Maine's Rural Hospitals Facing Financial Strain

February 6, 2009

Maine's Rural Hospitals Facing Financial Strain

Waldo County General Hospital in Belfast is a “critical access hospital.” Until recently, many of us were unaware of the significance of those three words. In the Maine state budget, however, the words take on a special meaning.

There are 15 critical access hospitals in Maine. Most are located in rural communities, such as Blue Hill, Calais, Houlton, Mount Desert and Rumford. These hospitals are the first point of access for medical services for many of Maine’s rural residents. Here in Waldo County, dedicated doctors, nurses and other employees bless us with a well-run hospital that provides excellent care.

Governor Baldacci’s recent supplemental budget proposed significant funding cuts to Maine’s critical access hospitals, including Waldo County General. While legislators were able to eliminate these cuts from the supplemental budget, the governor’s two-year budget for 2010/2011 still includes proposed cuts to critical access hospitals. Additionally, all Maine hospitals will be faced with reductions in MaineCare (Medicaid) payments for hospital-employed physicians.

To better understand what we may have lost as a community, let’s first review what was “saved” in the current budget:

Community Access Hospital Cost Rate: The final version of the supplemental budget restores the Medicaid reimbursement rate for Maine’s 15 critical access hospitals from 101 percent to 117 percent of cost. The governor proposed this cut even though Maine hospitals are owed four years of unpaid cost settlements, a total of $423 million. For Waldo County General, the reduction would have meant painfully large reductions in medical services.

Physician Fee Schedules: New federal rules require that hospital-employed physicians be paid by Medicaid (MaineCare) on the same fee schedule as those who have private practices. While this makes reimbursements fairer, the governor’s proposal created further shortfalls in hospital funding. At present, hospitals are reimbursed 89 percent of cost for the services for physicians they employ. Outside physicians are paid 57 percent of the Medicare fee schedule.

The governor’s proposed budget would have reduced all physicians to 57 percent of the Medicare fee schedule. The compromise budget will, instead, raise the level for all physicians to about 70 percent of the Medicare schedule, moving Maine close to the national average. The new rate took effect February 1, 2009 for hospitals and will begin July 1, 2009 for outside physicians. Under this change, Waldo County General will still lose around $300,000. And because of complicated reimbursement formulas, the hospital will need to cut expenses even deeper.

PIP Push: The final weekly Medicaid payment due to Maine’s 39 hospitals in fiscal year 2009 will be paid instead in the first week of July, 2009, at the outset of a new fiscal year. This means that the 2010/2011 biennial budget will have to make up the difference. PIP stands for Provider Interim Payment.

Overdue Payments: The most important provision of all is a new measure that was not in the governor’s proposal. Maine’s hospitals are owed more than $400 million in state and federal funds for overdue account settlements from 2005 through 2008. While most of that money is owed to the state’s large hospitals, critical access hospitals are owed more than $41 million. The new supplemental budget will require that portions of anticipated federal “stimulus” funds will be used to pay down debts due the hospitals from 2005 and 2006.

Those of us concerned about Maine hospitals believe that the state budget should first repay old debt due to the hospitals for two reasons. First, because 35 percent of it is paid by Maine taxpayers while the remaining 65 percent is paid in federal funds, paying the debt will inject substantial funds into the Maine economy at only modest cost to us. And second, the old debt is money that must eventually be paid. Let’s plan to pay it now when the Maine economy needs it most.

The Legislature made the right decision to restore the funding. The federal stimulus package may help solve the financial problem short term. However, Maine legislators need to remember that stimulus dollars will be “one-time money.” The State has an ongoing problem of underpaying hospitals that needs to be corrected. Additionally, the governor’s two-year budget still proposes to reduce funding to critical access hospitals, including Waldo County General.

Maine legislators need to take action now to develop a cost reimbursement system that insures fair and continued funding for all our hospitals. Maine has an aging population and the demand for medical services will keep rising. We need to make sure that the hospital debts are paid and that future Medicaid funding is sufficient for our hospitals to do what they do best: take care of us.

State Representative Jayne Crosby Giles (R-Belfast) is a member of the Maine House. Giles is the Ranking House Minority member on the Business, Research and Economic Development (BRED) Committee and a member of the Committee on Maine’s Energy Future. Giles is also a board member of Waldo County General Hospital.

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