The University of Virginia Medical Center could lose hundreds of millions of dollars over the next decade, said CEO R. Edward Howell, as provisions of the new health care law kick in.
Howell estimates the hospital could lose $140 million by 2020 as Medicare reimbursements are reduced; much of that money is used to pay for residencies for recent medical school graduates, he said.
A more immediate problem for the Medical Center looms, Howell said, as the state grapples with the prospect of Medicaid expansion. Opponents balk at the price tag and inefficiency of the program, but Howell said the hospital will lose $40 million a year without the expansion.
“The people that need care and aren’t insured will remain,” Howell said. “It really puts us in a pretty challenging position.”
The federal government currently reimburses hospitals that take care of a disproportionately high number of uninsured people. These payments, distributed under the Medicaid Disproportionate Share Hospital program, help these “hospitals of last resort” serve indigent patients.
One of the major goals of the Affordable Care Act is to reduce the need for DSH payments by making insurance more affordable and accessible, said Carolyn L. Engelhard, assistant professor of health policy analysis at the UVa School of Medicine.
That would, in turn, make it cheaper for states to expand Medicaid to include a broader net of residents, Engelhard said. She said she believes that’s a much-needed change — but the tradeoff is less DSH funding.
“That pool [of DSH payments] is shrinking because they assumed states would not need it as much,” she said. “[But] the state may not have the dollars to reimburse hospitals.”
The U.S. Supreme Court ruled last year that expansion will be up to the states, which administer Medicaid funding, and many Virginia lawmakers have reservations about an expansion, citing the cost of the current program.
Del. Rob Bell, R-Albemarle, said in September that he wants to find ways to cut costs before expanding Medicaid.
“Everyone understands Medicaid is one of the drivers for budget growth in the last decade,” Bell said. “We’re all looking for ways to try to find some way to manage the growth of Medicaid expenses.”
Spending on Medicaid in Virginia has grown 131 percent in the past decade, from $1.6 billion to $3.7 billion, according to the House of Delegates Appropriations Committee.
Reductions in Medicare reimbursements present another challenge.
Engelhard said the Obama administration convinced hospitals that the short-term loss in reimbursements would even out in the long run.
“The thinking was there would be so many more people who have insurance that [hospitals] would benefit from that,” Engelhard said. “Hospitals would have more paying customers.”
But Medicare also helps pay the cost of training residents — 32 percent of the cost, up to a certain number of residents. UVa is 127 residents over the cap, Howell said, and already hurting, while demand for physicians continues to rise.
“I am convinced we’re facing one of the most severe physician shortages this country has ever seen,” Howell said. “Without an expansion of the cap, we’ll have some real problems.”
It’s an issue facing all hospitals, and Howell said he’s working with the Virginia Hospital & Healthcare Association to find new revenue sources. But Howell said he’s not giving up on fighting for government funding for residencies.
Expanding coverage under the new law should not come at the cost of residency funding, Howell said.
“The same policymakers in Washington that make those decisions are also aware we’re facing this significant shortage,” Howell said.