SADOW: The Old Charity Hospitals Say They’re Losing Money, But…

It’s not exactly a case of breaking out the violins when considering the finances of Louisiana’s state partner hospitals.

The giant maw of health care in Louisiana, supercharged by Democrat Gov. John Bel Edwards’ ill-advised decision to expand Medicaid, continues to consume all tax dollars in its path. It’s budgeted up over $700 million from this year, with almost $100 million more in state-sourced money. This means it now takes up just about half of the state’s operating budget.

But the nine hospitals contracted with the state to provide indigent care find themselves having to do with not enough for the state. Last month, these reported overall paying out more money to service qualifying residents than received from the state. To make matters worse for them, because of auditing complexities the state chronically runs behind in making payments owed.

Still, the operators aren’t really complaining. Nobody likes to lose money, and theoretically, they would want to exit their contracts if this kept up. But they won’t do that, for reasons both financial and political.

While looking strictly speaking at the contracts might show them in the red, in an overall sense they aren’t losing money in their dealings with the state. Keep in mind that two additional channels of money can help them offset bookkeeping losses with the state.

First, depending upon individual case factors, at least some of the difference they could recoup as part of uncompensated care costs paid out by the federal government. For example, the two hospitals in central Louisiana serving as charity hospitals reported a shortfall last year of $25 million, yet they also received over $10 million in UCC costs for serving people of which most of whom would have qualified for free Medicaid care.

Second, they can engage in cost shifting to private-pay/insured patients. The most recent study estimates hospitals charge this group 2.4 times what they charge a Medicare patient for the same service, while Medicaid takes a much smaller proportion.

But a political consideration overshadows these. Medicaid expansion, with its transfer of hundreds of billions of extra dollars annually from taxpayers nationwide, overall has padded the bottom lines of hospitals. It exists tenuously in Louisiana and, if Edwards fails to achieve reelection, at the very least it will see significant changes next year.

Thus, administrators hold back on criticism of the presumed deficits and even will tolerate a loss leader such as the contracts, so as not to stir up a hornets’ nest. Implicitly they bargain to continue the contracts if allowed to keep profitable expansion. Yank or change expansion to limit their business, and they’ll start making threats about not renewing the deals.

And although some legislators took note of the ledger deficits and remarked this should change, they could solve this themselves easily: get rid of Louisiana’s ridiculous law that allows free care to people earning 200 percent or less of the federal poverty level and thus creates need for the contracts and charity hospital designations in the first place. It’s bad enough that the 25 to 138 percent cohort will cost Louisiana taxpayers over $46 million a year by dropping their privately-written policies to jump on the expansion bandwagon, but also taxpayers have to pony up for health care expenses by individuals making as much as $25,000 a year – to finance care worse than none at all.

The answer isn’t shoveling more money to partner charity hospitals, but for Louisiana to become the last state to scrap the concept of charity hospitals entirely.

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