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Rural Ozarks Hospital Says It Could See a 60 Percent Reduction in Bottom Line if Medicaid Expansion Fails

Ozarks Medical Center has an unusually high clientele of Medicaid and Medicare patients; federal reimbursements that help pay for 'charity care' are set to be reduced by 75 percent under new health care law
Some hospital administrators fear they might have to reduce services if the state does not expand Medicaid as part of the 2010 Affordable Care Act. (Photo credit: Alex Crowder,KSMU)

Hospitals across Missouri, especially those that serve high-poverty areas, are anxiously waiting to see whether state lawmakers will expand the state’s Medicaid program. As KSMU’s Jennifer Davidson reports, many hospitals will be directly affected by that decision.

Reporter Standup: "Right now, I’m standing right outside the main hospital in south-central Missouri: Ozarks Medical Center in West Plains. It serves over 150,000 people in one of the poorest Congressional districts in the nation. Patients and visitors are trickling in and out of the main door, and a line of Bradford Pear trees has just awoken for the Spring. But hospital administrators here – and throughout Missouri – are a bit tense right now. They’ve done the math, and know that they’re in a unique position regarding the Medicaid expansion. The 2010 Health Care Law, known as the Affordable Care Act, called for a Medicaid expansion for low-income adults. But the US Supreme Court ruled that the expansion was optional for states."

“What the federal government does is, it designates hospitals as a Disproportionate Share Hospital, or ‘DSH,’” said David Zechman, president and CEO of Ozarks Medical Center.

This hospital is a so-called DSH hospital because it receives payments from the federal government to offset the charity care it provides. Charity care is health care that isn’t paid for, usually because the patient doesn’t have money or insurance. At OMC, the DSH money doesn’t cover all the cost of charity – but it does cover about 30 percent...a sizeable chunk of change.

When the federal health care law was passed, it included a 75 percent cut in those DSH payments.That’s because another part of the health care law – the Medicaid expansion part – was supposed to make up for that reduction. So: more people covered by Medicaid, less charity care – and less of a need for DSH payments.

But what lawmakers didn’t factor in was the US Supreme Court’s later decision that states didn’t have to expand Medicaid. So, this hospital is still set to lose 75 percent of its DSH payments from the fed – and if Missouri lawmakers refuse to expand Medicaid, Zechman says OMC will be in a tight spot.

“I think that becomes pretty crystal clear, because at that point, we’re still going to be taking care of patients who don’t have any means to pay. And yet, some of the money to help offset that cost, 75 percent of that, will now go away as of October 1, 2013,” Zechman said.

He said hospitals are faced with the possibility of local services being reduced if the Medicaid expansion doesn’t go through.

Davidson: "Help me understand a little bit more about how the DSH payments affect OMC’s bottom line."

Zechman:“Here’s what I can tell you. If you combine the Sequester cut, which is two percent of our Medicare payments across the board; if you count the cut for the Affordable Care Act, which has started; if you count the cut if the Medicaid expansion doesn’t happen, we’re going to see a 60 percent reduction in our bottom line. There aren’t very many businesses, or companies, that can survive in America with a 60 percent cut into their operating margin that keeps the current programs going, and allows you to recruit really good people to provide care, that allows you to pay people competitive salaries, that allows you to buy decent equipment and technology."

Zechman said the OMC Board of Governors has endorsed the Medicaid expansion plan, even though the Affordable Care Act as a whole has not been popular in these parts.

“It was, I believe to be, a pretty landmark event. And they said, ‘We’re going to put aside what our personal beliefs are, and our personal ideological beliefs, because we believe this Medicaid expansion is the right thing for our community and the right thing for health are in our region,” Zechman said.

Reporter Standup:  "And here at OMC, about 45 percent of patients have Medicare, and about one in five have Medicaid, which is unusually high.The vast majority of the Medicaid expansion would be covered by federal dollars, but many Missouri Republicans say they’re still concerned about the millions the state will have to pick up. Other conservatives say they think Medicaid needs to be reformed before its expanded. So far, Missouri’s Republican-led House has flat-out rejected Medicaid expansion.  But Governor Jay Nixon strongly supports the idea, as does the Missouri Hospital Association. This week, Nixon met with House Republicans to discuss the matter:one item of discussion was using Medicaid funds to buy private insurance, and installing co-pays and cost-sharing plans for low-income Missourians.

For KSMU News, I’m Jennifer Davidson.

Click here for an archive KSMU story on how must the proposed Medicaid expansion would cost, and who would be affected.  And you can click here to learn about Governor Jay Nixon's business perspective on the proposal.