Struggling hospitals that cater to the poor face holes in their own safety net

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Timothy Caveney, chief executive officer of struggling South Shore Hospital: “If we don’t get funding relief, we won’t be able to stay open.” | Leslie Adkins / Sun-Times

Hospitals that get most of their business from treating Illinois’ low-income residents are warning they could soon be forced to close by a change in the way they get government funding for their services.

Are they crying wolf? Nobody seems to think so.

Yet finding a cure for their financial woes has not proven as simple as acknowledging their pain.

At issue is how to renew the state’s hospital assessment program, under which hospitals, in effect, tax themselves to allow the state to leverage more matching Medicaid revenue from the federal government.

That money is then redistributed under a formula that until now has favored the so-called safety-net hospitals that cater to the poor.

The program expires June 30. But any replacement will need to clear a lengthy approval process in Washington, which the hospitals say necessitates the Legislature working out a deal with them and with Gov. Bruce Rauner’s administration in the next two weeks.

The stakes are huge for many Chicago neighborhoods and for some suburban and downstate communities facing the potential loss of their only hospitals.

The safety-net hospitals, which by definition deal primarily with patients on Medicaid, say the proposed changes would result in them receiving less money at a time when they actually need an increase in funding.

Not only do these facilities serve an important role in keeping people healthy, but they also tend to be major employment anchors.

We’re talking about places like Norwegian-American Hospital in Humboldt Park, St. Bernard Hospital in Englewood and the eponymous South Shore Hospital and Roseland Community Hospital.

“If we don’t get funding relief, we won’t be able to stay open,” said South Shore CEO Tim Caveney, who made three rounds of layoffs and imposed 10 percent pay cuts last year to keep the struggling hospital afloat.

Caveney said 65 percent of the hospital’s patients rely on Medicaid coverage, which he said reimburses the hospital at a rate far below its costs.

South Shore currently gets $11 million through the hospital assessment program but needs “an extra $3 million to break even,” he said. Instead, it’s facing a reduction under the new formula.

Yet every hospital in the state is affected by the assessment program. And each has its own ideas about what constitutes fair distribution of the Medicaid revenue as it seeks to protect its own financial health.

Small, rural “critical access hospitals” are making a push to get what they see as their rightful share of the money.

And larger, healthier city and suburban hospitals, which have been seeing larger numbers of Medicaid patients since the passage of the Affordable Care Act, think they should be reimbursed proportionately.

In recent years, the hospital assessment program has produced $3.5 billion a year — $2.8 billion of which goes back to hospitals across the state while delivering $750 million to the state for other Medicaid-covered services.

There appears to be wide agreement that the formula, based on outdated patient data, needs to be changed. For one thing, the federal government is insisting on that.

But the safety-net hospitals say they can’t accept a formula that leaves them with less money. And some legislators are backing them up.

“The term I use is they’re always on life support,” said Sen. Emil Jones III, D-Chicago, whose district includes the beleaguered Roseland hospital. “This would wipe them out.”

One option is to find a way to increase the amount of money recovered from the federal government. A larger pot containing an extra $300 million to $400 million could allow for the safety-net hospitals to avoid taking a hit.

But there’s been disagreement between the hospitals and the Rauner administration about how much it’s realistic to expect the federal government will pay.

At an earlier legislative hearing, the healthier hospitals were asked if they can take care of the patients left in the lurch if their safety-net counterparts fall.

Their telling answer was no.

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