State Medicaid cuts force hospital
to spend less, streamline operation
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| By tightening spending, Carilion Stonewall Jackson Hospital expects to prevent employee layoffs. (ADAM CANCRYN/The Rockbridge Report) |
Lexington’s Carilion Stonewall Jackson Hospital is bracing for potential losses of more than $500,000 in Medicaid money, a source of funding for more than half of its patients.
The state and federally funded program, which pays for the medical treatment of low-income patients, is just one of the many services state legislators are aiming to cut in response to a $2.9 billion shortage in the state budget.
Gov. Tim Kaine estimates the statewide Medicaid funding cutback could total $148 million.
State Medicaid contributions are matched by funding from the federal government, enabling reimbursement to hospitals for three-fourths of each dollar spent on Medicaid-supported patients. The proposed 2009 Virginia budget cut of 5 percent cut would lead to another 5 percent loss in federal funding.
“For each [state] dollar you lose, it’s compounded by a dollar-matching grant from the feds,” said Dr. Thomas McNamara, the hospital’s CEO. “That’s why it’s so huge. The cuts you’re looking at are double.”
The state requires hospitals to treat Medicaid-supported patients, forcing Carilion Stonewall Jackson to absorb those hefty expenses, McNamara said.
Because more than 50 percent of Carilion Stonewall Jackson’s patients are on some form of Medicaid, the hospital is losing 10 percent of its income on the majority of its treatments.
But he said costs to patients will not increase to cover the losses. He said the hospital began streamlining its operations last year in response to the worsening economy.
“Only purchases involving patient safety or that were significant revenue-generating purchases were approved,” he said.
The spending cuts kept hospital revenue flat over the past year and eliminated the need for layoffs in the near future, he added. Yet McNamara acknowledged that losing Medicaid funding could hurt in the long term.
“We are doing what we can to tighten our belts,” he said.
The state is still working to avoid such significant Medicaid cuts. Kaine proposed a 30-cent tax hike on cigarettes that he claims would generate the $148 million necessary to cover the deficit.
However, a House of Delegates subcommittee voted 8-2 against the bill, arguing that one industry should not have to assume an extra financial burden during tight economic times. The state Senate rejected an identical proposal Tuesday.
Even if the cigarette tax were implemented, McNamara is not convinced it could cover the Medicaid cuts. Rather than paying more money, he said, people might simply choose not to smoke.
“As a physician, I see the need for people to not smoke; however … I don’t know how much we would realize from the cigarette tax,” he said. “I worry that the projections may be inaccurate.”
Even with a loss in Medicaid funding, McNamara said, Carilion Stonewall Jackson is prepared to handle the short-term financial effects of the economic fallout. But the prospect of the cuts has left its mark on the hospital.
“We’re pretty lean, so there’s not a lot of fat there to trim,” he said.
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