Rubio bill could help Nevada hospitals, but industry focuses on Carson City

For-profit hospitals in Nevada are hemorrhaging hundreds of millions of dollars a year, thanks in large part to stingy Medicaid reimbursements, a problem state lawmakers have been unwilling to address.  Now, a bill sponsored by U.S. Senator Marco Rubio (R-Florida) could spell relief in the form of federal money.

The Affordable Care Act and the doubling of Medicaid rolls in Nevada from 300,000 to more than 650,000 proved a boon to Southern Nevada’s public hospital, University Medical Center.  Not only did the rate of paying customers balloon, but a fund designed to offset the burden for so-called safety-net hospitals such as UMC, picks up almost all of the hospital’s uncompensated care – $72.4 million for 2017, the last year on record.

Not so for the state’s private institutions, which are enjoying increased patient loads, thanks to Medicaid expansion, but are suffering the low reimbursements – some of which have been stagnant for decades.

The Nevada Hospital Association (NHA) estimates private hospitals in the Silver State are reimbursed for only 57 percent, slightly more than half, of the care they provide to low-income and uninsured patients.   

Rubio’s bill, the State Accountability, Flexibility and Equity for Hospitals Act (SAFE Hospitals Act) would change the formula used to allocate more than $12 billion a year paid to “safety-net” hospitals throughout the country – those that provide uncompensated care to a disproportionate number of low income patients.   

Nevada hospitals receive about $80 million a year via the Disproportionate Share Hospital fund. The state pays about a third with the remainder coming from the federal government.  Under Rubio’s bill, Nevada could reap perhaps as much as $68 million more. 

But a spokeswoman for Sunrise Hospital, which is leading a public relations campaign to persuade state lawmakers to increase Medicaid reimbursement rates, says the hospital’s focus remains on Carson City, where it hopes to secure an additional $30 million a year in government funding.  

“Since it’s a proposal at this point, we will avoid speculation,” say Sunrise Communications Director Fran Jacques of Rubio’s bill. “Our request for more equitable reimbursement and stance with the campaign remains unchanged for the foreseeable future.”

The PR effort, which includes a petition to lawmakers, focuses on Sunrise’s Neonatal Intensive Care unit, where three-quarters of the newborns are covered by Medicaid, according to Jacques.

“We have the lion’s share of Medicaid babies.  We are the hospital of proximity and the bottom line for families with economic challenges.  We are the safety net provider,” she says.

A day of specialized NICU care can cost the hospital thousands of dollars, but the per diem Medicaid room and board reimbursement of $1,500 has stayed relatively flat for decades, according to data provided by the state. And that isn’t the only reimbursement rate that hasn’t increased much or at all.

• In 1980, the government set the reimbursement rate for room and board for Intensive Care surgery, pediatric, oncology and other patients at $1,345 a day, where it remained for 35 years.  In 2015, the reimbursement increased by $155 to $1,500 a day.
• Medicaid reimbursements for obstetric patients have declined slightly, from $1,203 in 1981 to $1,197 in 2015.    
• Reimbursement for psychiatric and detoxification patients remained at $460 a day from 1980 to 2014, then more than doubled to $944.
• Trauma Level One reimbursements remained at $2,200 a day from 1980 until a bump to $2329 in 2013.  The reimbursement has since returned to $2,200.  

The reimbursement rate for rehabilitation patients is an exception.  The rates have steadily climbed in the last forty years – from $460 in 1980 to $1,500 in 2015.

A change of fortunes

Not long ago, University Medical Center, the only non-profit hospital in Southern Nevada, required annual multi-million dollar bailouts from Clark County government.  The Affordable Care Act and Medicaid expansion changed that, providing the public hospital with a steady stream of insured patients, albeit low reimbursements.

UMC generated $625 million in net patient revenue during Nevada’s 2017 fiscal year, according to state reports.  As a public hospital, UMC’s uncompensated care, which amounted to $72.4 million in 2017, is almost fully reimbursed via the Disproportionate Share Hospital (DSH) fund.  

Sunrise, on the other hand, generated $621 million in net patient revenue for the year and provided $55.6 million in uncompensated care, but received approximately $250,000 in DSH reimbursement — a tiny fraction of its unpaid care.

Sunrise CEO Todd Sklamberg says the Medicaid deficit cost the hospital $77 million in 2017.  

