Fiscal cliff deal hits Maine hospitals; rural areas spared some cuts

Posted Jan. 04, 2013, at 8:17 p.m.

The New Year’s Day fiscal cliff deal has left Maine hospitals bracing for funding cuts and, at the same time, cheering the extension of federal programs designed to buoy rural medical centers.

Nationally, hospitals have sharply criticized the deal hammered out between Congress and the Obama administration. Hospitals won big on one hand, because the legislation averted a planned 27 percent cut in Medicare payments to doctors. But Congress had to come up with $30 billion to avoid the payment cut, and hospitals will have to pick up the tab for about half that expense over the next decade.

The scheduled pay cut, built into a 1997 deficit reduction law, forces a scramble for money each year because the formula used to fund Medicare hasn’t appropriated enough money to cover the program’s costs for about a decade. So Congress repeatedly steps in to delay, avert or shrink the pay cut in an annual ritual known as the “doc fix.”

Hospitals also helped to foot the bill for the doc fix last year, said Jeff Austin, a spokesman for the Maine Hospital Association.

“The doc fix was the biggest thing in our world, but it’s a mixed bag,” he said. “We’re glad about the doc fix but we’re upset that we were used to finance it.”

Maine hospitals, which employ about half the state’s doctors, expect to lose roughly $40 million over the next decade to pay for the doc fix, Austin said. That money will be part of $10.5 billion nationally that the federal government is recouping over the next few years for past Medicare overbilling by hospitals stemming from bill coding practices.

Hospitals maintain that they have not been overpaid.

Maine hospitals will be largely spared in coming years from another planned cut under the fiscal cliff deal that reduces Medicaid payments to hospitals that serve a high proportion of poor, uninsured patients, Austin said. About a decade ago, Maine decided to funnel that federal money into the MaineCare program to provide health insurance to a greater number of residents, rather than pay hospitals directly, he said.

“That doesn’t hit Maine hospitals like it does in other parts of the country,” Austin said.

Hospitals also face a 2 percent cut in Medicare payments from 2013 to 2021, which will cost Maine hospitals an estimated $21 million this year, Austin said. A September report found that the cuts could lead to the loss of 3,000 jobs in Maine in 2013.

That reduction is part of automatic spending cuts that were delayed until late February under the fiscal cliff deal. Many questions remain about how it will be implemented, Austin said.

“A lof of these cuts are stealing from the future to pay for today,” he said.

Maine’s 39 hospitals are also owed more than $480 million in overdue state and federal Medicaid reimbursements.

Hospitals welcomed the fiscal cliff legislation’s extension, though temporary, of some federal programs that benefit rural medical centers.

One program supports rural hospitals with fewer than 100 beds that treat a high proportion of Medicare patients. Another compensates hospitals that are critical to providing care in their regions but have low patient volumes. Together, the two programs benefit a handful of hospitals in Maine.

The Aroostook Medical Center in Presque Isle, which has 89 acute beds, will hang onto $3.2 million a year with the reinstatement of those programs, according to CFO Bruce Sandstrom. However, another federal program that directed additional payments to TAMC and other rural hospitals for outpatient services was not extended, he said. That will amount to a $3 million hit for TAMC, which largely eats up the other gains.

“From a budgeting point of view, we pretty much came out even, but if we look to where we were when we had all three of those programs in place, we’re going to be $3 million worse off than we were last September,” Sandstrom said.

Had the doc fix also failed, TAMC would have suffered to the tune of $1.3 million a year, he said. TAMC employs about 50 doctors.

Some question whether the program for rural hospitals that treat a high share of Medicare patients, called the Medicare Dependent Hospital Program, rewards inefficiency. Others argue that it helps hospitals to stay afloat in areas where patients may have no other options.

While some of the rural hospital programs were extended for just a year or less, Austin credited Maine’s congressional delegation for resurrecting them.

“Those are fairly big deals in Maine, a number of hospitals get them,” he said. “They help preserve access.”

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