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Mississippi hospitals alone losing $648 million

Communities dread BBA’s economic impact

When Congress enacted the Balanced Budget Act of 1997, estimated Medicare spending reductions were projected to be $103 billion in net Medicare spending reductions over a five-year period, with hospital reimbursements to be cut $44 billion. Revised estimates from the Congressional Budget Office show spending cuts since the 1997 BBA now total $191.5 billion, 86% more than originally projected.

“If cuts implemented in Medicare reimbursements to hospitals stand, we will have a number of hospitals that will not be able to survive and will close in Mississippi,” said Dr. Ed Thompson, health officer for the state health department.

The estimated impact of BBA reductions on Mississippi hospitals is $648 million, according to to a study prepared by The Lewin Group and Horne CPA Group for the American Hospital Association.

“Aggregate reductions under the (BBA) total over $200 billion in total Medicare reductions over five years, including $73 billion in reductions from direct fee-for-service payments for inpatient and outpatient hospital services over the same period,” the report read.

The $648 million breakdown, from 1998 to 2002, is estimated as follows: $375 million for inpatient payments, $123 million for outpatient payments, $131 million to home health agency interim payment and prospective payment system and $19 million for prospective payment system exempt hospitals and units.

The BBA will cost Forrest General Hospital in Hattiesburg more than $42 million over the five-year period, said FGH president Bill Oliver.

“These cuts are real and will cause a hardship for people in south Mississippi and throughout the country,” Oliver said. “We have to make it clear to Washington that these drastic reductions in Medicare spending, coming on top of an unprecedented squeeze from private insurance plans and HMOs, will hinder patients’ access to services.”

FGH recently joined with national, state and regional associations and health care organizations to launch a grass-roots campaign through Hospital Caregivers for BBA Relief to urge Congress to immediately restore Medicare funding.

“The hospital is doing everything possible…short of dropping services…to lower operating costs while it waits on Congress to respond,” said Allen Meadows, vice president of business development at FGH. “As a locally-owned, community hospital, discontinuing services will always be our last response.”

The Hattiesburg-area economy will suffer an annual $73-million loss once Medicare cuts to FGH are fully implemented, according to Dr. Joan Exline, assistant professor of health policy and administration for the University of Southern Mississippi’s Center for Community Health.

“Individual earnings will decline, as well as economic output from construction and supply expenditures,” said Exline, also a fellow at the American College of Healthcare Executives. “For every dollar cut in funding to Forrest General, nearly $2 are taken away from the local economy.”

Primarily as a result of the BBA, health care providers are beginning to go through cycles of expansions and contractions, said Kent Strum, a health care consultant, owner of Medical Staffing Services and former CEO of Baptist Health System in Jackson.

“The only concern I have is that the more consolidation there is upward, the less control and autonomy there is locally,” Strum said. “I don’t think that’s good.”

Julie Grantham, marketing director for the Mississippi division of HMA and Central Mississippi Medical Center, said all hospitals in the Florida-based, investor-owned health care system “are reeling from the anticipated effects of the BBA.”

“Our CFO estimates the impact of the BBA will be $25 million over the five-year implementation of the act for the Central Mississippi Medical Center’s main and north hospitals,” Grantham said. “We’re acutely aware of the impact.”

In Mississippi’s 84 rural hospitals, which house 7,837 licensed beds, patients are predominantly on Medicare, Medicaid or are uninsured. The estimated impact on Mississippi’s rural hospitals over the five-year period is $293 million.

Last month, the Madison County Board of Supervisors agreed to guarantee a $2-million credit line to keep Madison County Hospital open. By contrast, the Stone County Board of Supervisors began foreclosure proceedings against the Wiggins Hospital, owned by Nashville-based NetCare. Unless county supervisors or NetCare takes action, the county-owned hospital will close Oct. 29. Last week, the Wiggins Hospital began reducing services at the 50-bed facility, said Nicholas N. Owens, spokesman for NetCare Health Systems, a private health care company based in Nashville.

“Primarily as a result of the BBA, NetCare is selling four of its 14 hospitals,” Owens said. “The sale is due to a corporate strategy to refocus resources to NetCare’s core operations, which are in larger health care markets.”

The ripple effect of the BBA has been, and continues to be, profound, said Tim Thomas, administrator for Newton Regional Hospital in Newton.

“Much of the BBA relates to specific-type programs, such as home health and skilled nursing,” Thomas said. “But the BBA has a much broader impact on rural hospitals depending on the services they provide.”

Thompson said more hospital closures are expected.

“Many rural hospitals were struggling even with Medicare reimbursement rates that were prevalent prior to the BBA cuts,” Thompson said. “Cuts from the BBA will push them to the point that we’ll have to examine what we might need to do in our state health plan to address any gaps that may appear.”

Robert Pugh, executive director of the Mississippi Primary Health Care Association, said that, as a result, the demand for community health centers would increase as rural hospitals struggle to serve patients.

“Community health centers will not be able to adequately serve communities,” Pugh said.

Jimmy Blessitt, administrator for South Sunflower County Hospital in Indianola, said there is not enough commercial insurance business in the smaller communities to make up the losses.

Owens said some rural hospitals are opting to merge with larger health care systems because of the cutbacks.

“As well as reducing costs, larger systems can provide capital, sometimes millions of dollars, to upgrade facilities, to add specialties and services to hospitals to stay competitive in the marketplace,” he said.

Contact MBJ contributing writer Lynne Wilbanks Jeter at lwjeter@yahoo.com or mbj@msbusiness.com.

About Lynne W. Jeter

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