Safety net hospitals hope to block billions in cuts to Medicaid

For the past couple of years, healthcare advocates have managed to avoid scheduled cuts to Medicaid that would be devastating to safety-net hospitals.

America’s Essential Hospitals, the organization that represents hospitals with a heavy mix of patients who have lower incomes and rely on Medicaid, aims to avert those cuts again.

Unless Congress acts, on Oct. 1, health systems are looking at an $8 billion cut in the Medicaid Disproportionate Share Hospital (DSH) program. Beth Feldpush, senior vice president of policy and advocacy for America’s Essential Hospitals, said the organization is pushing to postpone those cuts, which she said would be virtually catastrophic.

“We will be focused on delaying these cuts further,” Feldpush told Chief Healthcare Executive.

“Our members are heavily dependent on Medicaid,” she said.

For America’s Essential Hospitals, postponing those Medicaid cuts to hospitals are at the top of the group’s agenda in Washington this year, she said.

While she said it’s difficult to predict the exact financial toll if the cuts move ahead as scheduled, Feldpush said, “These cuts are big enough they could cause hospitals to close.”

The DSH program is scheduled to get less money in the coming years, under the idea that there would be fewer people without insurance coverage under the Affordable Care Act. The program is supposed to be cut by $8 billion annually through 2027.

However, hospitals say those reductions would be crippling, given the financial difficulties hospitals have faced due to the COVID-19 pandemic.

The Greater New York Hospital Association has called for the cuts to be postponed for at least two more years. “These cuts would be catastrophic for safety net hospitals and could force many of them to reduce services or even permanently close,” the association said in January.

The program is also critically important in states that did not expand their Medicaid program during the COVID-19 pandemic, as they have more uninsured residents, Feldpush said.

Lawmakers in both parties have supported the Medicaid program in the past, Feldpush said, and she hopes that continues and the cuts would be averted or at least postponed, even with a new Congress.

Many states expanded Medicaid enrollment to receive COVID-19 relief funds, but states can begin recalculating eligibility in April.

Analysts say millions could lose Medicaid coverage beginning in April, which would pose more challenges to the members of America’s Essential Hospitals. KFF estimates anywhere from 5 to 14 million Americans could lose coverage as the continuous enrollment provision is phased out.

“Our hospitals really rely on Medicaid funding,” she said. “They have a lot of Medicaid patients.”

Designation for essential hospitals

The organization is also pressing lawmakers and the Biden administration for a federal designation for safety net or essential hospitals, Feldpush said. The group has been pushing for such a designation without success.

Bruce Siegel, president and CEO of America’s Essential Hospitals, said in December that he was disappointed the federal $1.7 trillion omnibus spending package “lacks targeted funding for hospitals that serve a safety net role — essential hospitals. These hospitals continue to face immense financial pressure from high labor costs and workforce shortages and a surge in respiratory illnesses.”

With a designation for safety net hospitals, Feldpush said those providers could gain more consideration in the allocation of federal aid. The designation would have been useful when policy makers were distributing COVID-19 relief aid earlier in the pandemic, she said.

Feldpush perceives more dialogue is happening in Washington now about the need for a designation for those essential hospitals.

“I think what’s encouraging now compared to when we were speaking about this is there are a lot of other folks engaged in the conversation now,” Feldpush said. “There seems to be more recognition.”

The 340B program

The organization is also hoping hospitals will soon see a resolution over payments in the federal 340B drug program, which offers discounts on some drugs to hospitals that care for a high number of underserved groups or those with lower incomes.

America’s Essential Hospitals was one of the groups that sued over cuts in the program, and the U.S. Supreme Court unanimously struck down the cuts last year. But the high court left resolving the issue to lower courts.

A federal judge ruled last month that the U.S. Department of Health and Human Services would have an opportunity to craft a remedy, frustrating hospitals who are anxious to get the funds.

“I am hopeful hospitals will see the money they are due soon,” Feldpush said. “We think this is something the administration can do in a straightforward manner.”

She said she is hoping to see some progress during the first half of the year.

Hospitals say the 340B program offers vital support to provide services in underserved communities in rural and urban areas, but some critics have said the program has grown beyond its intended scope.

With a new Congress and Republicans now holding a majority in the U.S. House of Representatives, some have speculated lawmakers may want to examine the size of the 340B program. Feldpush said she wouldn’t be surprised if that occurs, but she said the program remains critical to the members of America’s Essential Hospitals. Hospitals have also spoken out against drug makers who have reduced discounts in the program, saying they are violating the federal law governing the program.

Additional assistance

The groups would also like to see Washington offer some federal assistance to hospitals that continue to house patients simply because they can’t find beds at nearby post-acute care facilities.

Health systems leaders say they are continuing to board patients who are ready to discharge but remain in hospitals due to a shortage of beds or staffing at nursing homes and rehabilitation centers.

“That is a concern,” Feldpush said. “We are hearing it from our members more and more.”