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Safety net hospitals blast governor's proposal -- say it helps for-profits at their expense

Florida hospitals that provide the bulk of the charity care in Florida said Friday that Gov. Rick Scott's plan to draw down federal health care money by relying on them to raise funds will slash revenue to the state's teaching, public and children's hospitals by $302 million and "could put some out of business."

The governor's proposal attempts to address the concerns of the federal government -- which wants federal money to follow the patients who seek health care, instead of following the hospitals that serve them. But, the so-called "safety net" hospitals say, that set-up now rewards for-profit hospitals that often intentionally avoid serving the uninsured.

The Herald/Times first reported that the governor's formula resulted in a net reduction in federal revenues of $214 million to hospitals in Florida, most of it from Jackson Memorial in Miami and North and South Broward hospitals.

Since offering the plan to the federal Center for Medicare and Medicaid Services earlier this week, the governor's office has started telling lawmakers that the governor is willing to spend as much as $200 million in general revenue to offset those cuts and keep hospitals whole, sources have told the Herald/Times.

But the Safety Net Hospitals warn it could have a devastating impact -- for example, cutting revenue to Jackson Memorial in Miami by as much as $84.7 million in the first year and $135 million in the second year.  Download Spreadsheet of Governor's Proposal, 5.29.15

Under the plan, Miami Dade County would put up $320 million of its tax money to draw down $490 million in federal matching funds -- based on the 40/60 formula -- and receive only $100 million in return. 

 “While we appreciated Governor Scott’s recent unsuccessful efforts to retain current levels of LIP funding, we are disappointed to see that his proposal targets safety net hospitals and could literally put some out of business,” said Tony Carvalho, Safety Net Hospitals of Florida president in a statement. “We are urging the governor and his team to re-evaluate the harmful impacts of this proposed redistribution.”

Scott's spokeswoman, Jackie Schutz responded: 

“AHCA has spent days with HHS officials trying to be responsive to the parameters they sent us last week and they have worked through a formula that would keep record hospital profits almost entirely whole,'' she said in a statement. "In fact, only a handful of hospitals would lose money as a result of reducing the funding that their record profit margins show they could not afford.  This group totals only around $60 million in losses. Without HHS finalizing an agreement in principal on this federal healthcare funding for the poor, we will fail to have a budget that keeps Florida’s economy growing.”

Here's their press release:  Download SNHAF press release on Gov's LIP proposal 5.29.15

Governor Rick Scott’s proposal for  Low Income Pool (LIP) funding will slash reimbursements to the state’s leading teaching, public and children’s hospitals by $302 million and could put some out of business, the Safety Net Hospital Alliance of Florida (SNHAF) said Friday. 

At the same time, the proposal increases payments to for-profit hospitals, most of which are headquartered outside Florida, by nearly $100 million, a SNHAF analysis shows.

 “While we appreciated Governor Scott’s recent unsuccessful efforts to retain current levels of LIP funding, we are disappointed to see that his proposal targets safety net hospitals and could literally put some out of business,” said Tony Carvalho, SNHAF’s president. “We are urging the governor and his team to re-evaluate the harmful impacts of this proposed redistribution.”

Even though there is an additional $1.8 billion in recurring state general revenue available this year, the governor is not proposing using any to cover the loss of federal LIP funds. Fortunately, the Florida Senate wants to offset the loss of federal funding with recurring state revenue to address shortfalls in LIP and other program areas. The Senate is taking a fiscally responsible approach by proposing the use of recurring state dollars to cover recurring state needs, Carvalho said.

“In addition to the significant financial damage the governor’s proposal does to safety net hospitals, it creates major financial risk for the state by using a temporary revenue source for recurring operational expenses,” Carvalho said. “Over the next two years, the proposal will force the state to replace nearly $1 billion of evaporating LIP trust fund money that is being phased out. To avoid the crisis that other states have experienced, the Florida Legislature has always been very careful to distinguish between permanent and temporary sources of revenue.”   

Created under former Governor Jeb Bush, in conjunction with the federal government, LIP was designed to protect safety net hospitals as the state embarked on sweeping managed care reforms. Totaling about $2.2 billion this year, the pool – which is comprised mostly of federal and local public funds – provides crucial funding support to hospitals that provide high levels of Medicaid and charity care. LIP funding is essential to these hospitals because base Medicaid rates only reimburse hospitals at about half the actual cost of providing care.  

The SNHAF analysis shows that the governor’s proposal would result in nearly $302 million in cuts to its 14 member hospital systems next fiscal year. The state’s six leading teaching hospitals would collectively see reimbursements cut by nearly $200 million. That includes Jackson Memorial Hospital ($84.7 million); Tampa General Hospital ($32.6 million); UF Health Gainesville ($36 million); UF Health Jacksonville ($37.1 million); Orlando Health ($3.5 million); and Mount Sinai Medical Center ($5.8 million).

Five major public hospital systems would face also cutbacks. They include Broward Health ($30.8 million); Memorial Healthcare System ($28.6 million); Lee Memorial Health System ($12.9 million); Halifax Health ($5.9 million) and Sarasota Memorial Hospital ($1.6 million).

Meanwhile, major children’s hospitals also face the budget ax under Governor Scott’s plan. Two of the state’s top stand-alone children’s hospitals face cuts, with All Children’s Hospital slated to lose $12.9 million and Nicklaus  Children’s Hospital facing cuts of $8.3 million, while the Panhandle’s leading perinatal intensive care center, Sacred Heart Health System, would lose nearly $620,000.

One example of how the proposed cuts could seriously harm safety net hospitals is UF Health Jacksonville, which serves an inner city population in which 52 percent of its patients are either covered by Medicaid or receive unreimbursed charity care. The CEO of UF Health Jacksonville recently stated that the system operates at the financial “break even” point, with an average of about 50 days cash on hand. The loss of $37.1 million in LIP funding next year under the proposal could literally force it to shut down without an alternative funding source.

The governor’s proposal would take all of the LIP funding available next year – about $1 billion in federal funding and $900 million in local public funds that communities send to Tallahassee to draw down matching federal dollars – and apply that money to hospital base rates, regardless of the levels of charity and Medicaid care the hospital provides. 

The proposal also distributes $200 million of the funding as a one-time payment to some hospitals that provide high levels of charity and Medicaid care, but that funding does little to offset such huge cuts.

When the one-time payment disappears in 2016-17, it further exacerbates the negative impact of the cuts under the governor’s proposal. In the second year, the total cuts to safety net hospitals grow to $390.7 million, while the increase in payments to for-profit hospitals increases to nearly $128.8 million.

While Florida’s not-for-profit safety net hospitals reinvest any earnings into meeting the current and future healthcare needs of their local communities, for-profit hospitals typically send their profits to corporate headquarters outside of the state, where they are distributed to shareholders.

Even with the state incentives that public hospitals and local communities receive for contributing their local public funds to help pay for the state’s share of the Medicaid program, public hospitals face major cuts. The proposal amplifies a troubling and growing trend in which large urban communities – especially Miami-Dade and Broward Counties – are sending hundreds of millions of dollars of their local public funds to Tallahassee to help draw down additional federal Medicaid matching dollars, only to see those funds diverted by the state to other regions of Florida to pay hospitals for Medicaid care they are providing.

“Public hospitals that play an essential role in helping the state to pay for its Medicaid program by providing local public funds to Tallahassee are facing enormous cuts under this proposal, while for-profit hospitals and communities that do not raise any local public funds to help provide care to the poor and uninsured are reaping the benefits,” Carvalho said.

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