Funding plan stirs hospital trauma

Proposed reimbursement rules for hospitals that treat uninsured patients would cut millions of dollars from annual payments to Massachusetts hospitals that provide care for the majority of low-income and uninsured residents, according to new state projections.

The payment rules are another complex and contentious element of the state's healthcare overhaul law. Under the law, all residents were required to purchase health insurance starting July 1, and could face penalties next year if they fail to do so.

The executive director of a trade group representing the state's safety net hospitals - those that provide the most free care - said it is trying to get the proposed reimbursement rules modified before they take effect Oct. 1.

"Our hospitals are unable to withstand the cuts," said Ellen Murphy Meehan, executive director of the Alliance of Massachusetts Safety Net Hospitals. "The cuts are even more dramatic than what the state has estimated. Some hospitals will see their payments decline by three-quarters."

Massachusetts hospitals have traditionally been required to provide care to patients who go to emergency rooms, regardless of insurance coverage or ability to pay for treatment. The unpaid bills were reimbursed through the state's Free Care Pool, an account funded by insurance companies. Under healthcare reform, the pool is being remade into the Health Safety Net Trust Fund. The new fund will pay hospitals for treating patients who still lack healthcare coverage.

Safety net hospitals contend that few residents in their low-income communities have signed up for the state's free or subsidized health plans. As a result, they expect to continue to provide high levels of free care even though their reimbursements will drop.

At Southcoast Health System, parent of Charlton Hospital in Fall River, St. Luke's Hospital in New Bedford, and Tobey Hospital in Wareham, payments for treating the uninsured are estimated to decline by $5.6 million in the year starting Oct. 1.

"This is a big hit to take," said William Grigg, chief financial officer of the system. "We'll continue to see these patients, but it will mean less investment in medical equipment."

Some hospital officials also object to provisions requiring hospitals to collect copayments and deductibles from patients, even if they don't have insurance coverage. That will impose a huge bureaucratic burden on the hospitals, said Dan Moen, president of Heywood Hospital in Gardner.

"It takes a lot of money to collect small dollars," he said.

Moen said free-care payments to his hospital will decline by one-third, or about $500,000, in the year starting Oct. 1.

The proposed rules have also led to friction between different types of hospitals. Under the new rules, teaching hospitals such as Massachusetts General Hospital and Tufts-New England Medical Center will receive higher rates than safety net hospitals for treating patients without coverage. That angers some community hospital officials. Donald J. Thieme, executive director of the Massachusetts Council of Community Hospitals, calls the system inequitable.

"If we had a standardized fee schedule that is close to the cost of providing services, nobody would be over-rewarded," Thieme said.

Sarah Iselin, commissioner of the state's Division of Health Care Finance and Policy - which will finalize the rules later this month - said, "We'll be considering the feedback very carefully as we finalize the Health Safety Net Trust Fund regulations."

As of last month, more than 160,000 residents had signed up for Commonwealth Care or MassHealth, the low-cost and free health plans established under healthcare reform. Before the reform plan became law in April 2006, about 500,000 residents didn't have health insurance.

The new rules' impact on hospitals depends on a patient's status. For instance, reimbursement for those who show up for emergency room care and are not admitted is generally less than for inpatient care.

Some hospitals will see free-care reimbursements remain steady or increase slightly under the new plan, according to estimates by the Division of Health Care Finance and Policy.

Payments to Massachusetts Eye and Ear Infirmary will go down 2 percent to $38.4 million, while Tufts-New England Medical Center is expected to receive a 2 percent increase, to $7.2 million.

Others will experience massive cuts. Reimbursements at Quincy Medical Center would drop 56 percent to $1.6 million. Free-care reimbursement to Holyoke Medical Center would drop 49 percent, to $1.95 million.

"The hospitals have been working very hard to get people to sign up for health insurance, but the enrollment numbers are meager and the hospitals are going to be paying the financial price for the failure of individuals to enroll," said Meehan.

Jeffrey Krasner can be reached at krasner@globe.com.