Budget Realities Facing Community Hospital
Samantha Swindler, Tillamook Headlight Herald
May 24, 2011
Under Gov. John Kitzhaber's proposed state budget, Oregon's health care providers will face a 19 percent cut in Medicaid reimbursements starting July 1, and an expected 34 percent cut in the second year of the state's biennium.
Those cuts could mean job losses at Tillamook County General Hospital.
Melody Ayers, the hospital's development and marketing director, said the budget cuts would translate into a total revenue loss of $2.567 million-$4.355 million for the hospital over the next two years.
"Cuts of this magnitude are unprecedented in Oregon and will leave us no choice but to make significant cuts in service areas," Ayers wrote to the Headlight Herald.
"We are one of the largest employers in our community and despite our focus on creating and maintaining family-wage jobs, these cuts will impact jobs at our hospital."
The hospital has not yet made firm plans to handle the funding loss. As for job cuts, Ayers said, "Anyone with past experience (with budgeting) knows better than to rule it out."
Hospital CEO Larry Davy said job cuts would be a "last resort" and that there currently are no layoff plans in place. He said he was hoping to see cost savings from attrition rather than layoffs.
The hospital and its associated Tillamook Medical Group clinics have about 360 employees.
Davy said Medicaid payments make up about 15 percent of the hospital's revenue. He said the funding cuts could represent about a 5 percent revenue loss for the hospital.
That may not sound like much, but the nonprofit generally retains no more than a 1 or 2 percent profit margin - money that is reinvested into the hospital for equipment purchases and other projects. The governor's proposed budget would put the hospital's finances in the red.
The proposed cuts to Medicaid are not to be confused with Medicare, a federally funded program that serves primarily those 65 and older. About 47 percent of Tillamook County General Hospital's patients are on Medicare.
Medicaid, which serves the poor, is operated by the state with matching federal dollars. In Oregon, the program is called the Oregon Health Plan. It serves more than 380,000 people statewide.
Currently, most Medicaid providers are reimbursed by the state at a rate of 70 cents per dollar of cost. But rural hospitals, which have traditionally higher costs for service, have been reimbursed at a higher rate.
Tillamook County General Hospital, because it has fewer than 50 beds and is more than 30 miles from another hospital, is classified as a Type A hospital and funded at a dollar-for-dollar reimbursement level. Type B hospitals (rural hospitals fewer than 30 miles from another hospital) also receive higher reimbursements.
An even bigger concern for Tillamook is the governor's proposal to end the Type A and B status reimbursements.
Andy Van Pelt, communications director for the Oregon Association of Hospitals and Healthcare Systems, said his organization is fighting for those higher funding levels to be retained for rural hospitals.
The combination of losing its 100 percent reimbursement status, along with the base rate cuts, could mean a 38 percent to 52 percent cut in Medicaid reimbursement to Tillamook County General Hospital.
"We were led to believe that the As and Bs would be exempted from this," Davy said. "We didn't find out until last Wednesday [May 11] that the governor had proposed in his budget cutting As and Bs also."
Van Pelt said the reductions in Medicaid are "not an equal distribution of cuts" in the state budget.
Left with a projected $735 million deficit for the upcoming biennium, Van Pelt said the governor's proposal anticipates 84 percent of that savings - some $698 million - will come from the Oregon Health Authority. The vast majority of that will come from cuts in Medicaid reimbursements to physicians, hospitals, clinics and pharmacies, which the health authority oversees.
Because the Medicaid program relies on matching federal dollars, a total of about $1.8 billion will end up being removed from the program.
The Rinehart Clinic in Wheeler and the Tillamook County Health Department are federally qualified health centers and would be exempt from any Medicaid cuts under the governor's proposal.
The Legislature is scheduled to vote on the budget in the next two weeks. Van Pelt said his organization isn't offering a counterproposal, saying it would be "presumptuous to tell the legislators" what programs they should cut instead.
But Ayers hopes to see the proposed Medicaid cuts reduced by half.
"We have to do our part (to cut the state's budget deficit). We're fully cognizant of that," Ayers said. "If it was more down to the 7 to 10 percent range, it would be a little more doable. But 20 percent? It's a bit much."
"It's really fluid in Salem now. Every day you're hearing different movement," Davy said.
"The governor is standing pretty firm on his position."
Link to the story: http://www.tillamookheadlightherald.com
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