A proposed cut to the state Medicaid reimbursement rate could mean a loss of up to 2,500 health care jobs in Northeast Ohio, advocates say.
The Ohio Department of Medicaid has proposed a rate cut of 5% over the biennium for the care provided to Medicaid recipients. The Center for Health Affairs, an advocacy group representing Northeast Ohio hospitals, estimates that would result in a loss of $160 million over fiscal years 2018 and 2019 for the region’s hospitals, leaving them with few options to make up those costs.
The center’s members are looking at cutting services or cutting between 2,200 and 2,500 employees, said Tim Jarm, president and CEO of the center.
“It makes no sense to have $80 million a year taken out of the hospitals in Northeast Ohio, which is going to have significant ramifications both on shutting down programs and service lines or having to go and decrease employment at the hospitals,” he said.
Advocates may get what they want. Sources last Friday afternoon, Nov. 10, indicated that the rule could be withdrawn or postponed this week.
According to the proposed rule, the rate reduction, which applies to both inpatient and outpatient payments, is intended to “help balance state resources among competing demands while continuing to assure access to quality hospital care to Medicaid individuals in Ohio.”
In what Jarm calls a “bizarre” process, the state passed a balanced biennial budget over the summer, and then shortly after, the administration said there was an appropriations gap. The Ohio Department of Medicaid says it needs to make up a $1.1 billion appropriations gap in the fiscal year 2018-2019 operating budget.
Heidi Gartland, vice president of government and community relations for University Hospitals, called the rate cut “unnecessary,” “unjustified” and “downright harmful to working Ohioans.”
“We have not gotten a good explanation (for) this billion dollars of supposed cuts that the state is looking for,” Gartland said. “We can’t understand their underlying rationale.”
Jarm and the state advocacy group, the Ohio Hospital Association, both point to a $1.56 billion underspend in the Medicaid Budget for fiscal year 2017.
“Our concern is how they are justifying this appropriations gap, and why they continue to identify that when the Medicaid program has been underspent and we’ve been living within our means,” said John Palmer, director of public affairs for the Ohio Hospital Association.
No one from the Ohio Department of Medicaid was made available for an interview. In an email, a department spokesperson said, “We are reviewing updated projections of the Medicaid budget, and are taking underspending into account when determining if a hospital rate reduction will be necessary to keep spending within the budget’s appropriation levels.”
Updated projections and a decision about the hospital rate reduction will be announced at the Joint Medicaid Oversight Committee on Thursday, Nov. 16, the spokesperson said. The entity that ultimately needs to review the proposed change is the Joint Committee on Agency Rule Review.
The proposed rule would decrease expenditures for the state by $417.8 million over two years. To make up for the $1.1 billion appropriations gap, the state is also looking at achieving $273 million in savings through already-planned budget adjustments that take effect July 2017 and July 2018, as well as other moves.
Throughout the budget process, the Ohio Hospital Association worked with the state Legislature to avoid a rate cut and ultimately secured a rate freeze in the budget that went to the governor, who then vetoed that line item, Palmer said.
The rate cut will be “painful” for community hospitals across the state, said Steve Glass, Cleveland Clinic’s chief financial officer. Already, hospitals are reimbursed less than what it costs to provide services. They haven’t seen an increase in years as they incur annual inflation of supplies and salaries, Glass said.
“So as you can imagine it’s putting more and more financial pressure on our organization, particularly when you look at Medicaid, where hospitals across the state of Ohio lose money providing care to Medicaid patients,” he said.
For the Clinic, the rate cut will mean a loss of about $25 million a year, which will force the Clinic to look at “streamlining” services, which could include consolidation of programs, Glass said.
Gartland said that to have such a significant rate cut that hospitals feel is unjustified is “unprecedented.” She estimates the rate cut would cost UH $27.5 million.
The system has just two places to turn to make up for that loss, she said: cutting services or cutting employment.
“If this cut goes forward, there’s obviously going to be an impact on both of those,” she said. “You can’t do one without the other.”
Hospitals are at the point where they can’t absorb the loss, Palmer said.
“We, just like the state, need to know that we have reasonable reimbursement, predictable reimbursement and stable reimbursement if we’re going to continue to be able to invest in the health of Ohioans that are covered by Medicaid,” Gartland said.