Focus of Medicaid debate shifts to hospitals amid possible closure

April 19--TOPEKA -- As lawmakers tried and failed to override Gov. Sam Brownback's veto of Medicaid expansion last month, at a hospital a mile away, doctors were delivering babies, surgeons were operating, and nurses were providing care.

That hospital -- St. Francis Health -- may now close.

Its owner, Denver-based SCL Health, said Tuesday it will cease operation this summer but will try to find a new operator. It said the hospital had lost $117 million over five years, and the number of patients had decreased dramatically.

"Additionally, without expanded Medicaid coverage and other challenges related to public programs, St. Francis experienced added pressure," the company said, adding that uncompensated and charity care more than doubled from 2012 to 2016.

The possible closure of the 378-bed hospital has upended the Medicaid expansion debate in Kansas. Supporters of expansion have made the hospital a new rallying cry, pointing to financial pressures faced by hospitals across the state.

"If this is happening in Topeka, this could happen to our city, our area," said Sen. Barbara Bollier, R-Mission Hills.

Hospitals in south-central Kansas, including in Wichita, have voiced concern over the lack of Medicaid expansion and the added pressure that comes without the additional money expansion would bring.

Others are skeptical that Medicaid expansion would have a positive effect. Jim Owen, director of radiology and a member of the board at St. Francis Health, faulted SCL Health's management rather than the lack of expansion for its troubles.

"Would Medicaid expansion have changed the situation? The answer is absolutely not," Owen said. "Having said that, would St. Francis liked to have had Medicaid expansion? Absolutely. Every hospital would. Who's going to turn down more money?"

Medicaid provides health coverage for low-income and disabled people. Expansion is allowed through the Affordable Care Act.

Hospitals often benefit financially from Medicaid expansion because extending health coverage to more people reduces the number who need care without insurance. Hospitals often absorb the costs of uninsured patients who are unable to pay.

The Affordable Care Act also reduced payments to hospitals to help fund treatment of uninsured patients, with the assumption that Medicaid expansion would offset the loss. But a 2012 U.S. Supreme Court decision allowed states to opt out of expanding Medicaid.

Kansas is one of 19 states that have not expanded Medicaid. Last month, Brownback rejected a bill that would have expanded eligibility to people with incomes up to $24,600 for a family of four. The federal government covers 90 percent of the cost of expansion, and states pay the remaining 10 percent.

An effort to override the veto fell three votes short in the House.

Rural hospitals under pressure

In Wellington, a city of about 8,000 south of Wichita, Sumner Regional Medical Center has experienced difficulty without Medicaid expansion, one of the hospital's leaders said.

Its financial problems began in 2008 with the recession, said Fred Hinman, who chairs the health care authority board that oversees the hospital. Doctors and surgeons either left or retired, cutting its referring physicians by nearly half.

"Then the Affordable Care Act was not good for us. When Kansas did not expand Medicaid, that took federal money out of our pockets and did not put money back in our pockets from the state," Hinman said.

Wellington has been forgiving the hospital's utility bills since at least 2010, and the facility has payable debt of about $4 million. A sales tax in Wellington contributes about $100,000 a month to the hospital, Hinman said.

Wellington wants to have a hospital, he said.

"When Medicaid expansion is popular in Kansas, why the governor and his folks think they're smarter than everyone else and they know better than everyone else is irritating beyond words," Hinman said.

For South Central Kansas Medical Center in Arkansas City, south of Wichita, expansion could ultimately be the "deciding factor" between having local health care available long term and forcing patients to travel long distances for basic care, the hospital's CEO, Virgil Watson, told lawmakers in January.

A local sales tax has generated about $1.6 million to help pay the hospital's debt.

"This tax would most likely not have been needed had KanCare (Medicaid in Kansas) been expanded. However, without expansion, the financial assistance we need that would have been provided federally has fallen on the shoulders of our local citizens," Watson said.

Wichita hospitals call for expansion

In Wichita, both Via Christi Health and Wesley Medical Center say expansion could help pay for millions in uncompensated care the hospitals provide.

