Senate Budget Takes Aim at Hospitals

It doesn’t include a “sick tax.” But the Senate version of the state’s 2012-13 budget still takes direct aim at hospitals, in an effort to find hundreds of millions of dollars in cost savings and narrow the state’s revenue gap.

Several budget riders the Senate Finance Committee quietly approved late last week curb how much hospitals are paid for uninsured and underinsured patients, limit how they can use state and federal reimbursements, and open the door to even bigger cuts — all on top of a 10 percent reduction in what the state will pay most health care providers for Medicaid-covered patients, who are typically the neediest. Lawmakers added another half a billion dollars in cost savers into the Senate budget on Monday, from the expansion of managed care into the Rio Grande Valley to programs to better monitor high-priced neonatal intensive care units and use of emergency rooms.  

"When you've got a session like this, where people are looking for all possible opportunities to save money in the system, our biggest concern is what the aggregate impact will be," said John Hawkins, senior vice president of the Texas Hospital Association.

Notably absent from last week's riders? A tax on hospitals’ gross receipts, which hospitals flatly rejected after some Senate lawmakers floated it as a way to help bolster Texas Medicaid, the joint state-federal health care program for children, the disabled and the very poor. 

The riders are not a done deal: The full budget still has to make its way out of the Finance Committee — expected this week — and go to the Senate floor for debate. But some hospital officials, in a flurry of weekend emails, indicated that a few of the riders were a surprise, and might have been retribution for their decision not to agree to a hospital tax. That's a theory Senate Finance Chairman Steve Ogden, R-Bryan, shot down on Monday.

“There’s no retaliation in the budget,” he said.  

Among the proposed budget riders that affect hospital funding:

— A rider that requires hospitals to be paid for treating Medicaid patients with an average statewide rate, as opposed to the current system, in which each hospital has a unique rate. Projected savings: $31 million over two years.

— A proposal that would require that federal hospital matching funds (called Upper Payment Limit, or UPL, dollars) only be used for patient care, not for any capital improvement or other investments. 

There's also one other complicated series of riders. Texas intends to expand Medicaid managed care into hospitals to save money — a move that could jeopardize some federal hospital funds. If the federal government doesn't give Texas an exception to current rules, the state will either keep hospitals out of managed care or halt the expansion of managed care all together. If hospitals were excluded from managed care, the state would cut their Medicaid rates or state contracts in order to save $39 million over the next two years. If the state decides not to expand managed care, it would cut hospital Medicaid rates, contracts and other funding to save $243 million over the biennium.   

These proposals and more are on top of a proposed 10 percent Medicaid rate cut for hospitals other than children’s hospitals and rural hospitals, a move designed to save roughly $500 million over the biennium.  

Hawkins, with the Hospital Association, said he doesn't think all of these riders will remain in the budget — some could be pulled off by the full Senate, while others will likely be stripped away in conference committee. "We've had some good discussions with leadership over the last couple of days," he said. "They've asked us to point out where there are potential problems." 

Aziza Musa contributed to this report.