Facing a drastic cut in federal healthcare dollars for the uninsured beginning in July, the Florida Legislature has proposed a new model — set to be finalized this week — for distributing the smaller pool of cash and encouraging hospitals to cooperate like never before, including voluntary financial contributions among competing medical centers.
Some of Florida’s largest public hospitals, including Miami-Dade’s taxpayer-owned Jackson Health System, could lose tens of millions of dollars under the proposal while some other not-for-profit medical centers, including Baptist Health South Florida, stand to gain.
“This is really a whole new, important dynamic statewide and locally,” said Tony Carvalho, president of the Safety Net Hospital Alliance of Florida, which lobbies state legislators on behalf of publicly funded hospitals.
This year, Miami-Dade County will send about $217 million in local taxes for the LIP program, and should receive about $285 million in return after the federal match.
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Perhaps the biggest change is a nearly 50 percent reduction in the combined state and federal hospital funding program known as the Low Income Pool or LIP, from a total of $1.1 billion for the year ending June 30 to about $608 million for the following year.
Over the past two years, the Obama administration has reduced the amount of Florida’s LIP and other funding — arguing that the federal government should not pay hospitals to care for Floridians who would have had coverage if the state were to expand eligibility for Medicaid as prescribed under the Affordable Care Act.
For the year starting July 1, the Obama administration has further restricted Florida’s LIP money to pay hospitals only for the cost of free and discounted care to the uninsured. Florida also is required to create a new model for distributing the remaining federal healthcare dollars.
According to an analysis by the Safety Net Hospital Alliance, that new model will translate to about a $23 million loss for Jackson Health in a best case scenario for the coming year. Homestead Hospital, which is part of the nonprofit Baptist Health South Florida system, would gain about $14 million under the new model.
But Jackson Health and Homestead Hospital could both lose if they do not reach agreement on a mutual way to pay for the LIP program. In order for the hospitals to earn their allotted funds, local governments have to raise the full amount necessary to draw the maximum federal match.
Without financial contributions from Homestead Hospital and other medical centers, Jackson Health could lose as much as $41 million in the coming year, Carvalho said.
Miami-Dade Commissioner Daniella Levine Cava said she hopes the county can be a leader in getting local hospitals to cooperate.
$250M LIP funds that will benefit Jackson Health this year
Cava sponsored a resolution this week that directs the Miami-Dade mayor’s office to prepare a report on local hospital funding for the uninsured under Florida’s new system. The county’s Economic Prosperity Committee that oversees healthcare will consider the item on March 17.
“What we want is for the county to explore what are the changes in the system so that we can make intelligent decisions and recommendations about how to proceed,” Cava said.
Under the current model for the LIP program, local governments contribute taxes to Florida on behalf of publicly funded hospitals. Miami-Dade sends taxes on behalf of Jackson Health.
Those taxes, called Intergovernmental Transfers or IGTs, allow the state to draw federal matching LIP funds at a rate of roughly $60 for every $40 that Florida pitches in.
The local governments get their full contributions back, plus an increase from the federal match. The local governments distribute the LIP funds to the hospitals, including some medical centers that contribute no money to the program but benefit anyway.
In Miami-Dade, the primary beneficiary of the LIP program has been the county’s public hospital system, Jackson Health, which cares for more uninsured patients than any other hospital in Florida.
This is really a whole new, important dynamic statewide and locally.
Tony Carvalho, president Safety Net Hospital Alliance of Florida
For the current year ending June 30, Miami-Dade will send about $217 million in local money in order to receive about $285 million in return, with about $250 million going to Jackson Health and the remainder to local hospitals, according to Cava’s resolution.
Starting in July, however, Florida can no longer guarantee Miami-Dade a 100 percent return on its contribution. Instead, Florida was required to create a model that distributes LIP dollars to hospitals based on the cost of charity care they provide as compared to their commercial charges.
With no assurance that they will receive a full return on their contributions, local governments may choose to skip trying to get matching funds from the federal government, and simply send their money straight to local hospitals.
In Miami-Dade, Jackson would likely get the money, losing its federal match and leaving other hospitals’ charity care unfunded.
“There's like a disincentive to put your money in, and if that happens, we end up leaving a half billion dollars in federal dollars on the table,” Carvalho said. “Jackson would be killed, but Jackson has to make a decision: At what point would they be better off not funding this than losing money?”
Other funding sources for indigent health care used by Miami-Dade, including the Medicaid Disproportionate Share Hospital Program (DSH), are also scheduled for significant reductions beginning in 2017.
The Florida Legislature’s solution: allow private and nonprofit hospitals that benefit from LIP, such as Baptist Health, to voluntarily contribute payments to their public hospital, such as Jackson Health, in order to ensure that the local government has enough to draw the full matching amount from the federal government.
Baptist Health declined comment on Florida’s new model for the LIP program until after state lawmakers finalize the proposal at the end of the legislative session this week.
Jackson Health issued a written statement: “We're continuing to work with the delegation and our fellow healthcare providers in Miami-Dade County to ensure our residents receive the full benefit — fairly distributed — of the IGTs provided by Jackson Health System.”
Carvalho of the Safety Net Hospital Alliance, which represents Jackson Health, said he believes the state’s new model for distributing LIP and other federal healthcare dollars will be finalized by the Florida Legislature this week.
Getting local hospitals to cooperate and contribute under the new system likely will take months, he said.
“We’re going to have to be creative to show how it’s in everybody’s best interests,” Carvalho said, “and we're going to have to use some local political pressure.”