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South Florida hospitals face huge federal, state cuts

With the federal government already slashing their funds in big and small ways, and major state cuts possible from the upcoming session of the Legislature, South Florida’s hospitals are concerned about looming financial problems.

An analysis by the Florida Hospital Association shows that Miami-Dade hospitals stand to lose $1.9 billion in federal funding over the next decade to treat Medicare patients.

Broward facilities also face huge losses, but the FHA did not separate them out of the $11 billion that hospitals statewide are expected to lose during the next 10 years.

“The federal government has already taken their pieces of hide out of the hospital industry,” says Linda Quick, president of the South Florida Hospital and Healthcare Association.

“We are in no position for the state government to balance its budget on the backs of our industry.”

Jackson Health System, struggling to turn around its finances, stands to be a big loser. The FHA analysis shows Jackson losing $33.4 million a year in federal funds over the next decade. Jackson’s own analysis shows that proposed state changes mean it could lose at least another $45 million a year — and perhaps much more. Such losses could be devastating for a system that eked out a $1.5 million surplus in fiscal year 2012.

A large part of the federal cuts are imbedded in the Affordable Care Act, often called Obamacare . The nation’s hospitals agreed to them at the time because they expected to gain in other areas. But Congress added more cuts last year during the “sequestration” budget discussions. And finally, more cuts were slipped into the New Year’s Eve compromise to avoid the fiscal cliff — a quiet deal that helped doctors and cost hospitals.

To make the Affordable Care Act affordable, Quick said, hospitals agreed to lower Medicare rates, with the understanding that many more people would have insurance, meaning that facilities would have a greatly reduced burden of subsidizing the uninsured.

To compound the situation, Quick said most private insurers follow Medicare rate patterns, meaning they too will be lowering payments to hospitals.

The outlook became more uncertain last year when the Supreme Court ruled that states did not have to accept the act’s expansion of Medicaid. Gov. Rick Scott and the Legislature’s Republican leadership have been reluctant to accept the expansion, fearing it would cost the state too much money. Without expansion, a million or more uninsured Floridians could remain a burden on the state’s hospitals.

Meanwhile, Washington has been looking for ways to slash the deficit. The quietest cuts of all of call came in provisions buried in the New Year’s Eve legislation — called the American Taxpayer Relief Act — to deal with a festering problem for the nation’s doctors. Going back to the 1990s, federal balanced-budget legislation has required annual cuts in physician pay if Medicare costs kept rising. Congress has kept postponing the move. By the end of 2012, doctor’s Medicare payments needed to be cut by 26 percent to conform to the law.

The fiscal cliff postponed the physician pay cut for another year — but to compensate they reduced hospital programs by billions.

The biggest reduction came in the ways Medicare will now code for severity of illnesses.

Quick explained it this way: “The federal government assumes that institutions and physicians will upcode” — state that a patient’s condition is more serious than it is to get higher payments — “and so they are lowering the coding to deal with that.”

These fiscal cliff adjustments are going to cost Florida hospitals $700 million over the next four years, according to the FHA. Memorial Regional in Hollywood will lose $8.5 million, Broward Health Medical Center $5.4 million, Jackson $16.5 million.

“We want doctors to be adequately paid ,” said FHA President Bruce Rueben, “but not this way. We’re paying huge sums over many years just for a one-year fix in the doctor pay. I think it’s safe to say that all these cuts will have the cumulative effect of reducing the number of jobs available in healthcare.”