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Hospitals are places where people go to heal, but hospitals in North Carolina will be suffering as well from federal reimbursement losses and other cuts prompted by the Affordable Care Act.
N.C. Gov. Pat McCrory signed Senate Bill 4 on March 6, rejecting a state-based insurance exchange and blocking Medicaid expansion in North Carolina. While North Carolinians will still have access to the insurance exchange through the federal government, the expansion would have provided Medicaid benefits to an additional 110,000 people in Western North Carolina, according to the North Carolina Institute of Medicine.
A ruling by the U.S. Supreme Court allows states to opt out of the portion of the Affordable Care Act that expands Medicaid coverage. Under the new health-care law, the federal government will give a state more money if it covers everyone who is not on Medicare and who has an income below 138 percent of the federal poverty level.
The reimbursements, known as disproportionate share dollars, are due to be decreased, and eventually disappear altogether, as the Affordable Care Act is enacted.
Losing both the additional revenue from patients who would have qualified for Medicaid and the federal reimbursements will likely have a devastating impact on smaller hospitals which do not have a profitable payor mix like larger hospitals, according to the North Carolina Hospital Association.
About a third of North Carolina’s hospitals operate in the red, with another third operating with profit margins between zero and 5 percent, said Don Dalton, spokesman for the N.C. Hospital Association.
By not expanding Medicaid benefits and losing the reimbursements, hospitals will suffer even greater financial losses, he said.
“We understand the state leaders’ desire to try to fix some problems with the Medicaid program and we are working very closely with the N.C. Department of Health and Human Services to find ways to make Medicaid costs more effective,” Dalton said. “Our hope is that once those issues have been resolved, state leaders will reconsider expanding Medicaid.”
“We have long been concerned that any movement downward will adversely affect all North Carolina hospitals,” he said. While smaller rural hospitals typically have a higher payor mix of Medicare and Medicaid cases, the actual number of patients with those benefits are greater for larger hospitals, he added.
Hospitals lose money on three out of four hospital patients, Dalton said. Those three either have no insurance or have Medicaid or Medicare, and none pay the full cost of their care, he said.
Statewide, 46 percent of hospitals’ business is Medicare, of which 91 cents of every $1 of actual costs are received, Dalton said. Another 16 percent comes from Medicaid payments, of which 73 cents on every $1 is received. Twenty-seven percent comes from private insurers and 9 percent comes from uninsured individuals, of which only 32 cents for every $1 is collected from hospitals, he said.
In 2011, the last year for which complete information is available from the N.C. Hospital Association, hospitals statewide provided $902 million in charity care and wrote off another $710 million as bad debt.
“We estimate that about 60 percent of what was written off as bad debt could have been designated as charity care if those individuals would have given hospitals the information needed to declare it as charity care,” Dalton said.
Hospitals will not only be losing the federal reimbursements related to the decision not to expand Medicaid coverage this year, but will be losing $5.6 billion in Medicare reimbursements over the next 10 years, added to the $1.2 billion in other Medicare cuts already enacted, Dalton said.
For Mission Health, the largest hospital system in Western North Carolina, the decision not to expand Medicaid adds an unexpected and very challenging burden to Mission’s effort to provide care to those who need it regardless of their ability to pay, said Ronald A. Paulus, president and CEO of Mission Health.
“We understand that the full scope of the Affordable Care Act is incredibly large and very complicated,” Paulus said. “Whatever one’s feelings, the simple fact is that Mission Health will now experience reimbursement cuts totaling more than $310 million over the next 10 years, and one of the few offsetting benefits was supposed to have been Medicaid expansion.”
Hospitals are obligated to provide health care to everyone, even those who are not able to pay, he said.
“In order to continue to provide that charity care and absorb the very large reimbursement reductions driven by the Affordable Care Act, hospitals will have no option but to shift the cost to employers, putting strain on the critical businesses that drive our economy,” Paulus said.
About 72 percent of Mission’s patients are covered by Medicare or Medicaid or have no insurance at all. In 2012, Mission Health provided more than $37 million in unreimbursed costs for the treatment of Medicare and Medicaid patients and provided almost $76 million to treat charity-care patients and cover unreimbursed medical costs and other community-benefit investments. Last year, Mission Health also provided almost $32 million in free care for uncollectible accounts.
MedWest Health System, which includes three rural hospitals in Haywood, Jackson and Swain counties, serves a large number of elderly and low-income people.
Janie Sinacore-Jaberg, president and CEO of MedWest-Haywood, said the Haywood County hospital serves as a “safety net,” providing millions of dollars in care to those who cannot pay.
“As the federal government examines health-care delivery, the expansion of Medicaid is a way to provide coverage to more people and serves as a mechanism to assist in paying for those services,” Sinacore-Jaberg said in an email to Carolina Public Press. “In addition, all hospitals are facing cuts to Medicare reimbursements and we have to improve efficiencies and at the same time continue to enhance our quality of care.”
All hospitals in the state will look for ways to cut their costs, Dalton said, and some may eliminate money-losing services that patients had come to expect. In an effort to recoup the losses, hospitals also could levy higher fees on the patients who have private insurance, he said.