Federal program gives Ellsworth hospital, 3 others a booster shot of Medicare funds

Posted March 02, 2011, at 8:37 p.m.
Last modified March 02, 2011, at 10:45 p.m.

ELLSWORTH, Maine — Maine Coast Memorial Hospital will be one of four Maine hospitals participating in a five-year federal program that will bring an estimated $1.5 million in additional Medicare reimbursements to the Ellsworth facility.

Maine Coast, along with Inland Hospital in Waterville, Franklin Memorial Hospital in Farmington and Miles Memorial Hospital in Damariscotta, was selected to participate in the Centers for Medicare and Medcaid Services’ Rural Community Hospital Demonstration Program. The program was designed to provide reimbursements to small rural hospitals that better reflect the true cost of providing care to Medicare patients.

“This is a huge booster shot in the arm for us,’’ said Kevin Sedgwick, chief financial officer at Maine Coast.  “It comes at a time when we’re facing many financial challenges.’’

According to CMS, the program is designed to test the feasibility and advisability of making reasonable cost reimbursements for inpatient services to small rural hospitals and is aimed at increasing the capability of the participating hospitals to meet the needs of patients in their service area.

The program, Sedgwick said, targets “in between hospitals’’ like Maine Coast that don’t receive the scale of Medicare reimbursements that much larger hospitals do, but don’t qualify for other federal programs that help smaller critical access hospitals.

Medicare is the federal health care insurance program for people 65 and over and for disabled residents. Hospitals like Maine Coast are typically paid on a “diagnosis’’ basis for Medicare patients, Sedgwick said. The hospital receives a fixed payment for a specific diagnosis for a Medicare patient regardless of the cost involved in the treatment.

Typically, he said, payments run about 80 percent of the actual costs involved, he said.

Through the demonstration program, he said, additional funding will provide “cost-based’’ reimbursements to Maine Coast for those services that more closely match the hospital’s actual costs.

Congress authorized the demonstration program in 2003 and 10 hospitals around the country have participated. Maine was not  among the 10 most sparsely populated states which were eligible to participate in the original program. The federal Affordable Care Act, however, expanded the program in 2010 to 20 additional low population density states, which allowed up to 20 additional rural hospitals to receive the “enhanced’’ reimbursements.

In addition to the four hospitals in Maine, 15 other hospitals in Colorado, Iowa, Kansas, Mississippi and New Mexico were selected to participate in the demonstration program.

Members of Maine’s congressional delegation backed the expansion of the program and supported the applications for the four Maine hospitals to be included.

“This program will help ensure that these hospitals are able to continue providing quality health care services to Mainers,’’ U.S. Rep. Michael Michaud said in a prepared statement. “It will provide crucial funding to our small hospitals that are struggling under the current Medicare reimbursement formula.’’

While the additional funding will provide a financial boost to Maine Coast, Sedgwick said, it is not a cure-all for the current economic climate. In normal times, he said, the funds would give the hospital some flexibility to do some things it has put off.

“But this isn’t happening in a vacuum,’’ he said. “We have other large payers who are decreasing their reimbursements. So, much of [the demonstration program funds] will offset those costs.’’

Among those decreasing payments, he said, are insurance companies and other federal reimbursement programs. As an example, he said, the hospital stands to lose hundreds of thousands of dollars in reimbursement payments for CT scan procedures at the hospital.

“We’re grateful to have this program, but we are still very much aware that we still need to do more with less and to continue to look for efficiencies in our operations,’’ he said. “This program creates some stability, and in these economic times, stability is to be celebrated.’’

Participation for the four Maine hospitals will begin July 1.

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