Transcript Slide 1

Louisiana Hospital Association
The Budget Challenge of Healthcare
Healthcare Economic Engine
• The healthcare sector in Louisiana represents
almost 15% of total payroll in the state, totaling
approximately $8.33 billion.
• Hospitals employ 99,351with a payroll of $4.4
billion, which accounts for 55% of payroll within
the healthcare sector.
Economic Impact of
LA Hospitals
• Hospitals average about $469 million in
building construction each year, leading to
the creation of more than 8,042 new jobs
yearly in sectors other than healthcare.
• The overall economic activity that is
supported by hospital expenditures leads to
$487 million in state tax collections and
$325 million in local tax collections.
Economic Impact of
LA Hospitals
• Overall hospital expenditures are estimated to be
$8.8 billion; and overall business transactions as
measured by business sales, including the direct
hospital expenditures, are $18.6 billion.
• The number of jobs related to hospital expenditures
is 182,586.
• The healthcare industry in Louisiana employs more
than 269,184 people, over 16.3 percent of the total
workforce and approximately 15.3 percent of the
state’s total private payroll.
Healthcare Economic Engine
• Each job in a hospital supports almost one
additional job.
• Every dollar spent by a hospital supports
$1.14 of additional business activity.
Economic Impact of Hospitals
in the Lafayette Area
In the most recent cost report year 2009, 16 Lafayette
region hospitals had:
• FTEs
4,430
• Total Salaries
$181.9 million
• Total Operating Expenses
$830.8 million
• Net Patient Revenue
$667.9 million
• Average Hourly Wage
$21 - $27
(Some hospitals had not reported salary information)
Healthcare Coverage
in Louisiana
• 1.7 million have commercial health insurance
• 1.2 million rely on Medicaid
• 653,000 rely on Medicare
• 813,000 have no insurance coverage
Louisiana Hospital
Operating Margins
100%
90%
80%
70%
57% of hospitals surveyed
had total operating margins of
less than 1%.
60%
50%
43% of hospitals surveyed had
negative total operating margins.
40%
30%
20%
10%
0%
less than 1%
greater than 1%
Source: LHA 2009 Annual Survey
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Medicaid Enrollment History
State FY
Enrolled
State FY
Enrolled
SFY 1997-1998
730,898
SFY 2003-2004
1,067,188
SFY 1998-1999
717,813
SFY 2004-2005
1,113,410
SFY 1999-2000
726,734
SFY 2005-2006
1,142,280
SFY 2000-2001
846,646
SFY 2006-2007
1,154,533
SFY 2001-2002
930,154
SFY 2007-2008
1,174,215
SFY 2002-2003
1,010,201
Estimated Today
1.23 million
Source - DHH Medicaid Annual Reports SFYs 1997-98 thru 2007-08
Total Medicaid Hospital Service
Lafayette Region & State
• Lafayette Region
– Community Hospitals
– Rural Hospitals
– State Hospital
81%
5%
13%
• Statewide Totals
– Community Hospitals
– Rural Hospitals
– State Hospital
70%
8%
22%
Reimbursement
In Louisiana:
• Medicaid payments to community hospitals
(non-state, non-rural) are $153 million below
the cost of the care provided. (In Lafayette
Region alone, $28+ million)
• In addition, these same community hospitals
provided over $186 million in net un-reimbursed
costs to uninsured patients.¹
¹Net un-reimbursed costs equal gross costs less patient payments before uncompensated care
payments.
