'Fulcrum' of Gov. Scott's budget plan – hospital cuts – get first look from legislative committees

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Republican senators signaled interest Thursday in a plan by Gov. Rick Scott to overhaul — and reduce — Medicaid payments to Florida hospitals, but critics said the idea could be “devastating,” reports Jim Saunders of the News Service of Florida.

Lawmakers and hospital-industry lobbyists scrambled to try to understand the plan, which was a key part of 2012-13 budget recommendations that Scott released Wednesday. The plan, which involves standardizing Medicaid rates, would slash $1.8 billion and help finance a Scott proposal to increase education funding.

“This is the fulcrum on which the entire governor’s budget rests, in my view,” said Senate Health and Human Services Appropriations Chairman Joe Negron, R-Stuart.

Scott and his staff said the plan would help end wide variances in what hospitals get paid to care for Medicaid patients. Bigger picture, supporters see the idea as a way to rein in Medicaid costs that Senate Education PreK-12 Appropriations Chairman David Simmons said are “simply out of control.”

“I applaud the governor for what he has done in this budget,” said Simmons, R-Maitland.

But the Safety Net Hospital Alliance of Florida, a group that represents facilities such as public and teaching hospitals, released estimates that showed the proposal could lead to dramatic cuts. As examples, it would lead to $133.5 million in cuts at Jackson Memorial Hospital in Miami and $51.8 million at Shands Gainesville, according to the estimates.

“Personally, I think that it is going to destroy the health-care continuum in our state,” said Senate Minority Leader Nan Rich, D-Weston.

The state sets Medicaid rates each year based on reports that hospitals submit about the costs of services they provide. That can lead to discrepancies in rates, at least in part because services differ.

The plan would group hospitals into 10 categories, such as children’s hospitals, rural hospitals and general acute-care hospitals, and take into consideration inpatient and outpatient costs. It would establish a “rate band” — essentially flat rates — within each category to pay for Medicaid services.

The basic concept is that hospitals providing similar services should have similar rates, but the plan includes complexities. As an example, it would eliminate what are known as “buybacks,” which allow some hospitals to use local tax dollars to draw down federal funding. Such buybacks have helped alleviate state Medicaid cuts for those hospitals.

If approved, the plan would cut nearly $1.4 billion in payments to hospitals and more than $400 million in payments to managed-care plans that serve Medicaid beneficiaries. Part of the money that managed-care plans receive from the state goes to paying for hospital services.

In presenting the plan to senators Thursday, Scott administration officials pointed to the governor’s expertise as the former chief executive of the Columbia/HCA hospital chain.

“He feels very comfortable that the hospitals can sustain this,” said Karen Zeiler, chief of staff for the state Agency for Health Care Administration.

Some top Republican senators indicated they liked the idea of standardizing hospital rates, though they said they need more detail about how it would happen. Niceville Republican Don Gaetz, who is slated to become the next Senate president, described the idea as “long overdue.”

Senate Budget Chairman JD Alexander, R-Lake Wales, said it was too early to comment on the specifics of the proposal.

“But the concept of an institution doing a similar service ought to be making the same basic fee is very sound,” Alexander said.

Hospital industry officials, however, said Medicaid payments already do not cover the full costs of providing care to beneficiaries.

Also, Tony Carvalho, president of the Safety Net Hospital Alliance, said many of the savings in Scott’s plan would actually be reductions in federal funding. Of the $1.4 billion in cuts in payments to hospitals, he said $380 million would be state general revenue and about $1 billion would be federal matching funds.

Senate Health Regulation Chairman Rene Garcia, R-Hialeah, said he was concerned about how the plan would affect Miami-Dade County. Along with the cuts to Jackson, he pointed to an estimate that Miami Children’s Hospital would lose nearly $34.5 million.

“At what cost to Dade?” Garcia asked.

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including SaintPetersBlog.com, FloridaPolitics.com, ContextFlorida.com, and Sunburn, the morning read of what’s hot in Florida politics. SaintPetersBlog has for three years running been ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.