Hospital District in deep contingency planning for possible Medicaid cuts

DAYTON—Columbia County Hospital District CEO Shane McGuire doesn’t think the federal government plans to cut Medicaid benefits to individual healthcare users. Still, he is concerned about the effect on the hospital district’s budget if cuts are made to state direct-funded Medicaid programs, which the federal government heavily subsidizes. McGuire said the health system has “no slack” to absorb additional revenue cuts without cutting services.

“I believe that these types of funds are going to be targeted,” he said. “We have heard from some legislators that these directed funding programs are fraud, abuse, and money laundering.”

He explained that money from the state comes through state directed payments, which are funds that are often used to pull down federal Medicaid matching funds.

Washington’s directed funding programs include the ten-million-dollar funded Distressed Hospital Grant and the Washington State Safety Net Assessment. Last year, these programs provided 1.6 million in support for CCHD. The hospital district is now waiting to see if these programs will be approved for 2025. McGuire said many hospital districts are creating contingency plans and adjusting their budgets if those dollars are cut.

There are 57 public hospital districts in Washington state. The Seattle Times recently reported that Valley Medical Center in Renton was forced to lay off 100 non-clinical staff due to a pause in directed payment funding.

“We don’t have frivolous expenses to remove at this point. Any cut we make will directly impact patient care, not just for Medicaid patient care, but all patients will be impacted by Medicaid cuts,” said McGuire.

McGuire submitted a report to last week’s Port-sponsored Economic Development Steering Committee describing the hospital district in poor financial condition going into 2024.

“In 2024, the distressed hospital grant and the safety net assessment funding prevented us from having to significantly disrupt services,” he said. “We were close to missing payroll more than once in the first part of 2024, just after the electronic health record conversion.”

In his report, McGuire pointed to many other factors causing financial woes for the hospital district.

Insurance companies have decreased the amount paid for services, partly driven by the shift from traditional Medicare to Medicare Advantage plans. Medicare Advantage plans reduce hospital revenue since they don’t pay the total care cost like the original Medicare plan. They also have higher claim denial rates and much higher overhead costs. He said there has been a dramatic increase in Medicare Advantage plan enrollment over the last two years.

McGuire reported that roughly nineteen percent of commercial payers the hospital contracts with are paying less than the actual cost of care, and there is no option to pass higher costs along to commercial payers.

He also cited several years of lower tax assessments reducing tax revenue.

And charges for co-payments and co-insurance are more frequently being turned over to financial assistance and charity care.

“Inflationary pressures have tipped many household budgets upside down,” he said.

There are three ways the hospital district could make up the $1.6 million in lost revenue; by trimming $2.6 million in expenses, generating $2.2 million in new business over the next nine months, which is unlikely, and decreasing deductions from revenue.

“We never get paid 100 percent of what we bill,” he said. “There is always some type of contractual discount applied. If we could reduce our contractual discount by three percent, it would make up for the loss in revenue. It is likely going to be all three to address funding changes of this magnitude.”

As the sole healthcare provider in the community, CCHD is often called upon to perform health-related services, including non-emergency medical transportation, meals at the senior center, and the only childcare center in the community at the hospital campus. The CCHD provides integrated primary care, acute and post-acute care, long-term care, emergency services, and outpatient services to patients by 287 full and part-time staff. CCHD is the largest employer in Columbia County.