Hospitals would gain about $260 million in annual revenue if voters approved Medicaid expansion, with hospital officials making the case that it would be a much-needed boost to the bottom line, especially for rural hospitals struggling to stay afloat.

The extra revenue would more than erase hospitals’ total operating losses. Excluding Maine Medical Center, Maine’s hospitals lost a total of $50 million in fiscal year 2016, according to the Maine Hospital Association.

Nineteen of the state’s 36 hospitals are losing money, the association says. The 23 rural hospitals are under the greatest threat of closure or cutting vital services because of financial pressures caused by a number of factors.

A key factor in the losses is the increase in unreimbursed care stemming from people who don’t have health insurance.

If voters say “yes” to Medicaid expansion on Nov. 7, Maine would become the 32nd state to do so, and about 70,000 Mainers would become eligible for free insurance.

Advocates say people would be better cared for and rural hospitals could keep their doors open and maintain services if voters approved Medicaid expansion.

“It will provide critical support for rural hospitals,” said Robyn Merrill, executive director of Maine Equal Justice Partners, the nonprofit that got Medicaid expansion on the ballot. “A number of hospitals are operating in the red and are truly struggling and at risk of closing their doors. It has implications for all of us, and especially for communities that rely on rural hospitals.”

LEPAGE: ‘DON’T BE MISLED BY HOSPITALS’

Opponents of Medicaid expansion are pointing to hospitals as a reason to reject the referendum, saying that hospital CEOs make high salaries and that hospitals already enjoy tax-exempt status as nonprofits. Gov. Paul LePage has frequently attacked hospitals during public statements in the weeks before the election.

“Don’t be misled by hospitals. They only want to expand Medicaid to put more money in their pocket and the wallets of their CEOs. It has nothing to do with improving healthcare,” LePage said in his weekly radio address Wednesday.

The governor is a steadfast Medicaid expansion opponent who has vetoed five attempts by the Legislature to broaden the program, which operates in Maine as MaineCare.

The debate over Question 2 on Tuesday’s ballot has put hospitals at center stage in the run-up to the voting.

If Maine expanded Medicaid, the state would pay $54 million per year while receiving $525 million annually in federal money, according to the non-partisan Office of Fiscal and Program Review. The federal government pays for 90 percent or more of the cost of expansion.

Medicaid expansion is a major component of how the Affordable Care Act provides health insurance to low-income Americans. But a 2012 U.S. Supreme Court decision made Medicaid expansion voluntary, which is why some states, like Maine, have not expanded Medicaid.

‘A DIRECT HIT TO OUR BOTTOM LINE’

Rural hospitals have more patients with Medicaid, Medicare or who are uninsured when compared to urban hospitals like Maine Med, which have more private insurance patients. Medicaid and Medicare reimburses at lower levels than private insurance, but more than the uninsured, who usually can pay little or none of their hospital bills.

When the LePage administration cut Medicaid after the governor assumed office in 2011, rural hospitals ended up with more uninsured patients instead of patients with private insurance, according to hospital officials. Maine’s Medicaid population has plummeted from 356,000 in 2011 to 268,000 in 2017, according to the Maine Department of Health and Human Services. About 36,000 people lost coverage as LePage cut eligibility, including childless adults and parents with minor children who earned between 100 percent and 200 percent of the poverty level.

“It’s been a direct hit to our bottom line,” said Tom Moakler, CEO of Houlton Regional Hospital.

Moakler said in 2011, the hospital was in the black by $20,000. For the 2016-17 fiscal year, the hospital lost $690,000, and is only able to make payroll by taking out a line of credit.

During that same time period, Moakler said “bad debt” or charity care for patients who are uninsured, ballooned from $1.4 million to $3.4 million.

In an attempt to stay solvent, Houlton closed its skilled nursing center, cut back on administration costs and eliminated positions through attrition, in areas such as case management and radiology.

“We did all that, and we’re still in the red,” Moakler said.

Moakler said if Medicaid expansion were approved, Houlton would be in much better financial shape and be able to invest in capital improvements, such as replacing outdated technology.