The Kansas Hospital Association, which supports expansion, estimates Via Christi loses about $34 million annually under the Affordable Care Act. The hospital would gain about $50 million annually under expansion, the association says, for an estimated net gain of about $16 million.

Wesley Medical Center's estimated annual loss is calculated at approximately $28 million. The hospital would gain about $41 million annually under expansion, the KHA estimates, for a gain of $13 million.

"The state's decision not to expand KanCare has had a very negative financial impact on Via Christi," Michael Mullins, who leads the hospital, said in February.

Via Christi has cut 650 jobs since 2013, he said. That represents $52 million annually in lost wages.

Expansion would reduce uncompensated care provided by Wesley by tens of millions of dollars every year, the hospital's chief operating officer said earlier this year.

COO Casey Gruber also said reducing the number of people without insurance aids the hospital.

"Without regular care, the uninsured often wait until their health concerns reach the point of needing emergency care, which comes at a higher cost to us," Gruber said.

St. Francis' fate uncertain

SCL Health said Tuesday it will cease operating Topeka's St. Francis this summer but that it is willing to donate the facility to another organization that can take over operations.

The possibility of a closure has shocked Topeka. Hundreds turned out Monday evening for a vigil in support of the hospital, which employs about 1,600 people and has been operating since 1909.

"This is one of the most difficult decisions our organization has ever faced," SCL Health CEO Mike Slubowski said.

The exact role the lack of expansion played is unclear. The hospital's president has previously said expansion was a big part of the decision by owner SCL Health to put the facility up for sale nearly a year ago.

Rex Burgdorfer, vice president of Juniper Advisory, which helps nonprofit health systems with mergers and acquisitions, said that in St. Francis' case, a bigger challenge to finding a buyer was the presence of a strong competitor, Stormont Vail Health System, in Topeka.

In addition to providing federal dollars for states to expand Medicaid if they chose, the Affordable Care Act also moved to change hospital payments to "bundles" for treating specific conditions rather than fees for specific services, Burgdorfer said. Hospitals are also no longer paid if patients are re-admitted for problems soon after they're discharged.

The changes create incentives to improve care, but Burgdorfer said they also create incentives for hospitals to consolidate the health care delivery system, so they can control costs and follow-up care.

Lawmakers watching

Rep. Fred Patton, R-Topeka, said St. Francis' closure would be devastating.

Patton initially voted against Medicaid expansion but voted to override Brownback's veto of the legislation.

"Not only do we not have adequate hospital space to withstand St. Francis closing, but the economic impact of 1,600 employees losing their jobs and what comes along with that would not be good at all," Patton said.

But others are not convinced. Asked whether the hospital closing would change his vote, Rep. Dan Hawkins, R-Wichita, said "absolutely not."

"Medicaid expansion is not going to solve the woes of that hospital," Hawkins said. "It's being used as great political folly to further the Medicaid expansion narrative. But in the end, Medicaid expansion is not going to stop the decline of hospitals."

Rep. Abraham Rafie, a radiologist and Republican from Overland Park who opposes expansion, said it is not a cure-all.

"It won't solve all of our problems. It won't even come close," Rafie said.

House Minority Leader Jim Ward, D-Wichita, said he was preparing to renew the expansion push when the Legislature returns on May 1.

Ward also said he was willing to tweak the bill by making it clear that no money from Medicaid expansion will go toward abortion and including work requirements in the hope of getting enough votes to override a veto from the governor.

He said the reported closure of St. Francis should be a wake-up call for lawmakers who opposed expansion earlier this year.

"When do my ideological Republicans put their ideology aside to deal with reality?" Ward said.

Lawmakers probably would have to start from scratch if they want to try to pass Medicaid expansion. Brownback's veto of the bill in late March and the failed effort to override it effectively killed the legislation.

Contributing: Katherine Burgess of The Eagle and Andy Marso of The Kansas City Star

Jonathan Shorman: 785-296-3006, @jonshorman

Hunter Woodall: 785-354-1388, @HunterMw

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