LEXINGTON, Ky. – While Kentucky has gained national prominence as the only Southern state to fully embrace Obamacare, its hospitals say the law has left them facing billions of dollars in cuts and forced them to lay off staff, shut down services and worry for their financial health, and in some cases, survival.
The Kentucky Hospital Association outlined its concerns in a report released Friday called "Code Blue," saying payment cuts to hospitals are expected to reach nearly $7 billion through 2024. "Kentucky hospitals will lose more money under the Affordable Care Act than they gain in revenue from expanded coverage," it said, experiencing a net loss of $1 billion by 2020.
"This report provides the real picture of what our hospitals are facing," association President Mike Rust said during a news conference at the Lexington Convention Center, where the group was holding its annual convention. While the Medicaid expansion has given many residents health coverage that has brought new money into hospitals, "the rest of the story is the cuts."
Hospitals are suffering a net loss, officials said, partly because about three-quarters of newly insured Kentuckians signed up for Medicaid, which reimburses hospitals less than it costs to treat patients. Nationally, the Congressional Budget Office projected half of newly insured patients would have private insurance. But Kentucky is a poor state, so most people who signed up for Obamacare have qualified for expanded Medicaid, which covers those earning less than 138 percent of the federal poverty level, or about $33,000 for a family of four.
Meanwhile, state health officials, and Gov. Steve Beshear, continue to tout the benefits of the ACA — including the state's decision to expand Medicaid. More than half a million Kentuckians got coverage through the state's insurance exchange, called kynect.
A February report prepared for the state said Kentucky hospitals had received $506 million more in Medicaid reimbursement since January 2014 because of the Medicaid expansion. That study also said the Medicaid expansion generated more than 12,000 new jobs in health care and related fields.
Beshear said in a statement Friday that the new Medicaid payments have blunted the impact of other financial pressures on hospitals. "We are very aware of the challenges that medical providers face in Kentucky," the governor said. "Rather than trying to turn back the clock and return to old business practices, we are working directly with providers to help them develop new strategies for better, more efficient, quality health care delivery."
Hospital officials say they're glad so many Kentuckians have gotten coverage through the ACA. A Gallup poll shows the number of uninsured Kentuckians dropped from 20.4 percent in 2013 to 11.9 percent by mid-2014, the second-biggest decline in the nation, after Arkansas.
But the association report says: "While Kentuckians should be proud of this achievement, it is also important to understand another part of the story: The government's success in expanding health coverage has come at a significant cost to Kentucky hospitals."
More financial stress
Hospital officials acknowledged that some of the issues, such as low reimbursements from government insurance, existed before health reform, but say they have only gotten worse since it went into effect.
"There's no question it's been accelerated under the ACA," said Dennis Johnson, president and CEO of Hardin Memorial Health in Elizabethtown, Ky.
The association's report says Obamacare has cut the number of uninsured Kentuckians almost in half but also cuts Medicaid and Medicare payments to hospitals by $4.6 billion from 2010 to 2024 to help pay for this expanded coverage. Medicaid now pays 82 percent of the actual cost of treating patients, while Medicare pays 86 percent.
The ACA also calls for reducing Medicare payments to hospitals that re-admit patients within 30 days at higher-than-expected rates and those with increases in their rates of hospital-acquired conditions. And it brings substantial cuts in "disproportionate share hospital" payments for uncompensated care. At $4.6 billion, these comprise the largest share of total federal payment cuts through 2024 of $6.98 billion to Kentucky hospitals. (These also include bad debt cuts, legislative and regulatory coding cuts and across-the-board federal cuts called sequestration.)
The changing way patients get coverage under the ACA also hurts hospitals, the report says. About one in five hospital patients who recently signed up for Medicaid previously had private health insurance, which reimbursed at higher rates, officials said. Meanwhile, many patients with job-based private insurance, and plans purchased on the state exchange, face high deductibles and co-pays. When they can't pay their bills, a hospital's bad debt grows. The association's report says this pushes up uncompensated care, even as charity care to the uninsured drops.
Altogether, the report says, rising bad debt and low government reimbursements counter any gains from increased coverage. Even though hospitals are getting $506 million more in Medicaid payments, officials said, it costs $617 million to provide care to those patients.
Responding to pressures
Complicating matters, the report says hospitals continue to face problems with Medicaid managed care organizations, or MCOs, such as slow payments, reduced reimbursements and denials of services.
"In my little humble opinion, they're only managing money. They're not managing care," said Charles Lovell Jr., CEO of Caldwell Medical Center in Princeton, Ky.
Mark B. Carter, CEO of the Louisville-based MCO Passport Health Plan, said state contracts drive what they pay to providers. He acknowledged payments from MCOs used to be slower but said they've gotten better in recent years. And he said his company only wants to deny claims that are inappropriate or fraudulent.
Meanwhile, hospitals are making significant cuts. More than 65 percent of 109 hospitals responding to a September Kentucky Hospital Association survey reported they reduced staff, cutting more than 7,700 positions through layoffs, attrition and abolishing positions.
"Some Kentucky hospitals have had no choice but to reduce staff to keep their doors open," said Lovell, adding that this is the third year his employees haven't gotten raises.
More than four in 10 hospitals reported service reductions, such as closing a sleep lab, a wound care clinic and a surgery department. And two Kentucky hospitals have recently reported they've had to close their doors for good. Rural hospitals have suffered most. A recent state audit showed that 68 percent of Kentucky's rural hospitals scored below the national average on a measure of financial strength looking at such figures as profit margin and cash on hand.
The hospital group proposes some solutions, such as standardizing policies and procedures across the various Medicaid managed care organizations and allowing health care providers to appeal denials that resulted in no payments. Rust said his organization also plans to continue measuring the financial health of hospitals and that "Code Blue" is going to be an ongoing project.
Beshear said he plans to continue working with hospitals, and a federal grant has allowed the state to hold meetings to share the best national practices and design strategies. "We're proud of the progress Kentucky is making in health care and will continue to support our medical providers as they navigate the changing health landscape."
http://www.courier-journal.com/story/news/2015/05/08/ky-hospitals-obamacare-forcing-cuts-layoffs/26990637/
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