Medicaid cuts imperil hospitals that serve the poor

NEW YORK — At Kings County Hospital in Brooklyn, it takes, on average, two hours to see an emergency room doctor, 13 more to be admitted to the hospital and nine after that to get a bed. Five percent of patients — five times the national average — simply leave without being seen at all.

Nurses at public hospitals throughout New York City say they routinely care for 10 to 13 patients at a time. The New York State Nurses Association recommends that workloads for most nurses range from 1 to 4 patients.

And when the city and state governments started slashing their budgets in 2009 as the economic crisis deepened, the city’s public hospital system had to shutter clinics in the Bronx, Brooklyn and Queens to try to close a widening budget gap. 

This is the face of New York City’s looming public health care crisis — and it’s being mirrored across the country. Since the recession, public health systems have struggled to stay afloat as state governments cut their share of Medicaid spending and the Affordable Care Act scales down federal payments for treating uninsured patients, whose numbers the law presumed would plummet as a result of the Medicaid expansion. With the biggest of the ACA’s cuts still to come, many public hospitals now face grave threats to their bottom line.

“Public hospitals are often very reliant on Medicaid,” says Beth Feldpush, senior vice president of policy and advocacy at America’s Essential Hospitals, a national association of public hospitals. Continued cuts “could be a huge financial challenge,” she says.

According to annual surveys by the American Hospital Association, the country lost 16 public hospitals from 2003 to 2008. From 2009 to 2012, it lost 55 more, and another 27 in 2013 alone.

The experience of the New York City Health and Hospitals Corp., or HHC, the country’s largest public health system, illustrates the challenge of funding public health care. From 2008 to 2010, the state government's contributions to HHC declined by $240 million, or about 15 percent, as the state cut its share of Medicaid spending in a recession-driven austerity measure. Faced with rising costs and falling revenues, the corporation scrambled to reduce its budget deficit, which exceeded $650 million in 2009. In May 2010, HHC outlined a $300 million cost-cutting plan, dubbed “The Road Ahead,” which drew most of its savings from eliminating a tenth of the corporation’s workforce over five years.

Nurses working in the HHC system, which served 1.4 million patients in 2014, say their patient loads have grown significantly during the hiring freeze that began with The Road Ahead. Kristen, a contract nurse who has worked in several HHC hospitals and asked that her last name be withheld out of concern for losing her job, says that even when HHC does hire nurses, it’s only for 13-week contracts. “They’re not hiring staff; they’re hiring travel positions,” she says.

Research has shown that high patient loads for hospital nurses can be fatal. A landmark 2002 study found that every patient added to an average nurse’s workload increased mortality odds by 7 percent, and hospitals with nurse-to-patient ratios of 1-to-8 see five more deaths per 1,000 patients than hospitals with 1-to-4 ratios. The study, which looked at 168 hospitals in California, notes that the researchers were unable to estimate mortality rates for hospitals with 1-to-10 ratios or higher because “there were so few hospitals in our sample staffed at that level.”

In 2004, California adopted a safe-staffing law mandating nurse-to-patient ratios of no more than 1-to-6. Similar bills have been introduced in New York but have never passed.

As the rollout of the ACA began, many state governments, which typically cover 25 to 50 percent of Medicaid costs, looked to cut more from the program to pay for the law. Feldpush says that the extent of the cuts was often “arbitrary.” “States would say, ‘Oh no, we need $4 billion to pay for the ACA. Let’s take it out of Medicaid.’ ”

In some ways, New York state’s government has been especially unfriendly to public hospitals. Under a Department of Health and Human Services formula, the state's 21 major public hospitals are permitted to receive no more than one-sixth of funding allocated to hospitals that treat uninsured patients. Yet they provide more than a third of the state's uncompensated care. A state-run program intended to help fund safety net hospitals, which treat many low-income and uninsured patients, defines “safety net” so broadly that 42 of 47 hospitals in New York City meet the requirements for aid. That grants many well-off nonprofit and academic hospitals access to the program’s limited money. The list of qualified facilities includes Mount Sinai Hospital, which has assets of $2.6 billion and sees on average only half as many Medicaid recipients and uninsured patients as HHC hospitals.

“There’s extreme discrimination in the way that New York state treats public hospitals,” says Judy Wessler, former director of the health care advocacy organization Commission on the Public’s Health System.

That may be in part because public hospitals don't have the lobbying capacity of their nonprofit and for-profit peers. The Healthcare Education Project, a partnership between 1199SEIU United Healthcare Workers East and the Greater New York Hospital Association, spent more than $36 million on lobbying from 2005 to 2010, the most of any union lobbyist in that period. GNYHA includes public hospitals among its members, but the overwhelming majority of the hospitals in its network are nonprofit. Similarly, 1199SEIU, the country’s largest health care union, represents few HHC employees. (Most employees of the public system are represented by the municipal workers’ union DC37.)

