A federal rule, set to take effect in September, would strip about $120 million in Medicaid payments from Colorado hospitals and could devastate institutions that care for the state’s poor and uninsured patients.
“We’re struggling to see how we could stay open” if the rules goes through, said Peg Burnette, Denver Health’s chief financial officer.
The rules could slash about $65 million from Denver Health’s $518 million annual budget, Burnette said.
The University of Colorado Hospital and Memorial Hospital in Colorado Springs would also face crippling cuts, hospital officials said.
“This is a very big deal,” said Richard Knapp, executive vice president of the American Association of Medical Colleges. “In many states, institutions are very dependent on these dollars.”
The rule, as hospital administrators read it, would mean that only a public hospital could receive funds from Medicaid’s “disproportionate share” program, which supports facilities that treat the greatest number of poor and uninsured people.
At the same time, the rule changes the definition of a “public hospital” so that facilities like Denver Health and the University of Colorado Hospital would no longer qualify.
Only institutions with some taxing authority would qualify as a public hospital.
The proposed change would save $1.2 billion over the next five years, according to estimates by the White House Office of Management and Budget.
ERs around state would feel effects
The new rule is not designed to deny Medicaid money to hospitals that serve the poor and uninsured, said Sean Kevelighan, an OMB spokesman.
“There are probably some entities that fell into a realm where they were being provided payments based on being in a category they were not intended to be included in,” Kevelighan said.
Burnette estimates the change would cut Denver Health’s annual budget by 13 percent.
“Any cut of that magnitude would impact quality so substantially that we couldn’t stay open,” Burnette said.
The University of Colorado Hospital would lose about $35 million a year, said Anthony DeFurio, chief financial officer.
Colorado Springs’ Memorial Hospital estimates it would lose about $15 million a year, according to the Colorado Hospital Association.
“We’re very concerned,” said Steven Summer, the association’s chief executive.
The impact would be greatest on nonprofit hospitals serving the poor – like Denver Health, Summer said.
But if Denver Health could not care for the uninsured, he said, the impact would ripple through emergency rooms across the state.
“There is a downstream implication that would be horrific,” Brunette said.
Opposed by a coalition of senators
Congress created the “disproportionate share” program in 1981 to help the hospitals that serve low-income and uninsured patients avoid an added financial burden.
Medicaid is a joint federal-state program, with each side splitting the cost.
In the past decade, Congress and federal Medicaid officials have complained that states aren’t shouldering their share of the program’s escalating cost.
In proposing the rule change, Medicaid officials said audits found some states using Medicaid money not to pay hospitals, but for public health programs.
“That didn’t happen in Colorado, and where it happened, it’s been cleaned up,” Brunette said.
A coalition of 43 U.S. senators, including Colorado Democrat Ken Salazar, and organizations representing hospitals oppose the rule change.
The change, proposed by the Centers for Medicare and Medicaid Services, does not need congressional approval.
Congress can pass legislation specifically to stop it, and Sen. Mel Martinez, a Florida Republican, last week introduced a bill that would delay implementation for two years.
That bill is now before the Senate finance committee.
“We need to make the system better without sacrificing the stability of our safety-net hospitals,” said Cody Wertz, spokesman for Salazar.
Hospital and industry representatives say they plan to make a case before the state legislature’s Joint Budget Committee this week.
The Bush administration’s most recent budget proposal is also asking for cuts in the graduate medical education program.
That program reimburses teaching hospitals – such as CU and Denver Health – for the cost of training new doctors.
If approved, the cut would cost CU $3 million and Denver Health $1.7 million, officials at both institutions estimate.
The Association of Medical Colleges’ Knapp said his group is looking into legal action should the “disproportionate share” rule change take effect.
“We’re going to do everything we can to stop this,” he said.
Staff writer Karen Augé can be reached at 303-954-1733 or kauge@denverpost.com.
How much money?
Hospital administrators say they could lose millions in Medicaid funding if a cost-cutting move goes into effect.
$65 MILLION
Denver Health Medical Center (13 percent of its annual budget)
$35 MILLION
University of Colorado Hospital
$15 MILLION
Memorial Hospital in Colorado Springs
