Arkansas Hospitals Fear Looming Cuts to Medicaid

Piggott Community Hospital in Clay County could lose $150,000 to $200,000 a year as a result of looming Medicare cuts.

“For a small rural hospital, that’s a fairly substantial cut for us because it comes right out of the bottom line,” said James Magee, CEO of the 25-bed hospital.

But those Medicare cuts are just the first wave of potential cuts facing Arkansas hospitals.

When Congress was considering the Affordable Care Act of 2010, the hospital industry agreed to $155 billion in Medicare cuts nationwide over the next decade. In Arkansas that will amount to about $2 billion.

In exchange for accepting lower reimbursements for treating senior citizens, “we were offered by the feds that we were going to have expanded Medicaid coverage” for the working poor, said St. Vincent Health System CEO Peter Banko. “Now, unfortunately, that’s in jeopardy in Arkansas.”

The U.S. Supreme Court, in finding that the health care reform law was constitutional, forbade the federal government from forcing states to accept the Medicaid expansion. And Republican legislators in Arkansas, with a new majority in both houses of the General Assembly, have been cool to the idea of taking on that additional responsibility.

Medicaid is a joint federal-state program, and Medicaid in Arkansas was already facing a nearly $200 million funding shortfall in the fiscal year that begins on July 1.

“We don’t yet have enough information to measure the impact” of the Medicaid shortfall, said Paul Cunningham, executive vice president of the Arkansas Hospital Association.

Hospitals already are hurting from the Medicaid outpatient fee schedule, which was last adjusted way back in 1992. The inpatient rate for most hospitals is capped at $850 per day. There’s a 10 percent patient copay for the first day of each admission, but most of that is never collected from patients, he said.

Adding to the mix of bad news, Arkansas hospitals could lose $403 million in total Medicare payments for seniors over the next 10 years if the Budget Control Act of 2011 goes into place on Jan. 1. Banko said the “fiscal cliff,” in tandem with the other circumstances, “puts the industry as a whole in serious jeopardy.”

In 2011, Piggott Community Hospital reported total patient revenue of $19.9 million, about the same as in 2010. The same revenue resulted in net income of $864,891 in 2010 but a loss of $694,690 in 2011.

Magee, the CEO, said he hopes the Legislature convening in January votes to expand Medicaid, which would cover an additional 250,000 Arkansans. “That would possibly offset the losses that we’re going to suffer on the Medicare side,” he said.

But expanding Medicaid will require a 75 percent supermajority vote in both the House and Senate, making it “a big hurdle” to get past, Magee said.

If Medicaid isn’t expanded, Piggott Community Hospital won’t have many options to recover lost revenue. One possibility, he said, is trying to grow market share, although that will be difficult because the area isn’t thriving.

“We wake up every morning in a smaller market than we did the day before,” Magee said. “So that does present a problem.”

Banko said cuts would force providers to consolidate “because you’re not going to be able to make it by yourself.”