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Preckwinkle proposes to up spending on Cook County hospital

Thursday, October 18, 2012
Crain's Chicago Business
by Kristen Schorsch

(Crain's) — The Cook County Health and Hospitals System is close to a deal to expand its Medicaid rolls early, a move that could bring in nearly $100 million in annual net revenue but requires boosting spending by the cash-strapped health care network to nearly $1 billion, its highest level in three years.

County health system spending would climb 8 percent, to $966 million for the fiscal year beginning Dec. 1, from $894 million in 2012 according to Cook County Board President Toni Preckwinkle's proposed 2013 budget, unveiled today. Spending has fallen for two consecutive years amid a cost-cutting campaign.

County officials hope to enroll 115,000 patients into Medicaid before 2014, when the federal health care overhaul expands eligibility for the program for the poor.

To accommodate a surge of new patients, the county health system spending would reach its highest level since 2010, when Ms. Preckwinkle was elected and spending reached $974 million.

The increased spending is justified by the lure of bigger Medicaid revenue and transforming a system in which patients typically wait until they are sick to seek care, costing the system even more money, officials said.

“We're hopeful that over the next several years this can dramatically stabilize our public health system,” Ms. Preckwinkle said during a meeting of the Crain's editorial board on Tuesday.

Yet winning approval from the U.S. Centers for Medicare & Medicaid Services for the county's plan has taken longer than county officials expected.

In August, health system CEO Ramanathan Raju predicted that Cook County could start enrolling patients as soon as October.

On Tuesday, Dr. Raju said he expects to win federal approval by the end of this month.

The move would generate $99 million in net revenue, the biggest new revenue contributor to the county's proposed $3 billion 2013 budget and nearly four times the amount of the proposed increase in tobacco taxes.

Although approval is not final, federal officials have agreed to pay the county health system a fixed fee of $627 per Medicaid recipient per month for the crop of new patients, up from roughly $300 per person per month that county officials had earlier projected, Dr. Raju said.

“It's an influx of resources that are desperately need right now, and it's an opportunity for the system to improve itself,” Margie Schaps, executive director of the Chicago-based Health and Medicine Policy Research Group, said of the county's potential Medicaid expansion.

Even at the higher level of reimbursement, county health officials still face the challenge of keeping the costs of care under the fixed fee, because the county is responsible for any cost overruns.

A CMS spokeswoman declined to comment.

The added revenue should help reduce the annual county subsidy for the health system because the federal government would be shouldering more costs for new enrollees, Ms. Preckwinkle said. Under health care reform's Medicaid expansion, CMS would cover 100 percent of the cost of new enrollees until 2016, then 90 percent by 2020 and beyond, according to the Menlo Park, Calif.-based Henry J. Kaiser Family Foundation.

The health system is asking for a $254 million taxpayer subsidy for the 2013 fiscal year. That's in line with the 2012 budgeted subsidy. The amount has decreased every year since at least 2008, when the county health system received a $408 million subsidy, according to the Civic Federation, a Chicago-based fiscal watchdog group.

About 210 people would be hired from nearly 400 vacant positions in the health system to accommodate for the influx of patients if allowed to expand the Medicaid rolls early.

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