New federal budget yields possible $30M windfall for S.C. hospitals

  • Posted: Tuesday, December 31, 2013 9:00 p.m., Updated: Tuesday, December 31, 2013 9:35 p.m.
Keck

The bipartisan federal budget passed by Congress and signed by President Barack Obama last week makes South Carolina hospitals eligible for an extra $30 million this year, the state Medicaid agency estimates.

The windfall can only be used to help reimburse hospitals for more of the uncompensated care they delivered to poor, uninsured patients, but S.C. Medicaid Director Tony Keck, whose office distributes this money, isn't convinced that the hospitals need it.

"We don't have to spend that much if we don't want to," Keck said. "There's a question about what do we do."

The 2010 Patient Protection and Affordable Care Act established a series of reductions to Medicaid's Disproportionate Share Hospital payment program, starting with a 5 percent cut this year. The new federal budget now delays these cuts until 2016.

The DSH program, commonly pronounced "dish," uses a combination of state and federal funds to pay back hospitals for some - but not all - of the costs of health care administered to the poorest patients without health insurance.

"Essentially, they had a schedule of (DSH) reductions with the idea being as the number of uninsured goes down, hospitals wouldn't need as much of this money," Keck said. The new delay is a "tacit acknowledgement," he said, that the Affordable Care Act is "not going to change as much as they thought in terms of the number of uninsured."

More than 700,000 South Carolinians have no health insurance. In mid-December, the federal government estimated only a few thousand of these residents had been able to successfully sign up for a plan through HealthCare.gov since the website launched Oct. 1. The federal government has not yet released state-specific enrollment data for December, although initial projections indicate the numbers are likely improving because the website is easier to use now than it was three months ago.

Keck said the DSH reduction delay in the new federal budget means South Carolina could spend as much as $494 million to reimburse hospitals for uncompensated care this fiscal year, instead of $464 million - the amount his office originally projected to spend before the 2014 DSH reduction was canceled.

"That leaves a lot more money in the system. We haven't budgeted for that," he said. "We weren't planning on spending it this year and so if you don't spend it, you save the taxpayers money."

It wouldn't be the first time Keck has turned down federal health care dollars that he thinks South Carolina doesn't need. The General Assembly, at Keck and Gov. Nikki Haley's urging, is rejecting an opportunity to expand Medicaid eligibility under the Affordable Care Act starting this year, even though the federal government has offered South Carolina an estimated $4.1 billion through 2017 to accomplish that.

Half of all states aren't expanding Medicaid either. Hospitals in these nonexpansion states faced a significant financial hit if the federal government had proceeded with the DSH reductions, said Jason Alexander, CEO of East Cooper Medical Center.

"The delay in DSH payment (reductions) gives us a little bit more time to ramp up ways that we're going to insure the previously uninsured," Alexander said. "This is a temporary solution to give aspects of the Affordable Care Act a chance to take root."

East Cooper Medical Center will receive about $2.2 million in DSH payments this fiscal year, significantly less than other hospitals in the state that treat more indigent patients. Medical University Hospital is projected to receive more than any other hospital in South Carolina - an estimated $46.7 million.

Keck said if the agency decides to use the extra $30 million to increase these payments, he won't give hospitals more money carte blanche. "If we're going to spend more money, we need to get more results," he said.

About 10 percent of South Carolina's original $464 million DSH budget is already tied to a results-oriented program.

Hospitals were required to submit "Healthy Outcomes" plans to the state Medicaid agency this fall to preserve 100 percent of their DSH allocation this year. Each plan addressed ways to target emergency room "frequent fliers" and redirect these patients to more efficient, less costly health care resources.

Even if the Medicaid agency chooses to spend more DSH money this year, reductions are coming down the pipeline.

"It is important to note that this is a delay, not an elimination of reimbursement cuts," said Rozalynn Goodwin, vice president for community engagement at the South Carolina Hospital Association. "The reductions for 2016 will now be double what was originally proposed."

The hospital association is still evaluating the financial impact these changes will have on South Carolina hospitals, she said.

Reach Lauren Sausser at 937-5598.

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