Devil in details? Hospitals move to scuttle House budget

CONCORD — In preparing the 2014-2015 state budget, Governor Maggie Hassan and Democratic lawmakers set out to restore payments for uncompensated care to the state's largest hospitals, whose funding was cut and taxes were raised in the last biennium, but hospital officials claim their efforts will founder on inflated revenue estimates.
Yesterday, on the eve of the budget vote in the House of Representatives, Steve Ahnen president of the New Hampshire Hospital Association (NHHA), wrote to lawmakers urging them to scuttle the budget, which he warned would adversely affect "the patients and communities we serve" because some of the projected revenue will no materialize and therefore never make its way back to New Hampshire hospitals.
Henry Lipman, senior vice-president for Financial Strategy and External Relations at LRGHealthcare, said that the largest hospitals have gone without payments for uncompensated care for the past two years and expects they will go empty-handed again during the next two years if the House budget prevails.
Funding for uncompensated care, which amounts statewide to approximately $365-million a year, hinges on revenues from the Medicaid Enhancement Tax (MET) which is levied on hospitals' net income from patient services at a rate of 5.5-percent. The proceeds from the MET fund are used for uncompensated care payments and reimbursements to providers while a third share is applied to the state general fund as unrestricted revenue. The revenue from the tax applied to uncompensated care and provider payments — but not the share deposited in the general fund — is matched dollar for dollar by the federal government.
Against the advice of the NHHA and others, the governor and House Finance Committee projected revenues from the MET to increase from $194.4-million in 2013 to $231.9-million in 2014, a jump of 19-percent, and climb another 8-percent to $250.4-million in 2015. Calling the estimates "overly aggressive," Ahnen said they assumed that net revenues of hospitals would rise by a third.
Proceeds from the MET are distributed according to priorities established by the Legislature. In 2012 and 2013, payments to physicians and providers topped the list, followed by uncompensated care payments to "critical access" or rural hospitals, the state general fund and finally uncompensated care payments to the largest hospitals, including Lakes Region General Hospital in Laconia. There are 13 "critical access" hospitals, among them Franklin Regional Hospital in Franklin, Spear Memorial Hospital in Plymouth and Huggins Hospital in Wolfeboro, serving the Lakes Region.
The House Finance Committee reordered the priorities for 2014 and 2015. Provider payments remain the highest priority, with appropriations of $81.7-million in 2014 and $94.3-million in 2015, which would be matched by federal funds.
But, the committee jumped the general fund ahead of the hospitals, appropriating $72.2-million in 2014 and $73.7-million in 2015, or $24.3-million more than the governor recommended.
Uncompensated care payments to hospitals are the lowest priority. Both rural hospitals, which received 100 cents on the dollar in the previous biennium, and the larger hospitals would be paid 80-percent of costs. The committee appropriated $78-million in 2014 and $82.4-million in 2015, $36.9 less than the governor recommended. Like the appropriations for provider payments, those for uncompensated will be doubled by federal matching funds.
The Finance Committee projected that the rural hospitals will receive $47.1-million in 2014 and $50.9-million in 2015 while the larger hospitals get $97.9-million in 2014 and $111-million in 2015. However, the NHHA believes that the the proceeds from the MET are over-estimated by $50-million in 2014 and $67-million in 2015, or a total of $117 for the biennium. If the reduced revenues are distributed in the order of priority set by the committee, less than $35-million would remain for uncompensated care payments to the largest hospitals, $28-million in 2014 and $6.7-million in 2015.
"Cuts of this magnitude," Ahnen told lawmakers, "will only serve to continue the practice of increasing health insurance premiums to businesses and individuals, and set up the potential for further reductions in health care services that our patients and communities depend on."
Lipman likens the funding formula to a waterfall, which he fears will run dry before it reaches the largest hospitals. Without sufficient funds to defray a significant portion of the cost of uncompensated care, a share of those costs will be shifted to insured patients, increasing health insurance premiums to both employers and individuals. At the same time, he noted that since the hospitals fund uncompensated care payments with their MET receipts, "we are effectively paying the state to care for our Medicaid patients."