AUGUSTA, Maine — Last week Gov. Paul LePage signed a bill to pave the way for Maine to cover its $183.5 million tab to 39 hospitals for services provided over the years to patients enrolled in the state’s Medicaid program. Once paid, the federal government will kick in $300 million.
Now that the state plans to pay back its longstanding MaineCare debt to hospitals, how will the institutions spend the money?
The shortlist includes capital investment projects, bolstering finances and covering operating costs, according to hospital spokespeople. The debt payments, however, will not lead to changes in rates for patients with private insurance.
Eastern Maine Healthcare Systems’ seven member hospitals expect to receive a combined $115 million, which covers bills going back to 2005, according to Derrick Hollings, the health care system’s chief financial officer.
The network will use the funds to repay credit lines hospitals had to draw on to cover operating costs it struggled to pay with the outstanding debt, Hollings said.
“And of course we have a workforce that have not received pay increases regularly since 2005,” Hollings said. “This is going to position us so we could look at that.”
The nine hospitals in MaineHealth’s system will receive a combined $133 million, which will be used for capital improvements and help shore up finances, according to Katie Fullam Harris, MaineHealth’s vice president of employer and government relations.
“These payments will allow our hospitals and health system to continue to provide high quality care,” Fullam Harris said.
Faced with a $13.4 million operating loss, Maine Medical Center, the largest MaineHealth hospital, instituted a hiring freeze in May. The state owes the hospital approximately $67 million for years of underpayments from the MaineCare program, according to Albert Swallow, the hospital’s vice president of finance.
“Over that time we have lost the opportunity to use those funds for capital investment purposes and to earn investment income,” Swallow said in an email.
“While the receipt of these funds will improve Maine Medical Center’s cash position, it will do little to improve its current financial operating performance,” he wrote. “We will continue to closely review all open positions.”
While the payday is welcome, it shouldn’t be viewed as “some type of windfall for hospitals,” said Chuck Gill, spokesman for Central Maine Healthcare. “This is paying a bill that’s overdue. That being said, we’re very appreciative to the governor and the Legislature for getting it done. They delivered on their promise.”
What’s more, patients and commercial ratepayers shouldn’t expect to see a rate change because of the hospital payments.
Like many areas of health care costs, the issue of cost shifting — where hospitals charge more to patients with private insurance to make up for the falling reimbursements they receive from patients with MaineCare or Medicare — is not easy to discern.
Elizabeth Mitchell, former CEO of the Maine Health Management Coalition, said in March that hospitals are suspected of shifting the burden of the MaineCare debt to patients with private insurance, though how those costs are shifted are not certain.
In March, Wayne Gregersen, who oversees employee health benefits at The Jackson Laboratory in Bar Harbor, said the “hidden tax” hospitals were charging self-insured employers and commercial payers to make up for the MaineCare debt meant hospitals would be getting paid twice when the state paid back the hospitals — the first time via the cost shift, and the second time from the debt repayment.
“When they get those overdue hospital payments, they’re just going to be floating in money. … As far as I’m concerned, they’re getting paid twice,” Gregersen said at the time.
Whether the repayment of the debt will result in lower rates for private insurance holders is a fair question, said Joel Allumbaugh, CEO of National Worksite Benefit Group Inc. in Hallowell.
“In theory, if the [debt] created the cost shifts, then when those dollars come in, they should be calculated to lower costs for services,” Allumbaugh said. “But I’d be shocked if that happened.”
Swallow and Hollings said it won’t happen, maintaining their hospitals never raised rates on commercial payers and self-insured employers to make up for the nonpayment of the MaineCare debt.
“We have not, in setting our prices, taken any action to counterbalance not being paid by MaineCare,” Hollings said.
On the other hand, falling reimbursement rates from the federal and state governments for MaineCare and Medicare services are a different story, and have forced hospitals to adjust rates and shift costs onto payers with private insurance, Swallow said.
“Maine Medical Center’s rates to commercial payers and self-insured payers has certainly been impacted by decreases in MaineCare payment rates and increases in taxes assessed by the state in the past and will likely continue to be an issue in the future,” Swallow wrote. “However, that is an issue separate from the failure of the state to fully pay for the services provided to MaineCare participants at those lower payment rates.”
Hollings estimates that EMHS will be forced to absorb an additional $13 million because of cuts to the reimbursements it receives for providing MaineCare and Medicare services.
The debt may now get paid, but that doesn’t mean the hospitals are in the clear just yet.
Hollings said Eastern Maine Medical Center will be paying for the fact the state didn’t pay its bills for the next 30 years, in the form of a higher interest rate it was forced to accept on bonds it sold in January to fund capital improvements. He estimated it could cost the hospital $300,000 a year over the life of the bond.
“As you can see, the nonpayment of the debt has been very damaging,” Hollings said.