Calais Regional Hospital closed its obstetrics unit in August in a move that hospital officials said was necessary because the hospital is in danger of closing. The hospital’s annual revenues are about $30 million and it has lost an average of $1.8 million per year over the past seven years. Closing maternity services saves about $500,000 per year. Penobscot Valley Hospital eliminated maternity services in 2015 as a cost-cutting measure.

Andrew Coburn, a public health professor at the University of Southern Maine and an expert on rural health care, said Medicaid expansion will help alleviate financial problems at rural hospitals, but it’s not the solution.

“Rural hospitals are facing many financial threats,” Coburn said. “Medicaid expansion will help, but they will still be under a lot of financial pressure.”

He said low volume and changing demographics are also hurting some hospitals. For instance, when people retire, they convert from private insurance – which pays hospitals more – to Medicare, which has a lower reimbursement rate.

CONTINUED LARGE LOSSES ‘UNSUSTAINABLE’

At Franklin Community Health Network, which includes Franklin Memorial Hospital in Farmington, the hospital operated with a $4.9 million loss in 2016.

Tim Churchill, CEO at Franklin Community, said cutbacks to Medicaid, job loss in Franklin County and other issues facing rural Maine added up to a “perfect storm” of financial problems for the hospital. Recruiting physicians is difficult, and in order to maintain services, they have to hire traveling doctors, which are much more expensive than a full-time staff physician.

“We would be greatly helped by Medicaid expansion,” Churchill said.

Franklin is part of MaineHealth, which is overall in the black by $47 million out of $2.2 billion in operating revenue. MaineHealth owns 10 hospitals in Maine and is the parent company of Maine Medical Center. Maine Med is in the black by $61 million.

Al Swallow, executive vice president and treasurer of MaineHealth, said continued large losses such as what Franklin is going through, is “unsustainable” even though as a whole MaineHealth is in the black.

“Long term, our ability to maintain access to care is dependent on each entity being fiscally sound going forward,” Swallow said.

Swallow said Medicaid expansion would be “extremely helpful” for hospital finances.

“Yes, Medicaid does not pay as much as private insurance does. But it’s still better than nobody being paid,” Swallow said.

Reductions in uncompensated care by having more people with Medicaid would nearly double MaineHealth’s operating surplus, from $47 million to $89 million, according to financial statements released by MaineHealth.

Coburn said it’s unrealistic to expect networks to take on more struggling independent rural hospitals in Maine.

“Hospitals are not looking to add more debt and financial weight to their bottom line,” Coburn said.

EXPANSION FOES POINT TO TAX-FREE STATUS

Meanwhile, opponents refer to Maine’s 2002 Medicaid expansion as a reason to vote “no.” The previous expansion pre-dated the ACA, and federal money to help pay for more services was less generous. Budget problems in Medicaid, exacerbated by the recession, caused the Legislature to delay reimbursement payments to hospitals. LePage successfully advocated paying off $105 million in hospital debt in 2013.

Brent Littlefield, a political consultant and spokesman for the Welfare to Work PAC, which opposes Medicaid expansion, said hospitals in Maine enjoy tax-free status for a reason. Hospitals are saving a bundle on property taxes alone, he said. Littlefield also pointed out that hospitals can afford to pay administrators handsomely, with the average hospital CEO earning more than $300,000, according to a 2013 Press Herald article.

And not all rural hospitals are losing money. The Welfare to Work PAC criticized Medicaid advocates Maine Equal Justice Partners, the nonprofit that supports expansion, for highlighting financial issues at Down East Community Hospital in Machias.

Down East released a statement on its Facebook page, saying that “(although) there are many hospitals that are struggling and there are legitimate reasons to expand Medicaid, Down East Community Hospital is doing well at this time. Our operating margins are positive and have been so for several years now.”

Littlefield said for hospitals to ask for additional government help by expanding Medicaid is “sort of like having your cake and eating it too.”

“They are supposed to take money that they would have spent on taxes and spend that money instead on providing care for those in need,” Littlefield said. “If the hospitals want taxpayers to pick up this cost, are they then open to say they’re willing to be taxed?”

Joe Lawlor can be reached at 791-6376 or at:

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