Report: Ky. hospitals lose money under federal health law

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FRANKFORT, Ky. (AP) — Kentucky's decision to expand Medicaid meant an extra 400,000 people could have health insurance. But a new report says it also meant up to 7,700 hospital jobs would disappear.

The Kentucky Hospital Association said the state's hospitals have cut their workforce by 10 percent since 2013 as they prepare for an estimated $7 billion in federal cuts by 2024 to help pay for the federal Affordable Care Act. In a survey, the consulting firm Dobson/DaVanzo hired by the association found 109 of the state's 127 hospitals reported job losses of more than 7,700 through layoffs and attrition. The association estimates those job losses removes $208 million from local spending on goods and services and another $31 million from state income and sales tax collections that pay for government services.

Democratic Gov. Steve Beshear, who made the decision to expand Medicaid in Kentucky, noted that the 400,000 extra people on Medicaid meant an extra $506 million for Kentucky hospitals that has "blunted the impact of other fiscal pressures on hospitals." The report says that is likely the most money hospitals are going to get and they can expect nothing but reductions in the future.

"We take issue with picking one year and ... saying everything is great based on one year," Kentucky Hospital Association Vice President Nancy Galvagni said. "When you look at the cuts under the (Affordable Care Act), they ramp up."

The report notes that Medicaid only pays 82 percent of how much it actually costs hospitals to treat a patient. And under the Affordable Care Act, hospitals will get less money from the government to compensate them for providing free care to people who can't afford it.

The report seems to contradict a study Beshear touted earlier this year from Deloitte Consulting and the University of Louisville's Urban Studies Institute that showed Kentucky had added 12,000 jobs because of the Medicaid expansion. But that study included all segments of the health care industry, not just hospitals.

The hospital report released Friday showed in addition to the job losses, 44 percent of hospital workers had wages frozen or reduced. And more than 40 percent of hospitals who responded to the survey said they cut services like psychiatric units and outpatient clinics to reduce costs.

Rural hospitals seemed to suffer the most. Earlier this year a state audit showed 34 percent of the state's rural hospitals are in poor financial health and in danger of closing while 68 percent fall below the national average. That audit did not include 14 private rural hospitals that declined to participate. And it did not include financial information from 2014, when Medicaid spending increased because of the expansion.

"We are very aware of the challenges that medical providers face in Kentucky," Beshear said in a statement about the report. "Rather than trying to turn back the clock and return to old business practices, we are working directly with providers to help them develop new strategies for better, more efficient, quality health care delivery."

One thing the Beshear administration has done to help hospitals is to renegotiate contracts with the five managed care organizations that provide Medicaid services in Kentucky. Rust said the five organizations all have different standards for deciding the medical necessity of a procedure, and hospitals have to do a lot of work to keep up with all of them.

The report echoes the concerns of the state's conservative politicians, namely U.S. Senate Majority Leader Mitch McConnell and Republican presidential candidate Rand Paul, who have warned for years that the Affordable Care Act was damaging hospitals. Rust said he would not join McConnell and Paul in calling for Congress to repeal the law.

"There are some good parts of it and parts that give us some challenges," he said.

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