Without Medicaid expansion, financial future dims for safety net hospitals like UVa - The Daily Progress: Local

Friday, November 21, 2014

Without Medicaid expansion, financial future dims for safety net hospitals like UVa

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Posted: Sunday, June 29, 2014 7:15 pm | Updated: 6:21 pm, Mon Jun 30, 2014.

The University of Virginia Medical Center and other so-called safety net hospitals are bracing for more uninsured patients this year and financial losses starting in 2016 as the prospects of Medicaid expansion fade.

“Private hospitals may still see some indigent care [to fulfill their nonprofit mission], but more and more of those without public or private insurance will be triaged to teaching hospitals” such as UVa and the Virginia Commonwealth University Medical Center, said Carolyn L. Engelhard, assistant professor of health policy analysis at UVa’s School of Medicine.

A major part of the Affordable Care Act involved expanding Medicaid eligibility and, as a tradeoff, reducing payments to hospitals that treat the indigent and the uninsured. But the U.S. Supreme Court left the states to decide whether to expand Medicaid. Virginia is one of 24 states either debating or refusing expansion over cost concerns, according to the Kaiser Family Foundation.

Opponents in the General Assembly chafed at the idea of expanding a program that has grown 131 percent in the last 10 years, to $3.7 billion from $1.6 billion in fiscal year 2004, according to the state House Appropriations Committee.

Critics worry about the additional cost of expanding the rolls by an estimated 373,000 people. That puts hospitals that care for large numbers of uninsured patients in an awkward position, officials said.

Together, the UVa and VCU health systems estimate they could lose up to $386 million in disproportionate share hospital payments — federal subsidies for safety net hospitals that care for a disproportionate share of uninsured patients — between 2017 and 2022 without Medicaid expansion.

“Those states that do not expand Medicaid are still going to experience reductions,” said Larry L. Fitzgerald, UVa Health System’s associate vice president of business development and finance. “The Affordable Care Act is not going to work well in those states.”

Cuts to disproportionate share payments have been pushed back to 2016, but other costs associated with the Affordable Care Act could add up. UVa Health System officials say they are still uncertain about the costs of Well Virginia, the hospital’s new accountable care organization, or ACO.

ACOs are networks of health care providers who share information on patients and provide coordinated care. The organizations will be required to meet certain outcomes and provide preventive care that allows them to avoid unnecessary procedures.

“That’s a really good thing for the most important person in the world — the patient,” Fitzgerald said. “But it does mean our revenues drop.”

Engelhard said the current climate is especially hard on rural hospitals. Apart from the uncertainty surrounding Medicaid expansion, Engelhard said, these hospitals might end up having to take on more “bad” debt, as she calls it, due to the insurance mandate.

“I say ‘bad debt’ because hospitals will experience more of it as folks purchase cheap, bronze-level … plans with high deductibles and then find that patients default on paying their bills because the deductible … has not been met,” she said.

Fitzgerald said the UVa Medical Center doesn’t have a Plan B if Medicaid isn’t expanded, but administrators will focus on what they can control — streamlining operations and improving patient safety.

“We’re interested in the long-term financial viability of the system,” he said.

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