Hospitals find franchise-fee plan promising

By William K. Alcorn

The concern is that some hospitals may not get back 100 percent of the franchise fee.

YOUNGSTOWN — Area hospitals hope a proposed 1.6 percent state franchise fee will be returned to them dollar for dollar, but nothing is set in stone.

The final numbers are still unknown, even with the July 1 deadline for passage of the fiscal 2010-11 state budget less than three weeks away, but it appears some hospitals may actually come out financially ahead in the long haul.

The state proposes to use revenue generated by the fee — about 1.6 percent in the first year of the biennium budget and about 1.5 percent in the second year — levied on hospitals and other health-care providers, to draw an additional $2 billion a year in funds from the federal government for the state’s Medicaid program.

Under Gov. Ted Strickland’s initial proposal, hospitals stood to lose large sums of money. After moving through House and Senate committees, however, changes in the budget bill have hospitals breaking about even, according to the Ohio Hospital Association.

At this point, working from the Ohio Senate plan, an amount equal to fees paid by all of Ohio’s hospitals would be returned to them in aggregate in the form of cash, and the majority through a 5 percent increase in regular Medicaid reimbursements and an increase in other Medicaid payments, according to the Ohio Hospital Association.

Hospitals are now reimbursed only about 86 cents for every dollar’s worth of health care they provide to Ohio’s 1.8 million Medicaid patients, the association said.

A big unknown factor, said Jeff Rexroad, Forum Health administrator for patient financial services and care, is the refunding formula.

“We are hopeful that all individual hospitals get back dollar for dollar the amount of the franchise fee. It is our hope that there is no redistribution of wealth in the refunding formula,” said Rexroad.

According to the hospital association, Rexroad’s concerns are not unfounded.

The association said the Senate version would return the hospital-assessment dollars to the hospital community in aggregate, but not every individual hospital would recoup its assessment dollar for dollar.

The Senate plan, which is the basis for conference committee discussions, includes a 5 percent increase in Medicaid reimbursement, but that’s not guaranteed and could be changed as a part of the current discussions, said Tiffany Himmelreich, manager of media and public relations for the hospital association.

The Ohio Hospital Association’s main goal throughout the budget process is to recoup the hospital assessment in the aggregate and return those dollars to hospitals in as fair and equitable a manner as possible. The association is working with the Ohio Department of Job and Family Services to find a budget plan that returns assessment dollars to the hospital community. No specific plan has been determined, she said.

Also, Himmelreich said the state hospital association is strongly supporting the Senate’s commitment to keep out of the budget bill Medicaid-managed-care noncontracting language, which preserves the fundamental right of two private parties to negotiate a contract. The Medicaid-managed-care noncontracting would have limited hospitals’ ability to negotiate rates with Medicaid-managed care companies, she said.

The hospital association is also lobbying for various other increases in Medicaid supplemental payments and payments for hospital-owned home-health services, ambulance and hospice services, Himmelreich said.

Rexroad, along with hospital administrators from around the state, attended an Ohio Hospital Association update on the franchise fee Thursday in Columbus.

Donald Kline, chief financial officer for Humility of Mary Health Partners, said the goal is to get a return of the franchise fee dollar for dollar but believes there could still be a significant shortfall for HMHP.

“Our concern is that ‘dollar for dollar’ will not happen, not just for individual hospitals, but in the aggregate. It [the budget bill] looks a lot better than the original, but there will still be winners and losers,” Kline said.

Based on information received Friday that the state budget deficit is widening, Kline said the franchise fee could be increased to help compensate for the revenue shortfall. The increasing deficit could also cause the state to exclude more people from Medicaid, which would increase the burden of charity care on hospitals, he said.

The real story is the journey this franchise-fee proposal has gone through: The state House and Senate have responded to the inequities, Rexroad said.

He said he does not know at this point what the cost to Forum would be. But if hospitals come out on the losing end of this debate, there is no question it would be a major hit and cost jobs, he said.

“You can’t balance the state budget on the backs of the hospitals,” Rexroad said.

alcorn@vindy.com