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Some Illinois hospitals warn Medicaid change could mean cuts

By Sarah Zimmerman 
Associated Press

CHICAGO — Three of every five patients entering South Shore Hospital are poor or disabled and get their health care coverage through government-subsidized Medicaid.

Medicaid doesn’t cover all the costs to hospitals of providing the medical treatment, but reimbursement and the creative way Illinois receives matching federal dollars have allowed South Shore to continue providing vital services to its impoverished community on Chicago’s South Side.

As lawmakers consider revising that program, South Shore CEO Tim Caveny is worried that his hospital won’t see a dime of new money. If the hospital can’t get $3 million from the new program, South Shore would have to close by the summer, he said.

South Shore is one of 22 “safety-net hospitals” in cities and rural areas across Illinois that serve a high volume of Medicaid patients. Many facilities could lose money under the new program, prompting concerns that hospitals may have to cut services, lay off staff or even close.

For over a year, lawmakers have been in sensitive negotiations with the Illinois Health and Hospital Association, which represents 200 hospitals in the state including the safety-nets. The goal has been to draw down what advocates learned is $360 million more in federal money available to Illinois, update the distribution formula in response to federal pressure and make sure the safety-net hospitals get a sufficient cut.

Rep. Greg Harris, a Chicago Democrat who heads the House Appropriations-Human Services Committee, announced a tentative agreement this past week.

Final numbers have yet to be released, so it’s unclear how many hospitals would lose money under the redesign. But safety-nets are concerned because any loss would hit them harder than the traditional hospitals since they can’t make up losses on medical care with private-pay patients.

Caveny said he’s already expecting to receive no new funding for his hospital, which is critical to keeping his hospital open.

“We need $3 million more in funding from the program,” he said. “And that’s just to break even.”

The money is not only essential to Medicaid-dependent hospitals, but to the rest of the state budget. Officials take roughly $750 million from the state-federal mix to cover non-hospital related Medicaid services.

They’re racing the clock. Federal approval typically takes a year and the deadline is June 30. While negotiators say they still hope to come in under the wire, they also have plans for an interim “bridge” program to secure funding.

Medicaid matches the money a state puts up. In Illinois, like in seven other states, including Indiana and Ohio, hospitals pre-pay an agreed-upon assessment totaling, in recent years, about $1.4 billion each year. That draws a 60 percent federal match. The $2.8 billion left after the state’s share is distributed to hospitals on a formula partly based on patient data at least a decade old.

The federal government has been pushing states to put Medicaid clients into privately run “managed care organizations” where competition cuts costs. Illinois this year added 800,000 clients to managed care.

Using patient data from 2015, the latest available, will take them into account and will “fully reflect where services are provided,” said hospital association president and CEO A.J. Wilhemi, meaning more for hospitals with higher Medicaid patient rolls.

But safety-net hospitals have complaints about managed-care organizations. Caveny thinks the shift is good, but he said South Shore often waits six months to get paid for managed-care-covered treatment, causing cash-flow problems.

For another safety-net, St. Bernard in Chicago’s Englewood neighborhood, it’s a question of whether the claim is approved at all. CEO Charles Holland said St. Bernard’s denial rate for managed-care claims is 15 percent to 17 percent, meaning the hospital provides some services with no compensation.

Wilhelmi acknowledged the wrinkles, but maintained that the focus on funding actual Medicaid costs will benefit the safety-nets. He promised that distribution of the $360 million bump will prioritize safety-nets.

Ryan Keith, who represents the safety-nets, noted that a majority of these needy hospitals fare well under the new program.

That’s of little comfort to South Shore. Rising health care costs have already forced the hospital to make major cuts in the past year, Caveny said. Closure would mean putting “500 employees — mostly minorities — out of work.”

“We’re not getting greedy,” Caveny said. “There’s $360 million in new funding and we’re not getting any of it.”

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