Ten of Vermont’s 14 hospitals are battling Medicare reimbursement rules that they say will hit their bottom lines hard.
The federal government claims it overpaid the hospitals. And it wants that money back – amounting to as much as $12 million dollars, statewide. So the hospitals are lodging a formal appeal.
Reimbursement rules set by the Centers for Medicare and Medicaid Services can be complex and unpredictable. So Bob Hersey, chief financial officer at Northeastern Vermont Regional Hospital in St. Johnsbury, always sets aside a rainy day fund to cover unforeseen expenses. But now, Hersey says, it’s not just raining, it’s pouring. Medicare has greatly reduced what it gives NVRH to help defray the cost of a provider tax the hospital pays to the state.
"They think it's a clarification. Again, we think it's a change in policy." - Bob Hersey, chief financial officer at Northeastern Vermont Regional Hospital in St. Johnsbury
“They think it’s a clarification. Again, we think it’s a change in policy. Hospitals in Vermont and probably in 49 out of the 50 states pay this provider tax and Medicare, through their process, their cost reporting process, specifically pays their share of the provider tax back to the hospitals,” Hersey explains.
Not any more. During routine audits in Vermont, Medicare has decided it’s been paying too large a share of that tax since 2010. It’s now telling hospitals they have to give that money back. For NVRH, the retroactive payback over five years amounts to about $2.5 million. Since enough money has not been set aside to cover such surprise emergencies, NVRH will have to find that cash elsewhere. Hersey says access to or quality of care will not be affected by the 5 percent budget cuts he is asking each department to make, but he won’t rule out rate increases over time.
Neither will David Sanville, CFO at Mt. Ascutney Hospital, also affected by the Medicare reduction.
“It’s either we take services or expenses off the table or we increase our rates to try to recapture what’s been lost,” says Sanville.
And what Mt. Ascutney Hospital stands to lose, Sanville says, is about $200,000 a year.
Other Vermont hospitals are also reeling from this unexpected blow.
Michael Del Trecco is vice president for finance at the Vermont Association of Hospitals and Health Systems.
“Many of these organizations will face million dollar adjustments over a period of three or four years which they are not prepared for and don’t have the financial resources to pay back the Medicare CMS program,” Del Trecco says.
The provider taxes that Medicare has been helping hospitals pay help the state of Vermont draw down federal matching funds for another healthcare subsidy, Medicaid. Some hospitals, including Mount Ascutney, are challenging the state on its calculation of that provider tax, even as they appeal the Medicare ruling about how much of that tax it will pay.
But that appeal process could take many years to resolve, and meanwhile, the hospitals are on the hook for money many say they don’t have. They say their margins are already slim because neither Medicare nor Medicaid adequately reimburses providers for the care of an aging population.
