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Cook County hospital makes big bet big on Medicaid expansion

Monday, August 27, 2012
Crain's Chicago Business
by Kristen Schorsch

For Dr. Ramanathan Raju, the only thing worse than patients without insurance is not having enough of them.

The CEO of the Cook County Health and Hospitals System is counting on a massive expansion of Medicaid to boost annual revenue 11 percent, to $712 million, for the fiscal year that begins Dec. 1. With the added revenue, officials hope to cover a projected $152 million shortfall while holding steady taxpayers' annual subsidy to the financially strapped public health care network.

Since becoming chief executive nearly 11 months ago, Dr. Raju has tried to put in the past decades of politics, patronage and systemic inefficiency at the hospital system.

Now he has another problem: Patients are going elsewhere for care.

The Medicaid expansion under the federal health care overhaul would require the county to care for patients for a fixed fee—$300 per recipient per month—a big change for a system that is accustomed to billing for services. And it will require the hospital to quickly hire as many as 200 employees to accommodate up to 115,000 new patients, according to the county hospital's proposed 2013 budget, unveiled last week.

But Dr. Raju's proposal not only relies on signing up thousands of new patients; it requires reversing a decline in Medicaid revenue this year, as beneficiaries of the low-income health care program turn to other hospitals.

“The only thing to screw up on this one is actually not enrolling patients,” says George Hovanec, a Medicaid director under former governors Jim Edgar and George Ryan.

The federal health care law calls for expanding Medicaid in 2014 to include adults with annual incomes that are up to one-third higher than the poverty level, which is $14,404 for an individual. County and state officials have asked the U.S. Centers for Medicare and Medicaid Services to start treating those patients as soon as October. Most experts expect the federal agency will approve the application, which was filed in January.

But officials are seeing fewer than expected Medicaid patients at the county hospital system. Revenue from the program has plunged 40 percent, to $84 million, during the eight months ended July 31, down from nearly $140 million budgeted for that period at the start of the fiscal year.

“We still have a long way to go to improve patient care service to make it a very attractive place to go,” says Warren Batts, former county hospital board chairman.

While Dr. Raju says the enrollment target is aggressive, getting a head start on the Medicaid expansion is key to the system's success. “Nothing is sure until you get the money,” Dr. Raju says, “but this is a very good proposal.”

The proposed 2013 budget calls for other savings, including reducing spending by $25 million by using a new purchasing system.

Last year, Cook County Board President Toni Preckwinkle pushed to reduce the taxpayers' subsidy to the county hospital.

The subsidy could fall 28 percent, to about $307 million in the current fiscal year, from nearly $424 million in fiscal 2011, according to a July 5 analysis by the Civic Federation, a Chicago-based fiscal watchdog group.

A spokeswoman for Ms. Preckwinkle says the administration has “put everything in place to succeed.” Even without a revenue boost from Medicaid, the county hospital could still avoid layoffs, she says.

Cutting jobs would not be as bad as turning to voters, says longtime Chicago political consultant Don Rose. “It would hurt her politically, but not as much as raising taxes,” he says.



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