HCA’s Texas hospitals face Medicaid pay cut
Profiting from poor patients may end
Private Texas hospitals, including at least 21 facilities owned by the publicly traded Hospital Corporation of America, could see a dive in supplemental Medicaid payments if the federal government approves a state proposal to revamp its healthcare program for the poor.
HCA, the largest for-profit U.S. hospital chain, drew $657 million in supplemental Medicaid payments from Texas in 2010, making it especially vulnerable.
The payments – about one-quarter of all state-paid hospital financing – support public hospitals and those that treat high numbers of uninsured and Medicaid patients. They're also used to induce other private hospitals to care for the poor, expanding the reach of the healthcare safety net.
But some backers of the Texas proposal say not enough of the funds are reaching the poor, going instead to finance hospital construction projects and pad the bottom line of big companies and health systems like HCA.
Texas State Rep. Garnet Coleman, a Houston Democrat who chairs a state legislative committee overseeing the proposal, said HCA's share of the funds is “not based on seeing patients that were poor or could not pay. It was based on a formula that skewed in their benefit.”
“The [proposal] corrects that, and rightly so,” Coleman said. “That was a windfall on a loophole that must be closed.”
HCA's 157 hospitals nationwide generated $30 billion in revenue and $2.2 billion in pre-tax profits in 2010, according to Securities and Exchange Commission filings. Texas is among its biggest markets, home to 39 of its hospitals. More than half of the company's revenues come from its combined 75 hospitals in Florida and Texas.
The state says its proposal would make the $2.7 billion-a-year Texas supplemental payment program more transparent – and guarantee the money buys care for the poor. The proposal would expand funding available under federal rules, reroute some payments through public hospitals and create a new funding stream for hospital projects that help the poor, such as new community clinics. The new money would be distributed by coalitions of public and private hospitals.
Another change in the proposal could sharply curtail the dollars available to dozens of private hospitals beginning in 2013. The change affects the formula that sets the maximum amount of supplemental payments each hospital can receive.
Hospitals that treat a disproportionate share of uninsured people could see higher payments, said Stephanie Goodman, a spokeswoman for the Texas Health and Human Services Commission, but those “that don’t do a lot of uncompensated care should see a reduction.” Most of HCA's Texas hospitals fall into the latter category.
“We want to make sure the dollars are directed to the hospitals that are doing the bulk of uncompensated care,” Goodman said.
The money at stake is especially profitable to HCA, said Thomas Gallucci, a senior analyst at Lazard Capital Markets, because it comes on top of normal Medicaid payments. Gallucci provided data reported by HCA showing that, of the $657 million in 2010 supplemental payments from the state of Texas, $303 million were profits.
The exact impact on HCA and other private hospitals is impossible to determine. Texas's proposal got a tentative thumbs-up in a Sept. 14 letter from federal officials, but has not gained final approval. Hospitals continue to lobby the state for changes, and data needed to project the exact effects are not available.
Hospitals may also be able to figure out new ways to increase their funding.
This article was reprinted from Kaiser Health News, an editorially independent news service and a program of the Kaiser Family Foundation, a nonpartisan healthcare policy research organization unaffiliated with Kaiser Permanente.
