Hospitals in Mississippi are facing daunting financial challenges today and in the years ahead. In addition to having high costs for uncompensated care linked to the state’s decision not to participate in the Affordable Care Act Medicaid expansion, there are numerous federal budget cuts to Medicaid and Medicare that are causing concern.
One example is that hospitals saw significant reductions this year in Medicaid outpatient payments as a result of the implementation of the Ambulatory Payment Classification system, said Timothy H. Moore, president and CEO, Mississippi Hospital Association. And there are cuts of $638 million from between 2010 to 2015 to the Disproportionate Share Hospital payments to hospitals, a payment system that is designed to help hospitals that have a high proportion of Medicaid and Medicare patients.
“Hospitals are finding it very difficult to adjust financially to the almost three billion dollars of federal cuts to be experienced by Mississippi hospitals over the next 10 years,” Moore said.
And it could get wore with another $1.6 billion in cuts to Mississippi hospitals under consideration from 2016-2025.
Mendal Kemp, director of rural health, Mississippi Hospital Association, said the cuts are particularly of concern for the small rural hospitals in the state.
“The payer mix dictates how you are doing financially,” Kemp said. “Some of the small rural hospitals particularly depend heavily on Medicare and Medicaid. They have no private commercial insurance patients to speak of. That is why the cuts are doubly bad for the small rurals. Those are the ones in the greatest risk of closure.
“What they are trying to do is get their payer mix up to have more insured patients, and provide as many services as they can to break even. But without some assistance and alignment with other hospitals, this is very difficult. The larger hospitals do have a better mix of patients, Medicare and Medicaid is sometime a lot less percentage of their income.”
Smaller hospitals are working to survive by diversifying to provide other services such as primary care clinics and outpatient surgery services.
“They are still serving the community and meeting its needs, but are having to do it in a little different way than they were,” Kemp said. “But still, we are in danger. Yes, we are going to have some hospitals close.”
Some of the small rural hospitals have picked up important additional business by instituting a “swing bed” program. Swing beds provide services to patients who are ready to leave the hospital after surgery or another procedure, but aren’t yet ready to go home. They have exhausted the number of days allowed for a hospital stay for their condition that would be paid for by government programs or insurance. The swing bed program allows them to get the care they need until they are able to go home and care for themselves.
“Hospitals with a swing bed program are doing well,” Kemp said. “They do get more reimbursements than a regular hospital. They are receiving cost-based reimbursement, which is very helpful.”
Kemp said Mississippi has had four hospitals close in the past several years and two were Critical Access Hospitals. Thirty-two of the state’s 95 Acute Care Hospitals are CAHs. CAHs are reimbursed by Medicare on a Cost-Based System (101 percent of allowable cost) for inpatient and outpatient services. To be certified as a CAH, the hospital must be located more than a 35 mile drive from any hospital or in areas with only secondary two-lane roads available, 15 miles from any hospital. There are no distance requirements for hospitals that converted to CAH before Jan. 1, 2006.
“Pioneer Community Hospital of Newton closed in late 2015 after it lost CAH certification because of the distance requirements,” Kemp said. “Patients Choice Community Hospital of Humphreys County in Belzoni closed for financial reasons and mismanagement. Kilmichael Hospital in Kilmichael closed because of low-volume. Natchez Regional Hospital in Natchez closed because of financial reasons and was purchased by another hospital in the area.”
Another factor impacting hospitals is simply the decline in the number of patients being hospitalized. That is a nationwide trend as more surgeries and other procedures are being done on an outpatient basis.
There is also a big push by the federal government and private insurers to reduce unnecessary readmission of patients.
“It the patient doesn’t follow the regiment of care — doesn’t take the medicine correctly, for example — he or she can be back in hospital in 30 days,” Kemp said. “If patients are readmitted unnecessarily, the hospital is penalized in reimbursement. So everyone is trying to reduce that by monitoring the patients when they leave, calling them and following up to keep them out of the hospital. That is cutting down on the census. Across the state, hospitals seeing lower patient volumes.”
Another factor impacting hospitals negatively is the Medicaid Managed Care Organization.
“Medicaid has recently contracted much of its operation to two Managed Care Organizations,” said Richard Grimes, MHA chief financial officer. “The theory is that these companies will better manage care for Medicaid recipients, but that is not necessarily the case. We have heard that the companies’ bureaucracy has made it difficult for clinicians to provide care and for hospitals to be reimbursed for patient care. Lack of payment or delay in payment does real harm to the financial condition of hospitals.”
Grimes said to truly manage the Medicaid population, health care providers are realizing that they need to be at the center of a health plan designed to focus on the patient. Hospitals and other providers are considering development of a Provider Sponsored Health Plan to compete with and supplement the two Managed Care Organizations.
“They believe this will help the state in finding a solution to managing the Medicaid population with the added benefit of relieving some of the financial stress from recent changes in the Medicaid program,” Grimes said.
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