Defeat on provider fee could gut hospitals’ finances

Just weeks before the 2013 General Assembly convenes, the state’s provider fee, called a “bed tax’’ by some, remains a high-profile wild card – one that could deal Georgia’s hospital industry a crippling blow.

If the fee is not renewed – and anti-tax forces will oppose it – the Medicaid system may lose $430 million-plus that the assessment now generates. That loss would swell the state’s Medicaid financial shortfall, which is already about $400 million.

Not renewing the fee could mean a  20 percent reimbursement cut to Georgia hospitals. When a related payment add-on is removed as well, the overall cut in Medicaid reimbursements to hospitals could amount to more than 30 percent.

The financial fallout could close many rural hospitals, Jimmy Lewis, CEO of HomeTown Health, said Thursday. The organization is an association of rural hospitals across the state.

Gov. Nathan Deal recently urged hospitals to come together behind a proposal to renew the fee. (Here’s a WABE article on Deal’s comments.)

The Georgia Hospital Association, meanwhile, has been working for months on a new formula, seeking to have a new proposal in place for the legislative session that can unite the industry behind the assessment, due to expire in July. GHA told Georgia Health News on Thursday that it has finalized the formula.

Currently, the fee is not levied on individual patients or on hospital beds, but is based on hospital net patient revenue. More than 40 states use such assessments to help cover the costs of their Medicaid programs.

With rough economic times crimping state budgets, some states in the past five years have hiked provider taxes already in place or approved new ones on hospitals, nursing homes or managed care plans. The states use the funds to increase the federal spending on their Medicaid programs.

Two-thirds of the money generated in Georgia goes to shore up Medicaid’s budget. The rest goes to raise Medicaid reimbursements to hospitals.

The amount raised from hospitals is returned to the hospital industry through reimbursements. Individual hospitals get different amounts based on how much Medicaid business they do, so there are, in effect, winners and losers under this formula.

Grady Memorial Hospital, which has a large Medicaid patient mix, received more than $9 million from the state’s hospital provider tax in fiscal year 2011. Children’s Healthcare of Atlanta’s two hospitals netted a total of more than $22 million, according to state figures.

The biggest loser during that period was Piedmont Hospital in Buckhead, which lost $6.4 million.

Medicaid, jointly financed by the federal government and individual state governments, covers 1.5 million poor and disabled Georgians. The program constantly faces funding problems in Georgia.

In a potential blow to supporters of the provider fee, money from renewing the assessment is likely not going to be reflected in Deal’s initial budget. A spokesman for Deal, Brian Robinson, told GHN in an email this week that “we can’t plan on that money coming, since the Legislature could elect to not renew it.”

The hospital fee is expected to appear in the form of legislation.

Health industry officials tell Georgia Health News that the new arrangement worked out by GHA is likely to have two parts. The first would be a renewal of the current formula, which would be combined with a new arrangement to draw down federal money for private hospitals. The latter part would help smooth out the losses for organizations such as Piedmont Healthcare and Northside Hospital.

A GHA vice president, Kevin Bloye, told GHN in an email, “While our plan does not completely eliminate these losses [of some hospitals], it does reduce them and makes the system far more palatable for these hospitals.  This financing program is far from perfect, but when compared to the alternative — massive across-the-board Medicaid rate cuts — the overwhelming majority of our members are supportive of our plan.”

The legislative fight over the fee/tax will be fierce. Grover Norquist, a Washington-based anti-tax activist, in a recent letter to Georgia legislators, said renewing the hospital fee would kill jobs and raise health costs. He urged state lawmakers to oppose renewing what he called “a bed tax.”

Norquist is the author of an anti-tax-increase pledge that has been signed by many of the nation’s Republican lawmakers, including leading ones from Georgia. He said renewing the hospital tax would amount to breaking that promise.

Major Georgia hospital organizations have fired back at Norquist and come out strongly in support of the tax.

Children’s Healthcare of Atlanta, Grady Health System, Memorial University Medical Center in Savannah and HomeTown Health delivered a letter of their own to leading Georgia officials.

If the fee is killed, “the burden of funding Medicaid and caring for the most vulnerable Georgians would fall entirely on the backs of state and local taxpayers,” said the hospital group, called the Coalition for Medicaid Payment Equity.

Lewis said more than 20 rural hospitals could close if the provider fee is eliminated.

In an AJC column Thursday, Jim Galloway reported that many newly elected or re-elected Republicans in the Legislature consider themselves part of the Tea Party revolution. Those include state Sen. Josh McKoon of Columbus, who said he considers the fee a tax. “I oppose the bed tax for the same reason I support the governor on his decision to refuse the Medicaid expansion,’’ McKoon said.

The battle over the fee/tax, experts say, could largely drown out legislative discussion about expanding the Medicaid program, which is outlined under the Affordable Care Act but is not compulsory for the states. Deal, like other Southern governors, has said he opposes expansion, citing the costs to the state.