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Fears, frustrations bubble up in hearing over Illinois Medicaid

Tuesday, January 30, 2018
Crain's Chicago Business
by Kristin Schorsch

Illinois lawmakers held their first public hearing today on revamping a state hospital tax program, a move that's long overdue but is causing major anxiety among medical center executives.

In the hospital assessment program, nearly every medical center in Illinois pays into a pot of money that helps the state bring in more federal dollars. The initiative generates $3.5 billion for Medicaid, roughly 16 percent of the budget for the Illinois Department of Healthcare and Family Services, which runs Medicaid.

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But the program doles out money based on data from 2005 and 2009. A lot has changed in the health care industry since then. For one, hospitals and doctors focus on prevention, reducing the need for so many hospital beds. Plus, the state added more than 600,000 to Medicaid after expanding the program, and many of those new recipients live outside of Cook county.

During the roughly two-and-a-half-hour hearing in Springfield, the Illinois Health and Hospital Association, an influential hospital lobbying group and a key player that's part of updating the assessment program, laid out the broad strokes of modernizing it. Nothing is final. The group also addressed lawmakers' concerns about what will happen to hospitals in their communities and access to care for patients.

Meanwhile, leaders of Chicago safety net hospitals, which rely heavily on Medicaid funding to keep their doors open, laid out their frustrations and fears.

Here are some of the highlights of the hearing. Crain's live-tweeted the meeting, too. For a recap, visit @kschorsch on Twitter.

• State Rep. Camille Lilly, a Democrat, pressed IHA CEO A.J. Wilhelmi about whether safety net hospitals in her West Side legislative district would lose money in the new program. His response: No. "The funding will be available for our hospitals, our safety net hospitals and our critical access hospitals."

• The federal Centers for Medicare & Medicaid Services, which matches dollars that hospital contribute to the assessment program, for years has been concerned with how the program operates, said John Bohmer, an IHA senior vice president. Specifically, that hospitals are paid a fixed of money based on a formula that accounts for how many beds were full in 2005 and how much outpatient revenue was grossed in 2009. CMS must approve the new program.

• Charles Holland Jr., CEO of St. Bernard Hospital in Englewood on the South Side, detailed his frustrations over receiving $2 million less in the latest estimates for the new assessment program. This is despite his efforts to tailor services to what the community needs. This includes opening a $33 million outpatient center in 2016, and building and selling nearly 80 affordable housing units on what was blighted property near the hospital to help spur economic development in the impoverished area. "St. Bernard Hospital cannot long survive a reduction of that magnitude," Holland said. He foreshadowed what closing a hospital looks like: It's akin to a spreading cancer. A facility slowly deteriorates. Employees and doctors leave. Patients end up going to other hospitals. The hospital closes.

Holland also disclosed that St. Bernard lost between $15 million and $20 million when Family Health Network, a Medicaid insurer that the hospital helped launch in 1995 with other safety nets, decided to exit the Illinois Medicaid business in 2017.

• Nelson Vasquez, vice president of finance for Jackson Park Hospital, another South Side safety net, described the numerous claims denied by private insurers that cover Medicaid patients. One private insurer recently denied 23 percent of claims for medical services from 2015-16. So, the payments were late, too. Typically, the denial rate is less than three percent, Vasquez said. The denials raise questions about whether the Medicaid volumes of his hospital and others are accurately reflected in the data that officials are using in the new assessment program, critics say.

The next public hearing about the hospital assessment program has yet to be scheduled. Illinois lawmakers still need to pass a state law to update the program, then send it to federal CMS for approval.

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