Sunrise, celebrating its 60th anniversary, was once the hospital of choice for an exclusive clientele. The neighborhood and the times have changed.

“It’s not by design,” says Sunrise spokeswoman Fran Jacques of the hospital’s low-income patients.. “You don’t call Medicaid and they say ‘this is where you go for care.’  This is just where they come and that has been a changing dynamic as the city has grown. They come here because the community around Sunrise Hospital is a community of great financial deficit.”

Sunrise’s parent company, Hospital Corporation of America, is the largest chain of for-profit hospitals in America. Despite general unrest over Medicaid reimbursements, private hospitals remain squarely in favor of the ACA, evidenced by the plunge in health care stocks in December when a Texas judge ruled Obamacare unconstitutional.   

“Outdated system”

The current formula for DSH allocation is widely criticized as antiquated and unfair to states with a high percentage of low-income residents — Nevada among them.  The Census Bureau estimates, 13 percent of Nevadans, nearly 400,000 people, live below the poverty level. The national poverty level is 12.3 percent, about 40 million people.

Government analysts say the current formula for allocating money to safety-net hospitals has “no meaningful relationship between states’ DSH allotments” and three factors identified by Congress for study:

• the number of uninsured individuals;
• the amounts and sources of hospitals’ uncompensated care costs; and
• the number of hospitals with high levels of uncompensated care that also provide essential community services for low-income, uninsured, and vulnerable populations

The Medicaid and CHIP Payment and Access Commission found that “since implementation of coverage expansions under the Patient Protection and Affordable Care Act, total hospital charity care continues to fall, with the largest declines occurring in states that expanded Medicaid.”

“The Medicaid DSH program must be modernized, rather than relying on an outdated system that predominantly reflects state spending in 1992. My new bill would fix this disparity and update the system to create equity within the DSH program,” Rubio said in a news release. “For far too long, Florida has not received its fair share of funding for hospitals that serve the most vulnerable patients.”

Florida could gain up to $600 million in additional funding over 10-15 years, according to Rubio’s office.

Rubio’s bill would allocate each state’s DSH portion based on the state’s share of the total U.S. population earning less than 100 percent of the Federal Poverty Level (FPL). Nevada, which is home to slightly less than one percent of Americans living below the poverty level, would receive approximately one percent of the more than $12 billion annual allotment – $118 million, which is $68 million more than the state received from the federal government in 2017.

Almost two dozen Nevada hospitals are eligible to receive federal and state money to offset the cost of uncompensated care to low-income and uninsured patients, according to state reports.   

Those hospitals generated net patient revenue of $5.26 billion and provided $339 million in uncompensated care in 2017.  The data is used by the state to determine 2019 distributions from DSH.

Almost all of the DSH money is allocated to Clark County hospitals, with $1.5 million of $55 million in federal money slated to go to Washoe County in 2019.  

Among urban hospitals, St. Rose Dominican’s De Lima campus in Las Vegas provided the most uncompensated care as a percentage of revenue, chalking up just under $18 million, about 18 percent of its $96 million in net patient revenue. The hospital will receive roughly $200,000 from the DSH.  

UMC came in second with 11.5 percent or $72.4 million of its $625 million in net patient revenue unpaid by patients or a third party. The public hospital had the highest dollar amount of uncompensated care in 2017.

The Nevada Hospital Association has yet to take a position on the SAFE Hospitals Act.

“At this time, we haven’t provided our comments to Senator Rubio regarding the discussion draft of the SAFE Hospitals Act,” NHA spokeswoman Amy Shogren said in an email. “I believe his deadline is January 25. I am more than happy to share those with you once they are complete.”

Maybe this time…

“I’ve been in town for 11 years,” says Sunrise CEO Sklamberg. “I have given over 300 tours with legislators.  I’ve talked with them about the challenges of Medicaid. All but one said ‘I support you. I support the need to take a look at Medicaid reimbursement.’  Until the session begins.”

At that point, Sklamberg says, healthcare slips down the priority list, usually displaced by education.  

This time could be different.  

Democrats control the Legislature, women are flexing their muscle as a majority for the first time, and Governor-elect Steve Sisolak is on the record in support of increased reimbursements for Medicaid.

“At some point you have to evaluate the services you are providing,” Sklamberg says, referring to the hospital’s investments in cutting-edge technology and equipment. ”This is about care for all patients, not just NICU babies.”