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Virginia hospitals face serious financial challenges that threaten their ability to continue serving their communities. Rising costs of caring for an aging population combined with inadequate Medicare and Medicaid reimbursement have led to annual funding shortfalls approaching $1 billion for Virginia hospitals. This has resulted in one-third of Virginia's acute care hospitals operating in the red. If these challenges are not addressed, further hospital closures and service reductions are possible. A public awareness campaign called "Virginia Hospitals: Our Lifeline" aims to educate lawmakers and the public about these issues facing local hospitals.
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- 1. Virginia Hospitals: OurLifeline Sean T. Connaughton President and Chief Executive Officer Virginia Hospital & Healthcare Association
- 2. Modern Healthcare Magazine October5, 2015 “Much of rural America already resembles the country's future—it's older and sicker. Take Page County at the northern edge of Virginia's historic Shenandoah Valley, for instance. Despite its proximity to the nation's capital, the population over age 65 has increased by 28% to about 1 in 5 residents over the past decade. The poverty rate in the county of about 24,000 is up 21%. And unemployment stands at 6.9%, significantly higher than the national average. Access to healthcare for its aging population is crucial, local officials say. And, lucky for local residents, they still have the 25-bed critical-access Page Memorial Hospital, located in the county seat of Luray. Without it, residents would have to drive at least 45 minutes to an emergency room or for primary and preventive care. But the hospital's future is threatened by the ongoing cuts to Medicare and the failure of the state to expand Medicaid, officials say.” 2
- 3. Becker’s Hospital ReviewOctober 8, 2015 Cost cuts under the Affordable Care Act and the lack of Medicaid expansion in some states could spell disaster for rural hospitals around the country, according to a study published in Health Affairs. Researchers examined more than 1,700 rural hospitals, of which 1,111 were critical access hospitals and 595 were other rural hospitals. Of the critical access hospitals, 54 percent were located in states that chose not to expand Medicaid, and of the other rural hospitals, 62 percent were located in nonexpansion states. Though both CAHs and other rural hospitals in nonexpansion states recorded significantly lower total dollar value for uncompensated care than those in expansion states, their results suggest rural hospitals in nonexpansion states are still more financially vulnerable. Here are four things to know about their findings: 1. Uncompensated care accounted for a greater percentage of total net patient revenue at hospitals in nonexpansion states. The study attributed this difference to unreimbursed costs in Medicaid, Children's Health Insurance Program and other programs. 2. Levels of charity care and bad debt, however, were higher for noncritical access hospitals in nonexpansion states, compared to those in expansion states. Charity care and bad debt are associated with uninsured and underinsured patients. Critical access hospitals had similar levels of charity care and bad debt in both expansion and nonexpansion states. 3. Operating margins at critical access hospitals in nonexpansion states were lower than those in states that have expanded Medicaid. In fact, critical access hospitals in nonexpansion states had negative operating margins on average, according to the report. If disproportionate share hospital payments, Medicare reimbursement, Medicaid rates or bad-debt reimbursement are cut, these hospitals will be under great financial pressure, as they depend more on Medicare payments and bring in less revenue for outpatient and surgery services, according to the report. 4. The study found hospitals in nonexpansion states are in more sparsely populated regions, giving them a smaller pool of patients to draw from. Less traffic in the hospital will drive up per patient costs in nonexpansion state hospitals compared to expansion state hospitals. According to the report, nonexpansion states also have higher poverty rates, which means more patients will fall into the coverage gap, leading to higher bad debt and charity care. Patients fall into the coverage gap if their income is above the amount required to be eligible for Medicaid, but below the amount to be eligible for premium tax credits in the Marketplace. 3
