New DC Medicaid Funding Formula Helps, Hurts Hospitals

New formula brings boon for some hospitals, loss for others

Premium content from Washington Business Journal – by Ben Fischer

Date: Friday, March 25, 2011, 6:00am EDT

After a failed partnership with the D.C. government that disintegrated into a fiery feud with politicians, Specialty Hospitals of America LLC never expected to benefit from a change in District policy. But it did.

The Hadley and Capitol Hill operations of the New Hampshire-based health care company saw their combined share of a form of Medicaid funding quadruple, from $454,000 to $1.9 million, under a new formula the District uses to distribute the funds to hospitals with high rates of unpaid bills.

D.C. received federal approval to make the change in 2010. The most striking effect is an extra $10 million in revenue for cash-strapped United Medical Center, now owned by the District after being seized from Specialty, according to an analysis by the office of D.C. Chief Financial Officer Natwar Gandhi. The new formula also caused Children’s National Medical Center and Washington Hospital Center to lose millions. Quarterly payments began reflecting the alterations at the end of 2010.

Peter Miller, CEO of Specialty Hospital of Washington-Hadley, said he was surprised to learn of the extra revenue when informed in January, and Eric Reiseberg, president of the parent company, was unaware of the increase as recently as March 22.

“Were we surprised? Yes, we were, no doubt about it,” Miller said.

D.C.-owned United Medical Center is projected to turn a profit for the first time in years in fiscal 2011, almost entirely due to the influx from the Medicaid fund.

Specialty Hospital officials were clamoring for changes to the formula and other Medicaid rules for months prior to the takeover, and Reiseberg said the company could have stabilized finances at UMC had the formula been fixed sooner.

“The number UMC received after we left was identical to what we’d requested,” Reiseberg said. District officials say the problems that led to the July foreclosure were too widespread to be fixed that easily.

The formula changes were designed to consider the percentage of charity care given to D.C. residents at each facility, rather than the total charity care given regardless of patients’ residence. The new formula, therefore, doesn’t account for uninsured patients from outside the District.

The hospitals getting the shorter end of the stick, however, are not pleased.

Officials at Children’s, which stands to lose $7.5 million annually, and Washington Hospital Center, which will lose $3 million annually, said the cuts are already jeopardizing their own missions to care for the poor.

“I don’t want to make threats, that’s not what we do, but I’ll be honest with you,” said Jacqueline Bowens, Children’s chief government and external affairs officer. “We are having some very tough decisions regarding our ability to be able to continue to provide services that are undercompensated.”

Tensions between private health care providers and the public sector are running high in D.C., Maryland and elsewhere, as hospitals and doctors lead a lobbying effort to keep government budget cuts away from public insurance plans. In those battles, industry representatives are fighting on the same side. In this controversy, they’re fighting for the same dollars.

“We certainly do not want to advocate against other hospitals in the District,” said Janis Orlowski, chief medical officer of Washington Hospital Center. “On the other hand, you want to make sure things are done fairly.”

D.C. Council Health Committee Chairman David Catania is satisfied with the current formula, said his aide, Ben Young.

Other winners in the change are Howard University Hospital, Providence Hospital and the Psychiatric Institute of Washington. The Hospital for Sick Children Pediatric Center in lost much of its funding as well.

Kevin Wrege, Esq.

Founder & President

Pulse Issues & Advocacy LLC

Office: 202-625-1787

Mobile: 202-253-4929

4410 Massachusetts Ave., NW, #150

Washington, DC 20016


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: