Small, rural hospitals, struggling to stay afloat financially, took another blow last week when Gov. Tim Pawlenty turned down the opportunity for Minnesota to get an early start at expanding Medicaid eligibility.
In a letter to Human Services Commissioner Cal Ludeman, the governor cited the state’s costs to enroll early, which he claims would total $430 million over the next three years to obtain $1.4 billion in federal funding.
But DFLers dispute the governor’s numbers. Using figures from the non-partisan fiscal staff, they say the enrollment would cost Minnesota $188 million on top of what it is already spending. House media staff say the difference is that Pawlenty failed to include the savings to the health care access fund, which pays for MinnesotaCare, that early enrollment would produce.
Hospitals, physicians and advocates for the poor had pushed for early enrollment, saying it would create or preserve 22,000 private-sector health care jobs and provide better access to health care for upwards of 100,000 poor Minnesotans.
The Legislature, however, gave the governor the option of opting out of early enrollment after Republicans attacked the program as “Obamacare.”
“That was absolutely silly on the state’s part,” said Al Vogt, administrator at the Cook Hospital. About half a million Minnesotans already receive health care through Medicaid and Wisconsin has provided health insurance for its poorest adults through the Medicaid program for years.
“Gov. Pawlenty may have the good graces of the Republican Party’s central core,” continued Vogt, “but he has lost support from this state.”
The next governor will have another shot at the decision to enroll early without legislative action. DFLer Margaret Anderson Kelliher has said should she win the race for governor, one of her first executive actions would be to pull in the federal money and take up the early enrollment option.
The lack of adequate funding from both federal and state sources has been a thorn to rural hospitals for years.
“In small hospitals, such as Virginia, which has a 60 to 66 percent government pay, meaning Medicare and Medicaid, we get paid less from the government for what we do than what it costs,” said Dr. Wendell Smith, who works for the St. Mary’s Duluth Clinic health system and practices in the Virginia hospital.
Virginia Regional lost about $3 million over the last two years and more than $1 million so far this year.
Hospitals in larger cities like Duluth receive enough non-government patients to make up the losses, said Smith. Hospitals in smaller communities such as Virginia, Ely or Cook can not rely on that safeguard.
“You still have to provide the same quality. You still have to buy the same equipment. You don’t have the economy of scale on the equipment, so your overhead is more and your reimbursements are less,” Smith continued.
Nursing home dilemma
Smith’s concerns have been especially true for hospitals that also operate nursing homes. The state’s reimbursement rates for long-term care fall far short of the actual expenses, adding significantly to losses at small hospitals.
“We’ve lost $1.2 million year to date,” said Ely-Bloomenson Hospital Administrator John Fossum. “I would say at least half of that is the nursing home.”
Vogt said the Cook Nursing Home, which had reduced beds in an effort to cut costs, still loses $800,000 to $900,000 per year. The Cook-Orr Healthcare District has established a long-term care committee to examine ways to further reduce costs or increase revenue to make the nursing home come as close as it can to breaking even.
Some options being considered are the possible creation of a taxing district for the nursing home or selling the home to another provider.
“We don’t want to talk about closure, but we cannot allow the nursing home to bring the hospital under,” said Vogt.
Both Fossum and Vogt say the state has shown no interest in providing more financial support for nursing homes and with a $5 billion to $6 billion budget deficit looming, they don’t expect a significant boost in funding.
“The status quo can’t be maintained,” said Fossum. “I think the state is going to have to take a serious look at how many nursing home beds they think they need and tell everyone else to seek an assisted living option.”
Meanwhile, the recession has hit small hospitals hard as more people either lose health insurance or are saddled with prohibitively high deductibles, discouraging them from seeking medical care or making them unable to pay their bills.
“Our uncompensated care and bad debt have gone through the roof,” said Vogt, who estimates that the hospital’s uncompensated care has at least doubled.
Fossum said he has no hard data to support claims that lack of insurance or higher deductibles are keeping people from seeking medical care, but the anecdotal evidence is compelling.
“For some people, it’s a question of finances,” he said. “Do I make a house payment or do I go to the doctor?”
The Cook Hospital is doing better than many of its peers this year, said Vogt, thanks in part to a good patient volume and a levy it collects in the Cook-Orr Healthcare District. But, he added, the facility still needs to keep a close watch on its finances.
“Cook has always lived on a starvation diet,” said Vogt. “A lot of places are not used to that. But we could just as easily be on the other side of the bubble. At any given moment, hospitals can be in better or worse shape. It’s not that we’re doing anything wiser or better than the others; it’s just that our patient mix this year is helping us. It could be a different story next year.”
Bob Kelleher of Minnesota Public Radio News contributed to this report. You can hear MPR at 101.7 FM in Ely and 92.5 FM on the Iron Range.