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- 5. Virginia Hospital &Health Care Association • 30 member health systems • 107 community, psychiatric, rehabilitation and specialty hospitals • 33 VHHA staff, headquartered in Glen Allen • Affiliates: • VHHA Services • Virginia Hospital Research and Education Foundation • Virginia Business Coalition on Health • Virginia Health Care Waste Management Cooperative • Health Providers Insurance Alliance • ASPR Hospital Preparation Program • Principled, Innovative and Effective Advocacy • Improving Safety, Quality, Value and Service • Transforming Data and Analytics • Broadening Membership and Members’ Impact • Cutting Edge Education and Communication About VHHA 1 Strategic Focus
- 6. About Virginia Hospitals •30 health systems • 107 community, psychiatric, rehabilitation and specialty hospitals • 14,421 hospital beds • 15 designated trauma centers • 49 percent are rural hospitals • 51 percent are urban hospitals • 77 percent of Virginia hospitals are not-for-profit 2
- 7. Virginia Hospitals CareFor Their Patients and Communities • 3.6 million emergency department visits, 1.9 million outpatient visits, 781,625 inpatient admissions, and more than 103,000 babies delivered • $3 billion in community support • $627 million in free or discounted care • $135 million provided for subsidized health care services • $213 million paid in federal, state, and local taxes • $376 million spent on community programs such as mobile clinics, immunizations, health screenings, home health visits, etc. Charity care costs have increased 57 percent since 2008 2013 Data 3
- 8. Virginia Hospitals FuelOur Economy • 115,000 direct jobs • $8 billion in payroll • $17 billion spent on goods and services • Health care and social assistance represent roughly 500,000 jobs, or 11.4 percent of the workforce • The Virginia Labor Market Index data shows health care-related positions account for roughly 950,000 jobs, or 23 percent of all Virginia jobs • $36 billion in economic activity 2013 Economic Data 4
- 9. Hospitals Are AmongOur Largest Employers In 82 percent of rural localities, local hospitals are a top five employer. 5
- 10. Virginia Hospitals FaceChallenges
- 11. Patient Payer Mix Morethan three-fifths of all inpatient admissions involve the uninsured, or Medicare and Medicaid enrollees. 12
- 12. Combined Cuts toVirginia Hospitals 8 ACA cuts, when combined with 2 percent sequestration Medicare payment cuts and other related cuts to Virginia hospitals, will approach $1 billion per year by FFY 2021. Annual funding cuts of roughly $20 million (FFY 2011) will grow to $675 million in a few years (FFY 2021).
- 13. • As moreVirginians become Medicaid-eligible and enroll in the program, the proportion of hospital costs attributed to treating this population rises. • Medicare payments fall short of hospitals’ cost of providing care and will continue to fall over time. Virginia’s Population is Aging Source: Dobson Davanzo financial forecast model Sept. 2015 0% 10% 20% 30% 40% Cummulative Population Change 2011-2022 Medicare Medicaid All Other 84% 83% 82% 80% 80% 80% 79% 79% 79% 2014 2015 2016 2017 2018 2019 2020 2021 2022 Projected Medicare Payments Relative to Costs Medicare – projected growth in VA population over age 65 Medicaid – based on historical enrollment growth 2010-2013 All Other – projected population growth for VA population - Population projections from the Demographics Research Group, Weldon Cooper Center, UVA. Medicare payments include scheduled reductions under the ACA, value based purchasing, Hospital Readmission Reduction Program, Hospital Acquired Condition Reduction, ATRA coding adjustment, bad debt reimbursement reduction, LTCH budget neutrality Adjustment, IPPS prospective and retrospective coding adjustment, HHA prospective coding adjustment, 2-midnight rule offset, and MACRA 11
- 14. Growing Medicaid Shortfall 10 Medicaidreimbursements do not cover the actual costs of health care services. 0.79 0.72 0.72 0.72 0.76 0.78 0.78 0.75 0.72 0.68 0.64 0.64 0.7092 0.6842 0.6592 0.5 0.6 0.7 0.8 0.9 1 1.1 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 PercentofInpatientCostsReimbursed State Fiscal Year Medicaid Cost to Payment Ratio Cost of Care
- 15. Inadequate Provider Reimbursements Virginiahospitals had a Medicaid shortfall of $341 million and a Medicare shortfall of $683 million in 2013. 13
- 16. Charity Care CostsRising 15 Virginia hospitals’ charity care costs have increased 57 percent since 2008. $0 $100 $200 $300 $400 $500 $600 $700 FY08 FY09 FY10 FY11 FY12 FY13 Financial Assistance Provided by Virignia's Hospitals and Health Systems
