Hospitals fear health plan changes will add up to big losses

June 19--WASHINGTON -- Minnesota hospital executives expect big hits to bottom lines and possible service disruptions if Congress approves President Donald Trump's proposed budget or the U.S. Senate passes a health care reform bill like one approved by the House.

Either action could add millions to the ranks of uninsured patients across the country. Health executives interviewed by the Star Tribune expect uncompensated care to rise significantly under the health care delivery plans now on the table, and the effect on business operations for one of the state's major economic sectors could cut deep.

"I think jobs will be at stake here," said Derrick Hollings, chief financial officer at Hennepin County Medical Center in Minneapolis. "And it's not just us."

Republican Senate leaders have said that by the July 4 recess they plan to pass a version of a House bill -- the American Health Care Act (AHCA). The bill would repeal and replace the Affordable Care Act (ACA), former President Barack Obama's signature health care legislation.

Cuts to Medicaid, the government-paid health insurance for the poor, loom. So do premium hikes for those between ages 50 and 64, along with waivers that let states limit coverage and charge more to people with pre-existing conditions.

Trump has built House-passed cuts to Medicaid and other programs such as the Children's Health Insurance Program into his proposed budget. The Congressional Budget Office says the AHCA as it stands will reduce the federal deficit by $783 billion over the next decade.

"We're no longer going to measure compassion by the number of programs or the number of people on those programs, but by the number of people we help get off those programs," Trump budget director Mick Mulvaney told reporters in May.

Trump's secretary of Health and Human Services, Tom Price, has said that the envisioned 10-year, $834 billion reduction in Medicaid will give states freedom to create programs that better meet their residents' needs. He's also questioned the accuracy of CBO projections about the scope of cuts to Medicaid over time.

14 million more uninsured

To many Minnesota hospital administrators, the projections add up to losses.

"There is no question we would lose revenue from what's in Congress," said Dr. Kevin Croston, chief executive at North Memorial Health, which operates hospitals in Robbinsdale and Maple Grove.

This is because the CBO projects that the current version of the AHCA will result in 14 million more Americans being without health insurance coverage next year and a total of 23 million more being off the rolls in the next decade.

Uncompensated care was down statewide as a result of the ACA, which passed in 2010 and expanded access to Medicaid, explained Minnesota Hospital Association spokeswoman Wendy Burt.

"It is more than fair to say that uncompensated care will go up if the ACA is repealed or Medicaid is cut as significantly as is proposed in the Trump budget or in the AHCA," she said.

The upshot is that those losing health insurance coverage, those whose benefits expire, or those too sick to fit affordably in an actuarial pool will still need medical care. They will just have no way to pay for it.

Hospitals, meanwhile, are legally -- if not morally -- bound to treat sick people without regard to their ability to pay.

Uncompensated care -- the total of charity care and bad debt -- has shrunk as a percentage of gross patient revenue in many Minnesota hospitals. Charity care statewide went from $226.5 million in 2010 to $172.6 million in 2015, Minnesota Hospital Association records show.

From 2010 to 2016 North Memorial Health saw its percentage of uncompensated care decrease from 4.8 percent to 2.8 percent. In 2010, the year the ACA passed and began Medicaid expansion, North Memorial Medical Center had $58.7 million in charity care and bad debts. By 2016, the number was down to $21.3 million.

Allina Health's 14 hospitals saw the percentage of uncompensated care shrink from 2.7 percent to 1.9 percent from 2010 to 2016. At Regions Hospital in St. Paul, uncompensated care went from 4.08 percent in 2010 to 2.69 percent in 2016.

"We historically had experienced uncompensated care in the 3.5 to 4 percent range," said Heidi Conrad, Regions' chief financial officer.

Accumulated savings on uncompensated care are at risk under the new budget and health care proposal, administrators warn, and the rates easily could rise above pre-ACA levels.

Rural medical care crisis

If 23 million more Americans end up without health coverage, Conrad thinks there could be a rural medical care crisis in Minnesota. Even in an integrated system like the one to which Regions belongs, Conrad expects "expenses rising at a rate higher than revenue. We will have to make decisions about which purchases of capital equipment we can defer safely."

A new health care law and budget also could compel changes in care delivery.

"We will work hard for a margin to sustain ourselves," said Jeff Korsmo, executive vice president of operations at Essentia Health, a health system headquartered in Duluth and operating in Minnesota, Wisconsin, North Dakota and Idaho. "At some point you have to reconsider programs and geographic presence."

At hospitals that care for large numbers of low-income patients, adding to the rolls of the indigent by cutting Medicaid threatens a business model.

"We've been on this journey of lean management for 15 years," said Dr. Jon Pryor, Hennepin County Medical Center's chief executive. "At some point there are diminishing returns. We have one of the highest percentages of Medicaid patients in the U.S. At some point we're going to need more help."

Hospital administrators argue that Medicaid and Medicare payments already fail to cover costs of care to the growing number of patients in the two government plans. Statewide, the Minnesota Hospital Association says Medicare underpayments went from $848 million in 2011 to $1.5 billion in 2015 and Medicaid underpayments went from $579 million to $897 million. Throw in skyrocketing drug prices, and the ability of hospital revenue to meet expenses grows increasingly difficult, executives say.

Adding legislation that could cost 14 million people health insurance coverage in a single year while at the same time capping lifetime benefits for some insured people and possibly pricing some patients with pre-existing conditions out of the insurance market is a toxic recipe for the hospital business, said Korsmo.

"We cannot afford a significantly greater burden of uncompensated care," he said.

Sense of entitlement

The state hospital association's Burt said 38 hospitals in Minnesota already operate at a loss. Bad debt is piling up at many hospitals in Minnesota because patients who opted for the low premiums of high-deductible health insurance plans lack the financial means to pay their deductibles. Hennepin County's Pryor cites a 2017 survey that found roughly 60 percent of Americans have not saved enough to pay a $1,000 emergency room bill.

At North Memorial Health, Croston says the country's collective sense of entitlement to health care anytime anywhere at any price is wishful thinking. The numbers in the American Health Care Act and the federal budget "are disastrous" for the system, he said.

Minnesota's health care providers, like the nation's, are "headed toward something like a bubble," Croston said. "If all you do is provide health care for free, it gets harder and harder to stay open."

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