the Obamacare repeal bill won final passage, DSH payments would have continued in states such as Georgia.

“Unfortunately, this legislation hit a roadblock, so now we must regroup to provide solutions,” said Carter, a pharmacist. “This is yet another example proving that inaction on health care reform is not an option.”

Working together?

The anxiety over DSH cuts is an example of the larger debate going on within the GOP about how to approach Obamacare. Republicans are the party in charge in Washington, but without any internal agreement on how to repeal and replace the Affordable Care Act, they are stuck with it, at least for now.

As they departed last week for their monthlong recess, there was little agreement within the GOP about how to proceed.

Senate health committee Chairman Lamar Alexander, R-Tenn., made waves on Tuesday when he announced plans to hold bipartisan hearings during the first week of September. His goal is to hammer out a narrow compromise with his Democratic counterpart, U.S. Sen. Patty Murray of Washington, on another Obamacare-related problem, insurance subsidies that help lower-income Obamacare customers afford out-of-pocket costs. Trump recently tweeted that they are “BAILOUTS” and threatened to stop them.

Those hearings could present an opportunity to take on other health care legal fixes, such as DSH. So could a larger debate over reauthorizing the Children’s Health Insurance Program, which Congress must consider before Sept. 30.

Alexander and Murray still face a plethora of challenges, from a short timeline of only a few weeks to politically polarized committee members and Republicans leaders eager to move on from health care.

Democrats have said they’re willing to work with the GOP, but only if Republicans abandon their effort to repeal Obamacare. And the GOP labels Democrats hypocrites for saying the ACA needs work but refusing to partner with them on a replacement.

To some, the fracas in Washington looks like “a lot of power and no feelings,” said Nia Taylor, an Emory Hospital nurse.

Taylor was speaking Thursday with her sister, Sheila Bateman, about the health care mess in Washington as Bateman, who is uninsured, waited at Grady for an appointment.

Taylor said the prospect of payments such as DSH going away is “horrifying.” However, she thinks if they do go away, things will get so bad that lawmakers will have to sit up and pay attention.

“There’s no consideration of people lacking health care,” Taylor said. “They can’t get along. They’re thinking, ‘It won’t affect us.’ But it does affect them; it’ll really affect us if we’re not thinking about our future.”