In 2011, the Healthcare Education Project spent more than all but one lobbying entity in the state, contributing $6.8 million. That year, recently elected Gov. Andrew Cuomo established a task force to cut the cost of what his office referred to at the time as “New York’s bloated Medicaid program.” Former 1199 president Dennis Rivera co-chaired the handpicked team. Under him were GNYHA president Kenneth Raske and current 1199 president George Gresham. No HHC representative was appointed.

To bring down Medicaid costs, the task force proposed a 2 percent across-the-board cut in Medicaid reimbursements for the 2011-2012 state budget — especially damaging to public hospitals because of their heavy reliance on such payments. The bulk of the Healthcare Education Project’s 2011 expenditures went to an advertising campaign supporting the cuts.

“It’s a very political situation,” says Wessler. “Where the bread is buttered, I think, is the best way of saying it.”

With state aid continuing to decline, HHC has had to keep cutting expenditures, even beyond what was planned under The Road Ahead. Every year since 2009, HHC has spent tens or hundreds of millions of dollars less than anticipated as the corporation further reduces payroll. In 2014, the most recent year for which HHC’s public budget projections make comparison possible, the corporation spent $350 million less on salaries than projected before The Road Ahead.

A May 2015 review of HHC’s finances by the City Council executive budget committee says the corporation plans to cut the equivalent of 1,000 additional full-time staff in the next 18 months to save another $100 million a year. In June, HHC needed a last-minute payment of $318 million from the federal government when the corporation’s cash-on-hand dipped to less than eight days worth of funding. The corporation projects a $1.4 billion deficit in 2018, about one-fifth of HHC’s total budget.

The HHC press office did not respond to questions about past and upcoming budget cuts. It redirected Al Jazeera America to HHC President Ramanathan Raju’s public testimonies on the corporation’s website, including his testimony at the May 2015 City Council meeting to discuss the executive budget committee’s review. “We’ve got to really find enough revenue to offset all the cuts which are coming our way,” said Raju at the meeting, “because we do not want to do the other things of reducing employees [and] reducing services.”

Four days after the release of the Council’s review, New York City Comptroller Scott Stringer issued a report detailing the biggest threat yet to HHC’s bottom line: the loss of $827 million from 2017 to 2019 as the ACA phases out supplemental Medicaid payments to facilities that serve high numbers of uninsured patients, known as Disproportionate Share Hospital payments, or DSH.

The ACA was built on the assumption that these DSH payments would become less important as more people took advantage of the law’s Medicaid expansion to get insurance. “It’s not a bad theory,” says Feldpush of America’s Essential Hospitals, “but there’s a big difference between theory and practice.”

HHC’s uninsured patient population of half a million people decreased only 1.3 percent from 2013 to 2014 because undocumented immigrants aren’t eligible for Medicaid under the ACA. Right now, 11 percent of HHC’s revenue comes from federal DSH payments, and if the phaseout of that funding begins as scheduled in 2017, it will greatly exacerbate the corporation’s budget crisis.

HHC isn’t the only public hospital system threatened by the DSH cuts. Hospitals in the 22 states that declined to expand Medicaid, as well as those with large numbers of undocumented immigrants, face a sharp drop in revenue. In California, the statewide shortfall from the cuts is expected to be $1.5 billion.

Even with these cuts still on the horizon, public hospitals are already operating on untenable budgets, says Feldpush. Her group’s member hospitals had an average operating deficit of 3.2 percent last year, the first time public hospitals in the U.S. have been collectively in the red. “That is not sustainable,” she says. If payments continue to drop, she adds, “hospitals may have to start making some tough choices about whether they offer services where they take a financial hit.”

So far, HHC has avoided widespread service cuts. But advocates worry that a worsening budget crisis will lead to more service reductions or, at the extreme, the sale of some or all of the hospitals to private or nonprofit providers.

Anne Bové, a nurse who has worked at HHC’s Bellevue Hospital in Manhattan since 1978 and is president of the HHC executive council of the New York State Nurses Association, says if the public system starts privatizing, she’ll be concerned about the availability of trauma care for the poor. In a trauma unit, “you have to provide services … to anyone who walks through the door, whether or not they can pay,” she says. “It’s not something the private sector is willing to take on.”

Trauma care is just one possible casualty of the crisis. “There could be services that are moved around in the system, meaning they may not be in a particular borough; they may be consolidated elsewhere,” says Anthony Feliciano, current director of Commission on the Public’s Health System. “The services could be acute care services — I doubt pediatrics, but it could be some of the clinical care services, primary care.”

“These are assumptions,” he adds. “It’ll probably be major clinical services that people rely on.”