Hospitals’ Strategy to Boost Medicaid Enrollments Could Hurt Industry’s Long Term Financial Stability

To deal with the growing number of uninsured and underinsured patients flooding their emergency rooms, hospitals have been focusing their efforts on enrolling patients in charity care and government programs to cull swelling bad debt expenses (“Wichita Hospital Beefs Up Financial Counseling to Curb Bad Debt Expense,” October 10).  

While some industry experts say helping patients qualify for charity care programs will help health care providers fulfill their service mission and get paid, some industry experts say the strategy to get more eligible patients enrolled in state Medicaid programs is just a short term solution to hospitals’ financial woes. 

According to the American Hospital Association, 40 of 50 states face a budget deficit or are projected to by 2010, forcing them to cut Medicaid funding.  State governors have asked federal lawmakers to increase the Federal Medical Assistance Percentage (FMAP) paid into state Medicaid programs. However, with the country already a year into a recession that has lasted longer than most previous recessions, even if the FMAP is increased, the federal funding would likely only replace money states already have cut, some expert say.

Still, hospitals collect an average of just 10 cents of every dollar of unpaid medical bills after an uninsured patient leaves the hospital, said Fitch Ratings Analyst Lauren Coste.  So the strategy of getting Medicaid eligible patients covered ensures hospitals receive some reimbursement.

“Even given the budget shortfalls, it’s a chance of collecting something versus a guarantee of not collecting anything or close to nothing,” said Coste, a Fitch director of corporate finance who covers health care facilities.

Some industry observers, however, say the strategy is flawed and will hurt the hospitals’ financial stability in the long term, given how much hospitals rely on Medicaid reimbursements.   The AHA says Medicaid reimbursements accounts for 50 percent of the revenue from patient care. Hospitals, however, have long complained that it doesn’t cover the total cost of care.