Hospital franchises, Medicaid expansion debated

July 24--For legislators thinking about making it easier to open new medical facilities, the big question is where Virginians covered by Medicaid expansion will go for care, says the senior delegate who as an EMT has raced his share of people in need to emergency rooms.

Del. Bobby Orrock, R-Caroline County, who has just renewed his emergency medical technician certification, says the answer will have a lot to do with whether Medicaid expansion will buoy hospital finances enough to open more of the state's medical marketplace to competition.

But after a two-hour dive Tuesday into Medicaid expansion and its financial implications by the special study committee he chairs, the only thing Orrock knows for sure is the big question -- who's going to go where for what kind of care -- is still unanswered.

Still, he says there will be legislation next year to reform Virginia's Certificate of Public Need (COPN) program, which requires state approval of new medical facilities or expansions.

The program is supposed to ensure that care is accessible and affordable, while Medicaid expansion is aimed at covering health-care bills for some 300,000 low-income Virginians who don't have insurance now.

Hospitals say they need COPN protection to keep competitors from wooing patients from money-making services, such as cardiology, which help cover the costs of such money-losers as psychiatric care or obstetrics. Critics said the program creates monopolies that force up the cost of health care.

Orrock wants to know how many of the 300,000 likely Medicaid expansion beneficiaries already get "charity care," for which hospitals charge no money.

As an EMT, he said he's driven people to ERs when, if they had coverage, they might have gone to a doctor earlier on before their illness or injury became too severe.

The expansion of Medicaid to cover all Virginians with incomes below 138 percent of the federal poverty line -- that's equal to $16,750 a year for a single adult -- means such care will be covered for many people.

The new state budget also boosts the average reimbursement Medicaid pays from about 72 percent of the code of providing care to about 86 percent, said William Lessard, director of provider reimbursement for the state Medicaid agency.

Hospitals, except for the big public ones, such as the Virginia Commonwealth University Medical Center in Richmond and University of Virginia's hospital in Charlottesville, will pay new taxes to cover part of the cost of Medicaid expansion and the higher reimbursement. The federal government pays for 90 percent of the cost of expansion and will pick up most of the cost of the higher reimbursements.

The impact on hospitals gets complicated, Lessard said.

Two new taxes are at issue.

One is a tax of 0.5 percent of total patient revenue. It means hospitals will pay an amount equal to about half of what they collect from Medicaid to care for Medicaid expansion patients, Lessard said.

A second tax will amount to about $1 for every additional $3 hospitals receive because of Medicaid's increased reimbursement, he said.

"So where they were getting zero (for charity care), they'll be getting about 45 cents?" Orrock asked. Lessard said that sounded right.

It's a big deal for Hampton Roads hospitals. Riverside Regional Medical Center did $95 million of charity care in 2016, the latest year for which data are available. In comparison, it received $571 million in actual payments from patients and insurers. For Hampton's Sentara Careplex hospital, charity care cost $62 million, while it received payments amounting to $247 million. Sentara Norfolk General's charity care cost it $166 million, while actual payments it received amounted to $883 million.

Lessard said expansion should reduce the amount of charity care that hospitals have to cover, but that they will still do some.

Brett Rawlings, vice president of the Virginia Hospital and Health Care Association, said critical money-losing services such as psychiatric care, ICUs and obstetrics could see additional strains as Medicaid expansion brings in more people seeking care.

Orrock was a bit skeptical. Medicaid already covers pregnant women with incomes up to 205 percent of the poverty level, he noted.

In recent years, many General Assembly Republicans have pushed to end the certificate of public need program. They argue that the program just creates monopolies that keep the cost of health care high. Hospitals have argued ending the program would leave them financially strapped, especially as Virginia balked at expanding Medicaid until this year.

State Sen. Frank Wagner, R-Virginia Beach, made an emphatic case to open Virginia to more competition. He told the committee that a look at hospital charges showed Virginia hospitals charged nearly twice as much for four common outpatient procedures as did hospitals in New Hampshire, which abolished its certificate of need regulatory agency in 2016.

Not all GOP legislators are as certain, however. Orrock said he wonders whether free-standing emergency departments -- operations like the Sentara Port Warwick facility in Newport News -- ought to come under the certificate of public need program. They're currently exempt, and since they're often set up by one hospital close to a competing hospital, can be used to steer patients to different hospitals, depending on whether patients have insurance, said state Sen. John Cosgrove, R-Chesapeake.

"I've been doing a lot of listening today," said Del. Gordon Helsel, R-Poquoson, who is a member of the study committee. "There's a lot to be thinking about."

Ress can be reached by telephone at 757-247-4535

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