From the outside looking in, it would seem now would not be the best time for the University of Mississippi Medical Center — state’s largest hospital operation — to be taking on $37.4 million in new debt carried by Grenada Lakes Medical Center.
In a year or so, Mississippi hospitals could be looking at having to close budget gaps caused by the loss of more than $200 million a year in federal payments for treating uninsured patients — a consequence of the state rejecting Medicaid expansion under the Affordable Care Act. In addition, they will become the health-care option for the 300,000 or so working poor left uninsured by the state’s refusal to expand Medicaid to include them.
The University of Mississippi Medical Center has received approximately $55 million annually in federal Disproportionate Share Hospital, or DSH, payments in recent years.
So why is UMMC eager to take over the tens of millions in debt on the books at Grenada Lakes?
The potential for new revenues for one and the enhancement Grenada Lakes offers the academic medical center’s education efforts for another, said Jack Mazurak, UMMC’s assistant communications director.
But at the forefront, he said, is the need to fulfill the medical center’s public health mission.
“No matter what happens, Mississippians are still going to need health care, and somebody has to provide it,” Mazurak said after UMMC’s announcement of a 20-year lease of the 56-bed Grenada Lakes Medical Center with an option for 10-year renewals up to 50 years .
Under the lease agreement with the Grenada County Board of Supervisors, UMMC would pay the county about $1.8 million annually to retire the debt and plans to convert the debt from a variable interest rate to a fixed rate.
Future capital improvement, maintenance, insurance and utilities will also be UMMC’s responsibility, the Associated Press reported.
The AP also reported that UMMC will contribute $10 million to $12 million in working capital t the start of the lease, recouping the money from patient revenues.
Beyond fulfilling its public health care obligation, taking over Grenada Lakes helps to further the medical center’s education mission both at graduate and under-graduate levels, according to Mazurak.
Dr. James E. Keeton, UMMC vice chancellor for health affairs and dean of the School of Medicine, said in a press statement that the university will rotate some of its students and residents through GLMC.
“Education is a big part of what we do. We need more teaching venues so we can continue training more health professionals for Mississippi. Grenada brings that important element to the table,” Keeton said.
Meanwhile, despite the fiscal uncertainties for the state’s hospital industry created by Obamacare, Mazurak said UMMC is not anticipating Grenada Lakes will become a financial drain on a $1.4-billion hospital operation that ended last fiscal year with a $4.5-million surplus.
While minuscule to the overall budget, the $4.5 million in the plus column represents “a good start” on strategy UMMC has developed to control its costs, he said.
One leg of the strategy is to squeeze savings from everything from “floor wax to heart catheters,” Mazurak added, while putting more attention to keeping patients healthy and less prone to developing more serious – and costly – ailments.
More attention to marketing UMMC’s services to insured patients is another, he said.
And more recently, the cost consciousness has led UMMC to wrangle reimbursement concessions out of Blue Cross & Blue Shield, a strategy that briefly raised fears the giant insurer would pull out of the state.
One of UMMC’s main gripes with Blue Cross & Blue Shield was that it “is providing a lot of specialty services and we are not getting paid sufficiently for them,” Mazurak said.
UMMC argued it received reimbursements for specialized services at rates substantially lower than academic medical centers in neighboring states.
The new one-year agreement with Blue Cross & Blue Shield, Mazurak said, “will increase our revenues so we can maintain our mission.”