House, Senate contemplate hospital, nursing home cuts

TALLAHASSEE

Gov. Rick Scott’s controversial plan to overhaul the way Florida hospitals are compensated to treat the state’s poorest and sickest residents — and could have cost the facilities some $1.7 billion next year — has failed to win backing from state lawmakers.

But hospitals can still expect significant state cuts for their Medicaid care in the new budget year, with the House backing a plan to slash rates by 7 percent and the Senate unveiling a measure on Wednesday that could result in a 10 percent reduction.

The new round of budget cuts for hospitals, totalling hundreds of millions of dollars, comes on top of the current budget year, which included some $510 million in rate cuts for hospitals.

“I think everyone’s concerned about any further cuts to a program that was fragile to begin with,” said Gwen MacKenzie, CEO of Sarasota Memorial Hospital, which cares for 95 percent of the Medicaid hospital patients in Sarasota County.

Although the House turned aside Scott’s proposal for a tiered payment system that would dramatically change the way hospitals receive their funding, state Rep. Matt Hudson, chairman of the House health care budget panel, said lawmakers faced “some difficult choices that had to be made” in light of a budget shortfall of more than $1 billion.

In addition to the 7 percent cut for hospitals, the House is calling for a 2.5 percent rate cut for nursing homes that treat Medicaid patients. The cuts total $453 million for hospitals and nursing homes, but the hospitals could face another $200 million in cuts for patient care if state revenues dip in the coming year.

The House proposal, debated on the chamber’s floor on Wednesday, exempted rural hospitals and those that focus on children. It also included a 12-visit annual emergency room limit on non-pregnant adult Medicaid patients.

The Senate Health and Human Services Appropriations Subcommittee on Wednesday advanced a plan that would cut hospital rates by as much as 10 percent, which hospital lobbyists estimated could result in a $458 million reduction. Some 60 percent of the cut would fall on the hospitals that treat the largest populations of Medicaid patients, such as Jackson Memorial, Shands and Sarasota Memorial.

The Senate did not back a rate cut for nursing homes, but the health care panel is considering $86 million in cuts for mental health and drug abuse programs for adults — which are much deeper cuts than the House is contemplating. It also has a six-visit annual limit on emergency room use by Medicaid patients.

Sen. Joe Negron, R-Stuart, chairman of the Senate health care budget panel, said some of the hospital cuts could be offset by developing a new formula for using property tax dollars raised by local communities — including Sarasota — for health care.

While hospital lobbyists described Negron’s proposal as “complicated,” they said it was hard to see how the plan would not result in significant cuts in reimbursement rates for the hospitals.

Tony Carvalho, head of the Safety Net Hospital Alliance of Florida, said his preliminary estimate showed a rate cut in the range of $579 million — when also including a $121 million cut in reimbursements to hospitals from managed care companies.

Negron said the rationale behind the Senate plan is that the state is eventually moving all of its Medicaid patients — subject to approval from the federal government — into a managed care system. Under the current system, those managed care rates for hospital patients are now essentially subsidized by state tax dollars that will disappear when all the Medicaid patients are in an HMO system, he said.

The Senate proposal is a way to transition the hospitals and their Medicaid patients into the managed-care system, with the opportunity to use the locally generated tax dollars to offset some of those reductions, Negron added.

Carvalho said the Senate plan would put “pressure” on the local communities and health care districts to generate more tax dollars — which are matched by federal dollars — to offset the cuts.

Although lawmakers rejected Scott’s plan for a tiered payment system, the House and Senate are also including provisions in their budget plans that could lead to a future system where hospitals are reimbursed for their Medicaid patients based on the patient’s diagnosis.

It would be similar to Medicare, the federal health care program for the elderly, which uses diagnostic related groups to set rates for specific illnesses. Lawmakers want the state Agency for Health Care Administration to develop the plan in the coming year with the possibility of initiating in the 2013-14 budget year.

MacKenzie said she is still waiting to hear the details of the Medicaid cuts.

“They are considering a variety of things,” she said, “including trying to start the Medicaid managed care program earlier than 2014.”

Nursing home administrators said they can deal with a cut in the range of 2.5 percent, although it comes on top of current state and federal funding cuts.

“We’re grateful that the House has limited the cut to only 2.5 (percent), but there are a number of challenges even with that because there are a number of high-Medicaid facilities who will have trouble managing a cut like that,” said Nina Willingham, executive director of the Life Care Center in Sarasota and president of the Florida Health Care Association.

“We’re all still suffering from last year’s cut, and when you put on top of that the 11 percent that we got from Medicare this year, it’s a pretty difficult situation,” she said.

Staff Writer Barbara Peters Smith contributed to this report.