- 17. Bad Debt CostsIncreasing Growth in health savings account (HSA) high deductible health plans (HDHP) is leading to increasing bad debt costs for hospitals. 14
- 18. Inadequate Provider Reimbursements NeitherMedicare or Medicaid reimburse providers for the full cost of care. 9
- 19. What This MeansFor Virginia Moody’s Investors Service has reported hospital revenue growth and operating margins have recently hit at all-time lows. Fitch Ratings wrote that the Affordable Care Act has accelerated the transition of patients out of the hospital and into clinics by tightening reimbursements and emphasizing technology. One-third of Virginia’s acute care hospitals operated in the red in 2013, including 17 of 37 (46 percent) of rural hospitals. These trends are leading to increased consolidation. Nineteen Virginia hospitals have been acquired by, or merged with, another health system. One Virginia hospital recently closed. Virginia hospitals and health systems continue to work creatively to reduce costs, increase quality, and provide access to care. However, if these challenges are not addressed, hospitals may be forced to downsize staff and reduce services to remain in business. 16
- 20. Financial Forecast UnderStatus Quo Policies 17
- 21. Financial Forecast UnderStatus Quo Policies 18
- 22. Rural Hospitals FaceAdditional Challenges • Triple Cliff: Continuing resolution funding the federal government and highway funding authorization expire in early December; debt ceiling will be reached in November • Need to remain guarded against further cuts to provider reimbursements such as an extension of sequestration, site-neutral payment cuts, or reductions in graduate medical education or bad debt payments • Critical Access Hospitals: potential changes include elimination of CAH designation based on mileage from other hospitals and/or removal of the necessary provider designation • There is no longer an appetite to annually address Medicare’s rural extenders…recognize need for alternative payment models • Comprehensive package is unlikely in the current Congress, but proposals were circulated earlier this year o Senator Grassley proposal would pay CAHs 105 percent of costs for all services, but treat CAHs like a 24 hour emergency department o Congressman Graves proposal would eliminate DSH payments, make extenders permanent and develop a new payment model for rural hospitals 19
- 23. Virginia Hospitals: OurLifeline
- 24. Virginia Hospitals: OurLifeline Campaign • Research shows a majority of Virginians favorably view local hospitals and health care providers. However, research also shows that a majority of Virginians believe their local hospital is financially stable • It is vital to inform the public about the scope of the problem first to set the stage for finding policy solutions. • The Virginia Hospitals: Our Lifeline campaign is a public awareness effort focused on educating legislators, stakeholders and the public about the importance of hospitals and the serious challenges facing them. • The campaign is supported by broadcast (television and radio), print (newspapers and magazines), outdoor (billboard), transit (bus), and digital (online and social media) advertising to communicate about Virginia’s local hospitals and health systems. • The effort also entails significant outreach to our elected officials, stakeholders and the public. Visit ISupportVirginiaHospitals.com to learn more! 24
- 25. Virginia Hospitals: OurLifeline Campaign 25
- 26. Virginia Hospitals: OurLifeline Campaign 26
- 27. How You CanHelp • Visit ISupportVirginiaHospitals.com to register your support for Virginia hospitals and sign up for VoterVOICE • Sign up to participate in the Hospital Grassroots Network (individuals) or the Hospital Support Network (businesses, stakeholder groups, etc.) • Follow VHHA on social media and share posts 27
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- 29. 2015 General Elections •November 3 – All 140 members of the General Assembly up for re-election • House of Delegates – few competitive open seats; most incumbents will return and Republicans will retain a strong majority • Senate of Virginia – election season defined by several key open seats vacated by long-serving members such as Chuck Colgan, Walter Stosch and John Watkins • The outcome of several close races will determine whether Republicans increase or their 21-19 majority or the Democrats retake control 21
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