Health care ruling may affect local hospital's funding

Dec. 29, 2012 @ 08:33 PM

Last summer, ruling on President Obama’s signature health-care policy, the Supreme Court struck down a provision requiring states to expand their Medicaid programs.

Medicaid is the federal health-care program for low-income people.

The ruling could have serious consequences for LeConte Medical Center in Sevierville. Substantial federal funds are at stake.

Although the hospital is not at risk of closing, “It’s going to be a significant challenge,” said Anthony L. Spezia, president and CEO of Covenant Health. LeConte is a Covenant hospital.

LeConte is one of thousands of facilities nationwide that receive what are called disproportionate-share-hospital (DSH) payments from the federal government. The payments help hospitals offset the costs of treating uninsured patients.

Under the Patient Protection and Affordable Care Act (known by some as Obamacare), the federal government will reduce DSH payments by $14.1 billion between 2014 and 2019. Hospitals were to have needed fewer DSH funds because there were to have been fewer uninsured people.

As enacted, the health-care policy required states to expand Medicaid coverage for people earning up to 133 percent of the poverty level.

Now states do not have to expand Medicaid. Gov. Bill Haslam has not said whether the state will expand TennCare, the state’s Medicaid implementation.

“The elimination of disproportionate-share was supposed to be tied to a substantial expansion of insurance coverage,” said Spezia. “It’s unclear as to whether Tennessee is going to do the Medicaid expansion.”

The amount of DSH funds LeConte receives is not easily tabulated, said Teresa Giles, vice president of finance at Covenant. She described the payments as “significant.” In 2009, Tennessee was allotted $305.4 million in DSH money, according to the U.S. Department of Health and Human Services.

Haslam is still deciding whether the state will expand Medicaid, said spokesman David Smith. “He’s reached out to hospitals around the state and asked them to show him the economic impacts of the law.”

In early December, Haslam declared that Tennessee will not establish a health insurance exchange, one of the programs introduced by the Affordable Care Act. Instead, the federal government will set up Tennessee’s exchange.

Expanding Medicaid is a complex matter, said Tennessee Sen. Doug Overbey, R-Maryville. “I haven’t come down on the issue at this point,” he noted. “Disproportionate share is something we fought for and pushed for, and it’s important to our safety-net hospitals.”

“It looks like we probably won’t expand Medicaid,” said State Rep. Dale Carr, R-Sevierville, who will serve the 12th District in Tennessee’s House of Representatives next year. He cited the program’s cost.

“We are hopeful states will take advantage of the substantial resources available to them to cover more of their residents through the Medicaid program,” wrote HHS press secretary Fabien Levy in an email. “Under the Affordable Care Act, Medicaid eligibility expansion is completely paid for by the federal government in the first three years, and the federal government will cover at least 90% of these costs in the years thereafter.”

Next year, HHS will “develop a methodology to reduce Disproportionate Share Hospital funding over time in a way that is linked to reductions in the number of insured,” wrote Levy.

Despite the prospect of disproportionate-share cuts, Covenant’s Spezia doesn’t necessarily think TennCare should be expanded. “There are reasons not to do that,” he said.

One is that Medicaid may not even be sustainable at current levels, much less expanded levels, if the so-called provider tax is eliminated. Enacted in 2010, the provider tax lets hospitals secure additional Medicaid funding. U.S. Sen. Bob Corker, R-Tenn., has called the provider tax a “massive ‘bed tax’ gimmick” used by states to “bilk the federal government.”

“This provider tax is on everybody’s hit list in Washington to reduce the federal deficit,” said Spezio. “My position is, I’m in favor of the Medicaid expansion only if provisions are made to be sure Medicaid is going to be funded adequately.”

Covenant is committed to LeConte, Spezio said. “Right now we’re close to breaking even at Leconte, and we’re not unhappy about that,” he said. “We’re taking care of a lot of people, and doing a good job in the community – just at a marginal loss.”

Cuts in disproportionate-share funding would, Spezio said, “increase our losses.”