Hospitals face challenges this year

Posted Sept. 29, 2010, at 11:09 p.m.

DOVER-FOXCROFT, Maine — Every candidate for governor and the Maine Legislature is being asked by the Maine Hospital Association to make MaineCare reimbursement their highest priority when they win their seats and arrive in Augusta in January.

Steven Michaud, Maine Hospital Association president, said Wednesday the candidates are getting that message and they understand the problem.

“We believe that by the end of this year, the total will be around $400 million that is owed to Maine hospitals [for MaineCare reimbursement],” Michaud said. He added the state, which is facing its own budget crisis, has made MaineCare reimbursement the hospitals’ responsibility.

Brenda Harvey, commissioner of the Department of Health and Human Services, said Wednesday that while it’s true the state owes hospitals settlements from 2008 and 2009, it is also true that Gov. John Baldacci’s administration has paid 14 years of settlement debt in seven years.

“The governor inherited 10 years of settlement payments that were due and has paid settlements through all of 2007 for hospitals,” Harvey said.

In addition to the regular perspective payments the state makes to hospitals, Harvey said the state has paid hospitals a total of $3.6 billion. The state and federal governments still owe hospitals $300 million, she said.

Harvey said that when Gov. Baldacci reached an agreement with the hospitals in 2006 to give hospital payments priority in the General Fund, the hospitals projected a 3 percent growth in costs. The actual growth has amounted to 38 percent, she said.

Even as hospitals continue to struggle in the current market, enrollment in MaineCare has grown by only 10 percent, she said.

“We are working with the hospitals. We have started conversations with them this week to try to figure out a way to get these settlements reimbursed,” Harvey said. “We would like to close this gap.”

“This isn’t a matter of ‘oh they don’t pay us enough’ or ‘they’re cutting a payment,’ this is they’re not paying anything for new MaineCare [Medicaid] patients that are seeking our care,” Michaud said. “I think when you make it clear that this is a debt, it’s an unpaid bill, people get that and I think they’re embarrassed by it.”

If that isn’t enough, Maine hospitals also are facing a significant downturn in patient activity, according to Michaud.

To avert financial disaster, some hospitals, including Penobscot Bay Medical Center in Rockland, Blue Hill Memorial Hospital and Eastern Maine Medical Center in Bangor have resorted to layoffs and have left vacant positions unfilled.

Others, such as the 25-bed critical access Mayo Regional Hospital in Dover-Foxcroft, have reduced expenses from their operations budgets. Ralph Gabarro, Mayo’s chief executive officer, said Wednesday more than $2.5 million in operational expenses were pulled over the last two years to avoid any layoffs of the 389 full-time-equivalent jobs.

Located in financially hard-hit Piscataquis County, Gabarro said every job counts. To cut the hospital’s expenses, Gabarro said employees who left through attrition have not been replaced, benefits such as the retirement match have been reduced and no pay increases will be given this year.

Despite making those changes, Gabarro said the hospital’s profit margin for the upcoming fiscal year is 1.2 percent, even after factoring in a 3.5 percent general rate increase.

“That means if we have some real surprises, that’s going to put a lot of pressure on us; you know, there’s not a lot of wiggle room with a budget that is that tight,” he said.

Gabarro called this budget year the most challenging in his 13-year tenure at Mayo because of the nonpayment of the MaineCare debt and the decline in hospital activity. He said the drop in hospital use is related to the economic downturn because individuals have lost their insurance coverage, have higher deductibles or are holding back on accessing health care.

What would help the hospital, according to Gabarro, is to get the $4.6 million it’s owed for MaineCare reimbursement dating as far back as 2007, but he’s not optimistic it will be paid.

“We don’t see any indication that there’s a plan in place to pay us what we’re owed,” he said.

Gabarro said Maine hospitals received a bit of a reprieve with federal stimulus funds that were used to help hospitals get caught up. But no money has been included in the state budget over the last two budget cycles to repay the debt.

“We see the problem of payments increasing over time rather than going away,” he said.

“I wish I could see the light with the economy starting to bounce back here in our region, but I really don’t,” Gabarro said. “It may or may not come back; that’s the challenge.”

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