Tennessee hospitals have stepped in to help control their own destiny with the help of a bill sponsored by Sen. Doug Overbey (R-Maryville) and signed by Governor Phil Bredesen.
Governor Bredesen recently signed legislation sponsored by Sen. Overbey to prevent potentially catastrophic cuts to Tennessee hospitals as a result of budget cuts proposed earlier this year in the state’s 2010-2011 budget.
Hospitals asked the General Assembly to enact a “coverage assessment” on them in order to raise $230 million. Money raised will be used to draw down federal funds available through a temporary Medicaid match program officially approved by the Centers for Medicare and Medicaid Services (CMS) on June 30.
“I am pleased the General Assembly passed this legislation, and the governor has signed it into law,” said Senator Overbey. “Without this legislation, many of our hospitals, particularly those in rural areas, would have faced severe consequences and possibly closure.”
“The hospital coverage assessment will restore $659 million in proposed cuts to the TennCare program by allowing hospitals to temporarily ‘step into the state’s shoes’ to fund a significant portion of the program,” said Craig A. Becker, president, Tennessee Hospital Association (THA).
The plan works this way: Hospitals are assessed a percentage based on 2008 net patient revenue. The money, which then becomes state funds, goes into a fund that is matched by federal funds and paid back to the hospitals to restore the budget cuts and fill in the gaps in TennCare payments.
In explanation, Sen. Overbey said, “Essentially, the hospitals are using their cash flow to finance their TennCare programs.”
A few examples of the cuts that will be restored include those to critical access hospitals, the Graduate Medical Education program, a $10,000 cap on inpatient and the 8-visit limit imposed on outpatient services, therapies and office visits. Money raised by the fee will provide funds for the medically needy program and payments to reimburse hospitals for a portion of their uncompensated TennCare.
Some hospitals, including Blount Memorial, are exempt from the assessment. As a local government-owned hospital, Blount Memorial will not be assessed but will get payments to offset the proposed cuts from the Bredesen budget, but will get no more than that, explained Overbey. Participating hospitals will divide any monies that are left after the budget cuts have been restored to help offset TennCare shortfalls.
The bill will “sunset,” or end, after one year unless renewed by the legislature, something Overbey expects to happen. “I wanted a two-year period but the hospitals wanted to make sure it would work,” said Overbey. “I expect I will carry a bill next year to extend it for two years.”
Language in the legislation, Senate Bill 3528, ensures that any assessment imposed by this legislation would not be passed along to patients. The assessment is based on 3.52 percent of a hospital’s net patient revenue according to its 2008 Medicare cost report. In addition to local government hospitals such as Blount Memorial, critical access hospitals, freestanding rehabilitation hospitals, long-term acute care hospitals and pediatric research hospitals are not included in the assessment, as well as state mental health institutes.
The hospital coverage assessment will allow hospitals and the state to have some breathing room until the national and state economies recover, according to Sen. Overbey. “The assessment will not be passed on to patients, nor will the federal match affect the federal deficit.”
Hospital officials say the budget cuts would have had a long-term impact on TennCare enrollees, hospitals and other providers and patients, particularly Level 1 trauma centers and hospitals in the most rural areas of the state. It would also have severe ramification for high cost services, such as treatments needed for burn, perinatal and hemophilia patients.
Twenty-six other states have a similar assessment plan to provide funding for their Medicaid programs and twelve additional states are currently considering such a plan.