AUGUSTA – On Tuesday, Gov. Paul LePage unveiled a plan to pay hospitals the $186 million in MaineCare payments the hospitals are owed for care they provided as far back as 2009.
The state money will draw down an additional $298 million in federal matching funds.
Paying off the $480-plus million debt is good news for Maine’s 39 hospitals. As the governor says, paying off this debt is like a jobs bill. It will give hospitals the cash flow they need to make needed investments in their institutions.
For more than 10 years, the state hasn’t fully paid hospitals for the care they have provided patients on MaineCare, the name of the state’s Medicaid program. The hospital debt is the result of the state’s former policy of reimbursing hospitals only a portion of what was owed each year.
Under that old system, the debt would accumulate to significant levels. Then the governor would propose, and the Legislature would support, making a payment to reduce the debt, much like consumers with credit card debt.
In 2011 and 2012, the state reformed its payment system at Maine’s hospitals to a pay-as-you-go system. Now hospitals are being paid shortly after they deliver services to MaineCare recipients.
Hospitals still receive only 75 cents in MaineCare reimbursement for every dollar of care provided. But at least that 75 cents is being paid on time now. In other words, they cut up the credit card.
However, one last payment needs to be made.
Settlements don’t increase the rates at which care is reimbursed; they are not bonuses. Settlements are simply reimbursements for the care hospitals have already delivered to MaineCare patients.
Hospitals, like other businesses, are feeling the negative effects of the continued slow economy.
The average operating margin of Maine’s hospitals is a mere 1.7 percent. Uncompensated care, which is the sum of both bad debt and charity care, was about $450 million last year, up $32 million from the year before. And Maine hospitals are paying about $81 million in taxes to the state (yes, hospitals pay taxes).
And, as you are all well aware, the federal government has fiscal difficulties, and that negatively affects hospitals as well.
The fiscal cliff deal reached on New Year’s Eve cuts $50 million from hospitals in Maine over the next few years. The pending “sequester” cuts, set to take effect March 1, cut Medicare reimbursements in Maine by $200 million over 10 years.
Finally, the Affordable Care Act cuts hospital reimbursements by almost $900 million over the next 10 years.
All of Maine’s community and psychiatric hospitals are nonprofit. Their mission is to provide high-quality, affordable care to the communities they serve with a fundamental goal of improving the health of the entire community. Maine, hospitals ensure access by playing a much broader role in the delivery of health care services.
And their efforts have proven successes. Maine’s hospitals provide the highest-quality care in the nation, according to the U.S. Department of Health and Human Services. Maine hospitals performed the best in the nation pursuant to Medicare’s new “value-based purchasing” initiative.
When the state doesn’t pay its bills, hospitals can’t pay theirs. Hospitals continue to borrow from lines of credit to meet payroll and other obligations because of the state debt to hospitals.
Over the years, hospitals have been forced to make difficult decisions about programs and services and future investments that affect all of those who depend on the hospital and the physicians employed by the hospital.
The MaineCare debt also affects hospitals’ ability to recruit and retain needed health care professionals at a time when we are competing nationally to attract these professionals to Maine.
Hospitals understand how difficult budget times are for the state. We understand that there are other worthy programs that deserve state support. The fiscal year 2014-2015 budget battle to come is going to be difficult — tens of millions of significant cuts to hospitals are proposed in the recently released budget. We get it.
But the proposed hospital settlement is for past services. Hospitals have waited for these payments, and we’re hopeful that legislators on both sides of the aisle will support this proposal and help their local hospitals.
Steven R. Michaud is president of the Maine Hospital Association, which is based in Augusta.