PAR report on charity hospital partnerships notes fiscal uncertainties

By Steve Spires

If you were too filled with holiday mirth to check the morning papers  –  especially the Saturday before Christmas — you may have missed the fact that the venerable Public Affairs Research Council released a detailed analysis of the privatization of Louisiana’s charity hospitals.

But the 45-page report deserves a close reading, and not just because it echoes many of the concerns raised by LBP and others in the past year. While the jury is still out on whether the partnerships will improve quality and control costs, as Gov. Bobby Jindal touts, the report makes it clear that the deals lack sustainable long-term funding.

This, in turn, could lead to cuts in care, unless the Legislature is willing to make up the difference with an infusion of state dollars.

Some key takeaways from the report:

Planned DSH cuts
  • Federal dollars for uninsured care are going to be reduced.  Federal “disproportionate share” (or “DSH”) dollars — which finance care for the uninsured — provide a majority of funding for the new charity partnerships. But federal support for the DSH program is set to be cut in half by the end of the decade. While the cuts in the first few years are modest, this could shift hundreds of millions of dollars in expenses from the federal government to state taxpayers. PAR says the cuts could start to have a big impact as soon as 2017.
  • The state has a limited ability to use other federal funding means like Medicaid “upper payment limit” supplemental payments. Increasingly over the last few years, Louisiana has relied on the Medicaid “upper payment limit” financing mechanism that basically allows the state to make supplemental payments to hospitals on top of what they are regularly reimbursed for seeing Medicaid patients. However, the state does not have the ability to make unlimited payments — there is an “upper limit” in federal law, hence the name — and some federal government watchdog agencies have encouraged Congress for years to tighten up the program. UPL financing is a significant piece of funding for the partnerships, yet PAR says UPL is also “not an assured revenue source over time.”
  • “Advance lease payments” used to fill prior budget gaps was essentially money borrowed from the future. According to the Legislative Fiscal Office, the private partners collectively made more than $270 million in advanced lease payments in FY2013, for which they received credits against future rent payments. The lease payments are a key source of state revenue that help fund the partnerships, so this will create holes in the hospital budget in future years that will have to be filled with other revenues, or else services will have to be cut.

Perhaps most importantly, PAR notes that the partnerships mean Louisiana is doubling-down on the segregated safety-net model of charity care—with hospital-based health care for the uninsured and a more comprehensive system for everyone else—instead of moving toward a coverage-based model where money follows the patient. Individual coverage would increase access and choice while putting a greater focus on preventive and primary care.

Expanding individual coverage would also be a better deal for the state budget. The Jindal administration’s partnerships are being funded with 60 percent federal money and 40 percent state money, while a coverage expansion under the Affordable Care Act would be funded with 100 percent federal money for three years and never less than 90 percent after that.

The cruel irony is that without a coverage expansion, not only will many of Louisiana’s citizens remain uninsured, but the very hospitals that they must rely on for safety-net care would be put at increasing financial risk.

The solution is obvious: Louisiana needs to move ahead and expand coverage, which would not only increase access and choice for hundreds of thousands of the working poor, but would bring nearly $16 billion into the state economy over a decade, create jobs and ensure the financial viability of our hospitals and other health care providers.

They include details about safety-net programs like Medicaid, tax credits for low-income workers and educational scholarships and help promote a better understanding of how safety-net programs affect different communities across our state.
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