Source: DHH/ Myers and Stauffer Analysis
Medicaid Inpatient Hospital Payments
Compared to Medical Care Inflation
80.0%
1997 2.6% Medicaid rate increase
70.0%
5.0%
60.0%
4.0%
3.0% 1.0%
3.5%
5.3%
9.0%
3.0%
2.0%
6.0%
50.0%
3.0%
2.6%
3.2%
4.8%
2009 3.5% mid-year reduction in
February and 6.3% IP / 5.65% OP
reduction in August (approximate $90
million total impact to hospitals
including outlier reductions)
5.0%
10.0%
4.5%
30.0%
17.0%
5.1%
4.8%
3.3%
20.0%
4.3%
3.3%
3.2%
10.0%
0.0%
2006 $38 million appropriated for
3.8% Medicaid rate increase
2007 $33 million appropriated for
4.75% Medicaid rate increase
4.1%
40.0%
2001 $25 million appropriated for
2.5% Medicaid rate increase
3.0%
2.8%
2.0% 2.0%
0.0% 0.0%
2.0%
2.6%
-2.0% 1.0%
4.75%
0%
3.8%
0%
0%
0%
2.5%
0%
0%
0%
0%
-9.8%
-10.0%
-9.6%
2010
2009
2008
2007
2006
2005
LA Medicaid Hospital Rate Increases
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
Medical Care Inflation
2010 5% mid-year reduction in
February (approximately $50 million
impact to hospitals) and 4.6%
estimated reduction passed in recent
state budget (estimated impact of $46
million at present pending additional
data)
LA Medicaid Enrollment Rate Increases
Medical Care CPI projected for 2009 and 2010 using average of the three previous years; Medicaid Enrollment
Increases for 1995 and 1996 based on average of three subsequent years; Medicaid Enrollment Increases for 2009
and 2010 based on average of three previous years
12
13
Health Reform Becomes Law
• The Patient Protection and Affordable Care Act
(PPACA) was signed into law March 23. It was
amended by the Health Care & Education
Affordability Reconciliation Act, which was signed
into law March 30. Together, the legislation:
• Provides coverage to 32 million uninsured people by
2019.
• Costs an estimated $940 billion over 10 years (20102019).
Medicare & Medicaid Payment
Cuts – Paying for Reform
Nationally, hospital payments will be cut
$155 billion over 10 year period beginning in
2010 to help pay for expanding coverage to
32 million.
State Burdens Under
National Health Reform
• At 133% of Federal Poverty Level, nearly 42% of
all Louisiana residents would qualify for
Medicaid!
• 260,000 residents could be added to Medicaid
rolls.
• This alone could cost the state an additional
$614 million in state dollars.
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FISCAL YEAR 12 . . .
THE
“CLIFF YEAR”
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Misunderstanding….
“Why is it so hard for the
legislature to cut $1.6 billion out of
a $25.5 billion budget. That’s a
cut of only 6% and who out there
couldn’t manage to cut their
budget by 6%?”
18
Federal Funds cannot be cut to
deal with the shortfall
FEDERAL
FUNDS
45%
$11.5 B
19
For various reasons, the legislature and in some
cases the citizens, have chosen to dedicate certain
revenues for specific services. Dedicated funds are
not generally considered to be available to offset a
shortfall
FEDERAL
FUNDS
45%
$11.5 B
DEDICATIONS
18%
$4.6 B
20
The legislature allows some agencies to charge
a fee to offset some or all of the cost of their
operations. These fees are not generally
considered to be available to cover a budget
shortfall in the General Fund
FEDERAL
FUNDS
45%
$11.5 B
DEDICATIONS
18%
$4.6 B
21
The most versatile funding in the budget is
the General Fund which can be used to
pay for any expense of government
FEDERAL
FUNDS
45%
$11.5 B
GENERAL
FUND
30%
$7.7 B
DEDICATIONS
18%
$4.6 B
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Because there are restrictions on the use of the other
sources of funding in the budget, the General Fund is
where most of the cuts will have to be made to deal
with the $1.6 billion shortfall
GENERAL
FUND
30%
$7.7 Billion
Cutting $1.6 Billion out of this area of state
funding would amount to a 20% across-theboard cut
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However, there are even restrictions on the General
Fund and those restrictions protect $5.1 billion of
the total $7.7 billion from cuts. This “uncuttable”
part of the budget is referred to as
“non-discretionary” spending
$2.6 Billion
$5.1Billion
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This leaves 10% of the total state budget or
about $2.6 billion to absorb the $1.6 billion in
cuts needed to eliminate the $1.6 billion
projected FY 12 shortfall
$2.6 Billion
FEDERAL
NONDISCRETIONARY
AGENCY
FEES
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Breakdown of Discretionary
General Fund Budget
All Other
34%
Higher Ed.
37%
Health Care
29%
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