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Hospitals, Adult Care Homes Big Losers in Budget


As the North Carolina Senate approves the state budget for the upcoming year, some members of the health care community are smarting from further cuts that will bite into their ability to function.

By Rose Hoban, with reporting from Jasmin Singh & Hyun Namkoong

Hospital and adult care home operators are all reacting to the $21.1 billion North Carolina budget presented late Wednesday and passed by the Senate late Thursday evening, which contains cuts to those facilities, even as the state’s hospitals have taken cuts for the past several budget cycles.

Lawmakers have said they were determined to bring the state’s Medicaid budget under control. The program – which pays for care for more than 1.6 million low-income children, pregnant women, low-income seniors and people with disabilities – has been blamed for claiming an ever-increasing part of the state budget.

The final budget proposal trims about $135 million from Medicaid, much of it in the form of reimbursement reductions to providers.

“It’s a very disproportionate budget,” said Cody Hand, vice president for governmental affairs for the North Carolina Hospital Association.

NC Hospital Association lobbyist Cody Hand talks with Sen. Ralph Hise (R-Spruce Pine), co-chair of the Senate Health and Human Services Committee. Photo credit: Jasmin Singh

N.C. Hospital Association lobbyist Cody Hand talks with Sen. Ralph Hise (R-Spruce Pine), co-chair of the Senate Health and Human Services Committee, before a committee meeting in mid-July. Photo credit: Jasmin Singh

Hand said hospitals will realize a total of about a 3.9 percent rate cut for the biennium. According to figures from the NCHA, the 2013 budget took more than $70 million out of hospital reimbursement in the form of a 3 percent cut to inpatient rates, a cut to outpatient rates and an increase in the assessment dollars hospitals return to the state in exchange for being able to bill Medicaid.

This year’s tab for last year’s budget cuts total about $92 million; on top of that, hospitals will lose an additional $45 million from new cuts, which include a higher assessment rate, lower reimbursement for UNC Hospitals and East Carolina University’s hospital (now known as Vidant Health) and the creation of a statewide base rate for hospital reimbursement.

The hospital assessment rate goes from 25.9 percent to 28.85 percent, which Hand said was about a third of that $45 million reduction. Other parts of the rate reductions were less clear.

“There’s some things in there that we have a hard time calculating, like the single standard base rate; we don’t know what that’s going to do,” Hand said. “That does really impact our teaching hospitals that do graduate medical education.”

“We have balanced… Medicaid,” said Sen. Ralph Hise (R-Spruce Pine). “We have a robust Medicaid system, we have made some deep cuts to the Department [of Health and Human Services] first, and we have made changes to our rates.”

“If you want to help people living in rural communities have strong hospitals, stop making these cuts to them,” retorted Sen. Josh Stein (D-Raleigh). He pointed to the example of Pungo Hospital in Belhaven, which closed at the beginning of July.

“If you look at the number of hospitals that are shutting down services and offices and programs, and you aggregate it, it ends up totaling five Pungo Hospitals across the state,” Stein said.

Stein said hundreds of hospital workers across the state have lost their jobs.

“When they lose their jobs, entire units of hospitals are closing, which means the people don’t have access,” he said.

Special-assistance cuts

A different set of cuts will affect people with medical issues who live in group homes and adult care homes, as the budget trims eligibility for state- and county-funded special assistance dollars for low-income people who also qualify for Medicaid.

Currently, special assistance help is available for people who earn too much to qualify for Medicaid but receive the entitlement because they are “medically needy.” Often these are people with mental health issues who earn only a disability check and live in group homes, or people with mental health or developmental disabilities who live in adult care homes.

Alex Hamilton puts together his afternoon medications with help from Jenny Gadd at Hamilton's group home in Chapel Hill.

Jenny Gadd helps Alex Hamilton put together his afternoon medications at his group home in Chapel Hill. Gadd’s organization runs several  group homes for people with mental health problems throughout the Piedmont. Photo credit: Rose Hoban.

The current budget will limit special assistance eligibility to people who earn below 100 percent of the federal poverty level ($11,670 for an individual annually, or $972 per month). Anyone looking to receive special assistance after Nov. 1 who earns more than that amount will no longer qualify.

“That could be extremely problematic,” said Jenny Gadd, the group home manager for Alberta Professional Services, which runs several group homes for people with mental health issues in the Triangle and Triad. “It’s hard to tell what the eligibility really is going to look like, but that could really affect people in group homes.

“That’s even worse than losing personal care services,” Gadd said, referring to reimbursement for help provided to residents of group homes and adult care homes.

The personal care service rate has been an issue for several years and led to a settlement with the US Department of Justice over disparate payment for services for people living in institutions than for those who live in their homes.

“This is a risk to the state,” Hise said of the special assistance program during the budget debate Thursday afternoon. “The Senate’s original proposal is that [special assistance] is a program we need to eliminate. This is putting us at tremendous risk with the DOJ, and I for one believe we will get sued for this program.”

But according to Evelyn Hawthorne, who lobbies for the North Carolina Assisted Living Association, the plan for covering special assistance was agreed to by the assisted living lobby, legislators and federal regulators. She said the likelihood of a federal lawsuit are slim.

“We’ve just been through a process of around three years where this program has been put not through the wringer but through a food processor set on puree,” she said.

Hawthorne described a negotiation process to put in place a special assistance program that would pass muster by federal regulators. The new program in place tightens the number of hours of service allowed for a resident and has a more rigorous assessment program to make sure that eligible residents are receiving appropriate levels of care. The rates have also been reduced by close to 11 percent over the past 18 months.

“We are literally within weeks of having a new program finally in place, and this budget does not even allow it to work,” she said.

Hawthorne also said that restrictions in this budget would push some residents out of assisted living facilities and adult care homes and into nursing homes, which are more expensive.

Currently, an adult care home receives $1515 per month to care for a resident with Alzheimer’s disease to live in a “special care unit.” North Carolina Medicaid pays $4712 for a month in a nursing home, which provides a higher level of care, but Hawthorne said many assisted living patients with Alzheimer’s could qualify for the level of care in a nursing home.

“So you’ll have an explosion of costs on the nursing home line of the budget,” she said. “It’s like playing whack-a-mole with the costs.”

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