The Abercrombie administration, in a major policy shift, will award most of the $10 million in federal money the state receives this year to help cover medical costs for the poor at the state’s public hospitals.
Through the past several years, the state has given the federal money to private hospitals to help them offset the cost of caring for patients who are on Medicaid or are uninsured.
But the Hawaii Health Systems Corp., which oversees more than a dozen public hospitals, has a $10.5 million shortfall and is more than two months behind in paying bills.
"There is a real and substantial need here in Hawaii to support the Hawaii state hospital system," said Patricia McManaman, director of the state Department of Human Services. "They provide services across the state to some of our most vulnerable populations."
The administration plans to distribute $6.8 million of the federal money available for charity care this year to public hospitals to help with the shortfall. It will also direct $2.3 million toward Medicaid patients and the uninsured.
The administration will use the remaining $866,600 to lure an additional $883,400 in federal matching funds and give the balance — $1.7 million — to private hospitals.
Under Gov. Linda Lingle the state had been awarding most of the federal money for charity care to private hospitals, and the Abercrombie administration kept the pattern last year. Private hospitals estimated that bad debt and charity care caused losses of $115 million in 2010, largely from patients who are uninsured.
The state had been using a formula developed with the Healthcare Association of Hawaii, which represents private hospitals, to allocate the federal money based on the charity care provided at hospitals. The Queen’s Medical Center, which received $3.9 million in federal money for charity care last year, and Kapiolani Medical Center for Women & Children, which got $1.5 million, have been the largest beneficiaries.
Hawaii has been using the losses from charity care at public hospitals as the reason to get the federal money — known as disproportionate share hospital payments — yet has been awarding the money to private hospitals.
"There is a philosophical difference over who does that money really belong to," said state Rep. Ryan Yamane (D, Waipahu-Mililani), chairman of the House Health Committee.
Hawaii was not eligible for the federal money after it launched QUEST — the state’s version of the federal Medicaid program — in 1994. But U.S. Sen. Daniel Akaka, D-Hawaii, fought to restore the state’s eligibility, and the state has been receiving a share for the past several years. Under the federal health care reform law approved by President Barack Obama and Congress, Hawaii is eligible for $100 million in federal money for charity care, or about $10 million a year.
Bruce Anderson, president and chief executive officer of the Hawaii Health Systems Corp., said the federal money this year is welcome.
The $600 million public hospital system includes Maui Memorial Medical Center, Hilo Medical Center and Kona Community Hospital, critical lifelines for residents on the neighbor islands.
Anderson said using the federal money for charity care for private hospitals "was a policy decision made by the previous administration."
"I can’t understand why funds derived from public hospital system losses were being diverted or redirected to the private-sector hospitals, particularly when we have such a huge need in our public hospitals," he said.
Some advocates for private hospitals have said privately that the Abercrombie administration’s policy shift might be punitive, which McManaman denies.
State lawmakers passed a bill that would establish provider fees for private hospitals and large nursing homes that would enable the state to get millions in additional federal Medicaid money next fiscal year. Private hospitals would pay about $42 million in fees and get $77 million in return. The state would get a 7 percent cut — or $2.8 million — in the transaction.
McManaman had pushed hard for a larger state share, arguing, among other things, that it would allow the state to restore some of the benefit reductions for adults in QUEST scheduled in July to contain rising costs. But lawmakers agreed with private hospital advocates, who warned that support for the provider fee could erode if the state took more of the money.
The administration announced earlier this month that it would continue to cover durable medical equipment, such as oxygen tanks and wheelchairs, that had been planned for elimination as part of the QUEST benefit reduction. McManaman has suggested that other benefit reductions might also be canceled.
Gov. Neil Abercrombie’s advisers say he has not decided whether to sign the provider fee bill or allow it to become law without his signature.
State Sen. Josh Green (D, Milolii-Waimea), an emergency room doctor and chairman of the Senate Health Committee, said the additional federal Medicaid money that would be generated from the provider fee is essential for private hospitals now that the administration has chosen to use most of the federal charity care money for public hospitals.
"It is critical for the governor to support both the public and private hospitals, so if he is committed to this change in funding plans, he must let the hospital sustainability bill become law," Green said in an email. "Any other approach would be irresponsible and wrong."
