A Mills administration proposal to alter how hospitals are reimbursed and taxed would substantially reduce funding for York Hospital, even though most other Maine hospitals would get more money. But Democratic leaders in the Legislature are pushing to protect the southern Maine medical center.
On Friday, they included protections for York Hospital’s funding in an agreement on supplemental budget fixes, according to Senate President Troy Jackson, D-Allagash. The Legislature’s Appropriations and Financial Affairs Committee is expected to vote on the language to safeguard the hospital at some point in the coming days.
Dr. Patrick Taylor, president and CEO of York Hospital, said the Mills administration’s proposed changes to the funding formula would result in a $2.4 million decrease in annual revenue for York, one of the few remaining independent hospitals in Maine. After five years, that annual cut would balloon to $8 million, when a provision would expire that would give the hospital about $5.6 million a year to help make the transition.
“It would have a huge impact on our ability to deliver services,” Taylor said of the proposed change. “It’s a huge threat to us. We want to remain a strong, independent, community hospital.”
York Hospital now is reimbursed by Medicare and Medicaid as if it were a critical access hospital, a federal designation that ups its reimbursement for services to 109% of costs.
The designation is meant to help small, rural hospitals that typically have a more difficult time staying solvent, in order to protect access to care in rural areas.
While York Hospital is not rural and would not qualify to be a critical access hospital under the federal program, Maine lawmakers decided decades ago to give the higher reimbursement to the hospital because of its proximity to the Boston labor market. York Hospital has higher labor costs than similar hospitals in Maine because it needs to pay workers more, Taylor said.
Under the administration’s proposal, York Hospital would no longer be reimbursed as much as a critical access hospital, but for the first five years, the state would partially make up for the loss with the $5.6 million annual payment.
Most other hospitals in Maine would see their funding increase under the administration’s proposal, which would cost about $60 million a year in new state and federal dollars for Maine’s hospital system. The proposal would increase the tax on net revenues from 2.25% to 3.25%, but also increase most reimbursement rates.
Two critical access hospitals in Washington County said they would also lose money under the proposed rate and tax reform. Down East Community Hospital and Calais Community Hospital stand to lose just over $500,000 a year if changes in their reimbursement and tax rates go through, they said in a statement.
“As you can imagine, this is another negative blow to our financial performance and will drive rural hospitals to reassess the breadth of services that can be provided and still remain viable,” the statement said.
The Washington County hospitals were not mentioned in Jackson’s summary of the Democrats’ agreement on supplemental budget fixes.
York Hospital has an annual budget of about $210 million and 1,100 employees, according to federal nonprofit tax filings.
Lindsay Hammes, spokesperson for the Maine Department of Health and Human Services, said the goal of rate reform is “to ensure uniformity across the reimbursement system.”
“That said, the department appreciates the role that York Hospital serves in its community, county and southern Maine,” Hammes said. “That’s why the department and Maine Hospital Association agreed that the rate reform proposal include a transitional payment for York to neutralize the impact of the proposal on them for half a decade, allowing them to adapt to the new system.”
In a February letter to York County lawmakers, Jeanne Lambrew, Maine’s health and human services commissioner, wrote that York Hospital “does not meet any of the Critical Access Hospital criteria (to justify higher reimbursement rates). It is not “small” as defined as having fewer than 25 beds. York Hospital has 54 beds. It’s not at least 35 miles away from another hospital. York Hospital is 13 miles from Portsmouth Regional Hospital, 15 miles from Douglas Wentworth Hospital in Dover and 25 miles from Southern Maine Health Care (in Biddeford).”
The Maine Hospital Association supports the rate proposal overall. But Jeff Austin, the association’s vice president of government affairs, had no comment on York Hospital’s potential loss in revenue.
Taylor said the hospital association has lobbied to make the overall changes revenue neutral for York Hospital but has not been able to get the Mills administration to agree to more than the five years of extra money to help the transition.
He said he couldn’t predict what cutbacks the hospital would have to make if funding is not restored.
“I don’t have a Plan B right now,” Taylor said.
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