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Hospital officials say refusal will hurt bottom lines

1/14/2014

By JIM McLEAN

By JIM McLEAN

Kansas Health Institute

PARSONS -- For Jodi Schmidt and other hospital administrators throughout Kansas, Medicaid expansion is a critical business issue, not a political one.

Schmidt is chief executive of Labette Health, a 99-bed regional medical center that serves Parsons and several surrounding communities in southeast Kansas. She said the money being lost because of the decision by Gov. Sam Brownback and legislators to not participate in the first year of expansion could mean the difference between the hospital finishing the year in the black or with a deficit.

Schmidt previously was vice president of regional operations at Hays Medical Center.

"Whatever your politics, the reality on the ground for hospitals is that Medicaid expansion is critically important for us," Schmidt said.

Expansion could provide coverage to an estimated 85,000 Kansans who make too much to qualify for the state's existing Medicaid program -- called KanCare -- but too little to be eligible for federal tax credits to help them purchase private coverage on the Healthcare.gov exchange.

A study done last year for the Kansas Hospital Association estimated expanding eligibility to the level called for in the Affordable Care Act would increase federal Medicaid spending in the state by $3 billion between this year and 2020. The federal government has pledged to pay the full cost of covering the expansion population for three years and no less than 90 percent thereafter.

Expansion would provide Labette Health and other hospitals in the association's southeast district an additional $2.7 million a year to share.

The money is needed, Schmidt said, to partially offset anticipated Medicare cuts and looming reductions in federal payments that help hospitals offset the cost of caring for the uninsured.

"We could be seeing an additional $1.7 (million) or $1.8 million in reduced reimbursement next year," Schmidt said. "And so this lack of Medicaid expansion is just one more hit, and there is only so much individual hospitals can bear."

Forty miles away on U.S. Highway 59 from Parsons, the story is much the same in Chanute. There, Dennis Franks, the CEO of the 25-bed Neosho Memorial Regional Medical Center, said the hospital needs the money that would come with Medicaid expansion to offset cuts in other reimbursements.

"When you live on the margin, every dollar counts," Franks said. "So, when I'm taking $700,000 to $1 million a year out of my budget, that means there are services I can no longer provide. What am I going to do to make sure that I keep my doors open and do the things for this community that I need to do?"

Via Christi Regional Medical Center in Wichita might be the Kansas hospital most affected by the state's reluctance to participate in the Medicaid expansion. Last year, it received nearly $13 million in so-called disproportionate share payments to help offset some of the costs of caring for the uninsured. Starting next year, those payments will be steadily reduced along with Medicare reimbursement rates.

That prospect has put Via Christi at the forefront of an effort being mounted by the hospital association to work out a Medicaid expansion compromise with the Brownback administration and Republican legislative leaders.

"We've made some progress with the public and with some legislators in making the case for Medicaid expansion," said Bruce Witt, director of legislative affairs at Via Christi. "We're at the point now where politics has kind of come into play, and that's where the real challenge lies."

Put simply, the challenge is getting Brownback and legislators to decouple the expansion issue from Obamacare, which remains anathema to the Republican Party's base and unpopular with most Kansans, assuming polls are accurate.

The hospital association has hired former U.S. Health and Human Services Secretary Mike Leavitt, a Republican who served in the Bush administration, to try to persuade Kansas Republican leaders to move forward with expansion using a private-sector approach similar to those being developed or implemented in Arkansas, Iowa, Pennsylvania and a handful of other states.

Witt said he is hopeful progress can be made if expansion advocates with Leavitt's help can "engage the business community."

"The Kansas Chamber, for example, has, at least, expressed a willingness to continue discussions about Medicaid expansion, particularly if it's taking a more Kansas-based, private-market solution," Witt said.

Mike O'Neal, chief executive of the Kansas Chamber, confirmed the business organization is willing to participate in such talks.

"I can't predict at the end of the day whether that discussion will bear fruit in a way that the people who want the expansion are going to be satisfied," O'Neal said. "But the discussion of an issue this important is healthy, and it should take place."

Both O'Neal and Senate President Susan Wagle, a Wichita Republican, have said they expect the messy rollout of the ACA will make the expansion discussion more difficult. But both said they would be open to Kansas pursuing a plan like the one Pennsylvania officials are seeking federal approval to implement.

"I'm intrigued by the Pennsylvania plan because it has a work component to it," O'Neal said. "They are actually trying to change the profile of the Medicaid population and incentivize some that are in that population to get into a work situation."

Approximately 45 percent of uninsured Kansans in the Medicaid eligibility gap are employed, according to the Kansas Health Institute, a nonpartisan research and policy organization that includes the editorially independent KHI News Service.

If the reaction of a key member of the Kansas House is any indication, reaching a compromise on Medicaid won't be easy. Rep. David Crum, chairman of the House Health and Human Services Committee, said he doesn't support the alternative approach being proposed by the hospital association.

Crum said plans that propose using federal Medicaid dollars to help low-income persons purchase private coverage "don't really create any significant advantage."

"It's just kind of a way, I guess, to possibly expand Medicaid and make it look like you're not -- like you're shifting it to the free market and so forth," Crum said. "But the bottom line is, it's still basically going to be the same cost over time. I've not seen any magic bullet for a way of expanding Medicaid that's superior to the standard Medicaid expansion."

KHI staff writers Dave Ranney, Phil Cauthon and Mike Shields contributed to this report