AHA: Congress Must Expand Medicaid Share Now to Avoid State Health and Hospital Cuts

Cheryl Clark, for HealthLeaders Media , June 24, 2010

The American Hospital Association is giving its campaign to extend federal Medicaid funding another strong push, saying that if Congress waits too long to provide relief, states and hospitals may be forced to further cut critical staff and curtail healthcare programs for the poor.

"We don't have updated figures for 2009 yet, but one third of hospitals were losing money in 2008," says Caroline Steinberg, AHA trends analysis vice president. She says hospitals experienced the worst financial performance in a very long time in 2008 because of the recession. Total margin revenues "were only 2.6 in 2008, and that was down from 6.9 in 2007, a significant drop in financial performance."

"The federal government has more of an ability to help the states than the states have to help themselves," she says.

Hospitals have become more efficient, delayed programs, and cut back staff, according to a new AHA survey in March and April, 2010. But they are still struggling. They also can't absorb the costs of care if state Medicaid programs cut back further.

The AHA specifically wants Congress to extend the increase in Medicaid matching funds put in place last year by the economic stimulus bill. The program, called the Federal Medical Assistance Percentage (FMAP) is set to run out at the end of the year.

Congress may think it can wait until then to approve a last minute extension, but they have to realize that states, and hospitals, are setting their budgets for the coming fiscal year now, Steinberg says. "States are in the middle of budget cycles," she says. "They need to know for planning and to prepare for what they will do if they lose federal assistance."

If they aren't assured now that the money will come, state Medicaid programs are poised to make coverage decisions and hospitals may make staffing decisions that impact the delivery of care, not just for Medicaid patients who need care, but all patients, Steinberg says.

On Tuesday, the National Governor's Association sent Congressional leaders a letter on behalf of 47 state governors essentially making the same case.

"Although the nation's economy shows signs of improvement, states' fiscal condition continues to deteriorate," notes the letter. "Consequently, governors continue to support a two-quarter extension of the enhanced FMAP provided under the American Recovery and Reinvestment Act (ARRA) as the most efficient way to help states avoid further layoffs and service cuts that could otherwise slow recovery."

The letter added that while the current FMAP does not expire until Dec. 31, "[d]elaying action until the end of the calendar year will force states to act now to reduce pending budget gaps by enacting further cuts in their workforce and core services, both of which will serve as a drag on the economic recovery."

To bolster the point, the AHA released data from a survey of 572 non-federal, short-term acute care hospitals from March and April, 2010. The responses were summarized as follows:

  • Patients continue to delay or forego care because of lack of insurance, and 70% of responding hospitals reported lower overall patient volumes, while 72% reported depressed volumes of elective procedures.
  • Of those responding, 74% reported reduced operating margin; 50% reported reduced non-operating income and 44% reported reduced access to capital.
  • 87% reported increased bad debt and charity care, and 65% reported an increase in the percentage of patients covered by Medicaid, the Children's Health Insurance Program or other programs.
  • Of those responding, 76% said they had cut administrative costs, 73% delayed capital investments, 53% reduced staff, 25% cut services, 8% divested assets, 3% merged with another facility, and 24% made other changes to weather the storm.
  • Although the economy is starting to look better, hospitals are not ready to respond. Of those hospitals surveyed, 98% have not restored services or programs that had been cut, 89% have not added back staff or increased hours and 67% have not started or continued capital projects.

"Hospitals are struggling to update their facilities and equipment to meet the needs of their communities and keep pace with advances in medicine as access to capital has remained stagnant and worsened for some hospitals," according to the AHA survey summary. "The new data reveal that difficulties accessing capital persist for hospitals, with 44% reporting reduced access to capital continues and nearly a quarter reporting that their ability to access capital is getting worse.

"These difficulties in borrowing are particularly worrisome as hospitals scramble to invest in information technology to qualify as ‘meaningful users' to obtain Medicare and Medicaid incentive payments for information technology authorized under the ARRA and avoid future penalties."

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