Hospitals pay for states' refusal to expand Medicaid

The financial picture for hospitals in states that failed to expand Medicaid doesn't look good, according to the Wall Street Journal.

The expansion of the low-income health insurance program was meant to offset cuts to disproportionate share hospital (DSH) payments. But in states that declined to expand Medicaid, the cuts will go through without additional reimbursements to balance them out. To date, two dozen states have either declined to expand Medicaid or have yet to make a decision on the issue.

Shelby Baptist Medical Center, near Birmingham, Ala., turned a $1.6 million profit in 2012, due in large part to $9 million in DSH payments, according to the article. Now those funds are at risk, and about 190,000 Alabamans who would have qualified for Medicaid will fall into a coverage gap due to Alabama's failure to expand the program.

"Unfortunately in our state, without expanding Medicaid, and with very limited enrollment in the exchange, we're not seeing the benefit," Greg Johnston, chief financial officer of Baptist Health System, which operates the Shelby facility and three others, told the WSJ. "We're seeing more on the cut side."

Alabama has 84 DSHs, nearly 40 percent of which operated at a loss in 2012, according to the WSJ. The Alabama Hospital Association expects the cuts to DSH payments to cost hospitals in the state about $40 million in 2014, executive vice president Rosemary Blackmon told the WSJ.

The Centers for Medicare & Medicaid Services issued a final rule on DSH payment cuts last September, cutting about $1.1 billion over the next two fiscal years. The cuts will be larger in states with more DSHs, states with lower uninsured rates and states that "do not target their DSH payments on hospitals with high levels of uncompensated care," FierceHealthcare previously reported.

To learn more:
- read the WSJ article (registration required)