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On top of layoffs and service cuts, add 'Bay State Boondoggle' to problems afflicting hospitals

This article first appeared in the St. Louis Beacon: Pemiscot Memorial Hospital, in Hayti, Mo., is on the equivalent of life support, unsure how long it will survive without an infusion of more federal Medicare and Medicaid dollars.

In most rural communities as well as in large and small cities, the challenges facing hospitals are not as dire as the case of Pemiscot, but all are being forced to cope in a new health care environment as a result of sequestration, failure of Medicaid expansion and other cost factors. Medicare is paring its payments while Medicaid payments to Missouri will be reduced because the state decided not to expand the program.

State lawmakers say they decided against expansion because Missouri can't afford the expense and can't count on the federal government to keep its promise to pick up a large part of the tab. But the lawmakers also have agreed to take another look at the issue, first through a review committee this year and perhaps through legislation next year.

In the meantime, many hospitals are responding by laying off workers or phasing out some services to cut expenses. Rural hospitals, such as Pemiscot Memorial, are especially vulnerable because they are in areas where residents tend to be poor and rely heavily on the very health programs, Medicaid and Medicare, whose rules are changing.

Pemiscot Memorial has tried to reduce its costs by laying off a few workers and operating more efficiently. For now, says Pemiscot CEO Jack Pennington, the hospital is trying to “adjust to the new environment,” but he says that’s tough to do when a hospital is in one of the poorest areas of Missouri. On Tuesday, he warned that a combination of sequestration, which has reduced Medicare payments, along with the failure of Medicaid expansion, could cause the hospital to close.

“It’s absolutely a possibility,” Pennington said. “The structure we’ve functioned under for quite some time is in danger because of the changes to our pay sources. We continue to do the same work, and the cost is going up. So we are in jeopardy.”

Layoffs in Liberty and elsewhere

Pemiscot hasn’t resorted to major layoffs, but others have, including Liberty Hospital in Liberty, Mo., north of Kansas City. Last month, it announced the elimination of more than 100 jobs, along with the shutdown of its wound clinic and an end to a patient transportation program. The hospital’s CEO, David Feess, described the action as “fiscally responsible,” saying “We're looking at being as efficient as we can be, yet provide quality health care.”

Some hospitals have found ways to avoid major layoffs. One is the University of Missouri Health Carein Columbia. Spokeswoman Mary Jenkins said the system decided to eliminate 90 positions that had gone unfilled. In addition, she said it offered reduced hours and salaries to 29 workers. But she said the hospital was unable to retain jobs for six other workers.

In comparison to some other hospitals in Missouri, Heartland Health in St. Joseph remains in relatively good financial shape. But it is trying to control its costs in part by getting out of the ambulance service business as of July 1. The hospital says the action is in response to ambulance losses that will approach $2 million this year.

Phasing out that service will help offset some of the hospital’s lower federal reimbursements, says Dr. Mark Laney, president and CEO. He says the hospital had counted on an expansion of Medicaid as a way to counter declining federal reimbursements. When that didn’t happen, he says Heartland had to make some tough decisions because it already was coping with a $26 million reduction in federal reimbursements, partly due to sequestration, the policy of across-the-board cuts in federal payments for a variety of programs. These include a 2 percent cut in Medicare payments to hospitals.

He says Heartland and other health providers now operate in a environment where they are forced to “maximize efficiency and quality in order to be effective and continue to serve their communities.”

So far Heartland has avoided layoffs. But, as Liberty Hospital demonstrated, larger-than-usual layoffs are generally the rule rather than the exception, extending even to major health systems in Missouri.

BJC is not immune

The biggest example is BJC Healthcare in St. Louis. Last week, it announced that 160 jobs would be eliminated, most of them not directly related to health care delivery. June Fowler, vice president for communications at BJC, said the layoffs were the largest in BJC’s 20 year history.

“Like other health care systems across the state and country, we are not immune to what is going on in the health care environment,” she said. “We’ve made cost-cutting measures to offset the impact of sequestration and to prepare for the impact of not expanding Medicaid.”

Aside from sequestration and the Medicaid expansion issue, BJC’s reductions are necessitated by a drop in elective medical services among health care consumers. Because they now face higher out of pocket payments for care, some consumers are putting off care for the time being, she said.

Bay State boondoggle

In addition to coping with sequestration and the lack of Medicaid expansion, Missouri hospitals are grappling with still another problem involving federal fiscal policy and health reforms. It’s being called the “Bay State boondoggle.” The term might sound like a dance craze out of Boston, but it’s actually a health care earmark that could have adverse financial consequences for hospitals in Missouri and other states.

The term refers to a provision that then-Sen. John F. Kerry, D-Mass., inserted into federal health legislation to require that workers in urban hospitals in Massachusetts get Medicare wage reimbursements at least as high as those going to rural hospitals in the state. But it turns out that Massachusetts has only one rural hospital, Nantucket Cottage, and its wages are high because it’s situated in an isolated area with a high cost of living. Kerry told the Boston Globe in 2011 that the state had been losing out to some other states in certain Medicare reimbursements, and that his action was aimed at helping Massachusetts level the field for those reimbursements.

Allowing Nantucket Cottage to set the floor for wage reimbursements in Massachusetts means the state’s hospitals will reap millions of dollars a year in extra federal reimbursements at the expense of hospitals in other states, according to Sens. Claire McCaskill, D-Mo., and Tom Coburn, R-Okla. They are part of a movement to enact the Hospital Payment Fairness Act of 2013, which would remove the provision favoring Massachusetts.

Coburn says the act would end an earmark “that primarily benefits one state at the expense of others.” MCCaskill adds that, “we should all want a system that’s designed fairly.”

The Missouri Hospital Association says its member hospitals could easily lose more than $15 million a year unless the provision is eliminated. States would lose money, it says, because there is a single pot of federal dollars for Medicare wage reimbursements. If Massachusetts is reaping extra millions each year, it means fewer dollars are available for reimbursements to hospitals in other states.

The MHA has been a leading voice against the provision. Its president and CEO, Herb Kuhn, has called the provision “Yankee ingenuity.” “This small hospital, sitting on an island in the Atlantic Ocean, (is) having a profound impact on hospital payments across the country.” The MHA says it is pleased that the bipartisan team of McCaskill and Coburn has intervened to try to address the problem.

Robert Joiner has carved a niche in providing informed reporting about a range of medical issues. He won a Dennis A. Hunt Journalism Award for the Beacon’s "Worlds Apart" series on health-care disparities. His journalism experience includes working at the St. Louis American and the St. Louis Post-Dispatch, where he was a beat reporter, wire editor, editorial writer, columnist, and member of the Washington bureau.