Florida Lawmakers straining budgets of children’s hospitals

The following article was published in the Florida Independent on September 26, 2011:

Lawmakers straining budgets of children’s hospitals 

By Ashley Lopez

McClatchy and Kaiser Health News are reporting that recent decisions by Florida lawmakers have leaders of the state’s children’s hospitals worried about their budgets.

McClatchy/Kaiser report:

After years of being largely immune to concerns about costs, children’s hospitals are being buffeted by powerful economic and political forces. Chief among them: State lawmakers are slashing Medicaid payments to children’s hospitals as part of their efforts to close budget gaps. The federal-state health plans account for about half of children’s hospitals’ revenues. Even small cuts, like the 3 percent payment reduction Florida lawmakers enacted this spring, will severely strain budgets, advocates say.

“In past years, children’s hospitals have been held harmless in state budget negotiations,” said Tony Carvalho, president of the Safety Net Hospital Alliance of Florida, which includes children’s hospitals. “This year, with the size of the budget deficit, the mood in the legislature was everybody had to participate.”

In California and Florida, lawmakers are shifting Medicaid populations into more restrictive managed care plans. Hospital officials estimate the moves will cost them millions in lower payments. Cindy Ehnes, president of the California Children’s Hospital Association, said children’s hospitals are suffering “from death by a thousand cuts. This year is no exception, just worse.”

…

At Florida Hospital for Children, regional vice president for government affairs Rich Morrison worries that Medicaid cuts could undercut children’s hospitals’ ability to cover their debts. “That’s the question I have. Can you really sustain your capital infrastructure given what you’re going to get paid by Medicaid?”

Children’s hospitals typically treat high rates of low-income patients, the number of which continues to grow. Coupled with the troubled economy and state cutting spending, these hospitals are falling short. In separate reporting, McClatchy/Kaiser explain that these shortfalls from Medicaid payments fall mostly on privately insured patients:

Some children’s hospitals offset much of their Medicaid losses by charging privately insured patients higher rates – a form of Robin Hood economics in which the well off unknowingly help to pay for the poor. Hospitals for adults also shift costs but not to the same degree.

There’s an enormous impact on the rates paid by private insurers. Seattle Children’s Hospital has raised its prices for commercially insured patients by 7 percent to 9 percent per year to cover Medicaid shortfalls. Even so, it still loses millions on Medicaid. “Cost shifting is an inevitable result of a large government program paying less than its fair share of costs,” spokeswoman Louise Maxwell said.

The Legislature is poised to make steep budget cuts in Florida. Health care policy-makers in the Legislature have pointed to the amount of spending in the state for Medicaid as something they will continue to address as the legislative session nears.