Health News

Report: Florida hospitals at risk of losing $1.3 billion

Florida is at risk of losing about $1.3 billion in federal funds used to reimburse hospitals that treat large numbers of poor and uninsured patients, jeopardizing the medical centers’ ability to continue serving those populations, according to a report released Thursday by state healthcare officials.

The 244-page report was required by federal regulators who wanted Florida healthcare officials to explain how the state will ensure that hospitals can continue treating patients with Medicaid, the federal-state program for the poor and disabled, without relying on a special pot of supplemental money known as the Low Income Pool or LIP program.

The LIP program is scheduled to end by June 30 under an agreement with the Centers for Medicare and Medicaid Services or CMS, a federal healthcare regulatory agency.

The report by Navigant Consulting Inc., a financial and healthcare advisory firm, concludes that without an extension of the LIP program, Florida’s large public hospitals — the primary beneficiaries of the LIP program — would be hard-pressed to provide services to the poor and uninsured.

“These funds are critical for maintaining access to essential hospital services for the state’s large Medicaid and uninsured population,’’ the report noted in its conclusion. “Not having these funds available for payment to Florida’s hospitals may exacerbate an already tenuous situation.’’

Without LIP payments, the report notes, the average reimbursement for hospitals to treat Medicaid patients would be about 62 percent of the actual cost.

Payments below cost generally lead hospitals to cover those expenses by raising prices on other payers, a practice commonly known as “cost shifting.”

Still, hospitals that treat large numbers of uninsured patients, including undocumented immigrants, would be especially hard hit without the LIP program.

Miriam Harmatz, a health law attorney for Florida Legal Services, a nonprofit advocate for the poor, said she hopes the report will help state healthcare officials and lawmakers find a sustainable way to continue providing medical care for the neediest residents.

But Harmatz said she also believes the Obama administration ultimately would continue to help hospitals cover their costs for treating the uninsured and Medicaid patients, even without the LIP program.

In fact, during negotiations between state and federal healthcare officials last year to extend Florida’s LIP program, CMS said that in future years it made greater sense to consolidate a variety of different funds into a single pool.

“I believe this administration wants to work very closely with states and providers to ensure a viable safety-net system going forward,’’ said Harmatz, who in November co-authored a report warning that Florida legislators’ refusal to expand the eligibility criteria for Medicaid, as called for under the Affordable Care Act, might cost billions of dollars in lost funding for public hospitals.

Though Medicaid expansion would not cover undocumented immigrants — and would still leave hospitals with underpayments — Harmatz said that “we think there will be some mechanism” to help hospitals cover those costs.

Tony Carvalho, president of the Safety Net Hospital Alliance of Florida, which advocates for public hospitals, said that without the LIP program, state officials would have to find alternatives, such as using general revenue money.

Other options, he said: “You could put a tax on the HMOs. You could put an increase on the current tax on hospitals.’’

Another alternative, Carvalho said, was for counties that raise local taxes to fund their public hospital systems to keep that money and use it locally. The LIP program is derived from locally-raised taxes that are then matched by the federal government.

Miami-Dade is projected to raise nearly $407.8 million in local taxes this year — more than any other county in Florida — to help fund operations at its public hospital network, Jackson Health System, according to a report from the state legislature.

In return, Jackson is projected to receive about $505 million in LIP funding, according to state projections.

Established in 2005, the LIP program was designed to to ensure sustained government support for doctors and hospitals to provide services to to Medicaid, under-insured and uninsured patients.

But last year, Florida received approval to transition from a Medicaid system that paid doctors and hospitals on a fee-for-service basis to a managed care model where private insurers would coordinate medical services for those patients. About 85 percent of Florida’s estimated 3.5 million Medicaid beneficiaries are enrolled in a managed care program.

The LIP program, however, is not allowed to be used for managed care, meaning that Florida’s transition from fee-for-service to managed care made it necessary for Florida Medicaid to find another way to continue making these supplemental payments.