Miami-Dade County

Jackson Memorial Hospital expected to lose $140 million under new Medicaid law

Jackson Memorial Hospital is bracing again for big cuts — this time, the result of a new law that will send millions of federal dollars that used to go to Miami-Dade hospitals elsewhere in the state.

When the provision takes effect in July, healthcare systems across Miami-Dade County stand to lose $218 million in Medicaid matching funds, also known as Low Income Pool funds.

Jackson alone will shoulder a $140 million hit.

“That would be fairly catastrophic,” Chief Executive Officer Carlos Migoya said. “We’re at a point right now where we are fairly efficient. It’s not like we have a whole lot of extra fat to cut.”

In a twist that shows how complex the new funding formula is, hospitals in Broward County are expected to gain about $31 million.

Still, officials at Broward’s two largest public hospitals say the law should be repealed.

“Even if this could bring us more money this year, we oppose it,” Memorial Healthcare System Chief Executive Officer Frank Sacco said. “We are going to lose transparency. In the future, we might not have any control over where the money goes.”

The new funding formula was a little-known part of Florida’s 2011 Medicaid reform law, a Republican-driven overhaul of the state and federal insurance program for the poor.

The provision was intended to make the distribution of an estimated $1 billion a year in federal Medicaid matching funds more equitable. But its unintended consequences are now becoming clear, as the funding mechanism known as “tiering” is scheduled to take effect.

Hardest hit are hospitals that serve large numbers of uninsured and Medicaid patients, and counties such as Miami-Dade that put their own residents’ tax dollars toward Medicaid. Those local dollars are matched by federal funds.

In the past, hospitals in the counties that raised the funds got nearly all of those federal dollars back. Now they are being shared with some communities that don’t raise their own funds.

The money will be divvied up through a complicated formula that places hospitals into three different categories, or tiers.

The first, which gets 35 percent of the total funds, is made up of children’s hospitals, teaching hospitals and rural hospitals that serve large numbers of Medicaid patients.

To be in the second tier, hospitals must meet two conditions: They must be located in a county that raises healthcare funds, and more than 9 percent of their patients must be on Medicaid. Those hospitals share 35 percent of the funds.

The third category includes other hospitals that take Medicaid patients. They get 30 percent of the money.

The tiering system is not the only change driving the cuts.

State analysts have predicted that the new funding formula will prompt local governments to cut back on their funding — impacting the federal match. They expect that to lead to an overall $565 million statewide decline in federal matching funds for hospitals.

Hospitals on the losing end are fuming.

“The fact is, the voters have put on themselves taxes that deal with healthcare,” said Migoya, whose hospital sees more Medicaid patients than any other hospital in the state, and thus stands to see the biggest drop in funding. “Now, the Legislature is using some of this money to benefit other communities that chose not to tax themselves, as well as for-profit hospitals.”

Even state Rep. Matt Hudson, a Naples Republican who played a key role in the Medicaid reform law, said the Legislature should rework the formula this session. He said the Legislature did not intend to have such an impact on counties that have been raising their own healthcare funds.

“It would really, really put a dent on some of the major treatment facilities in the state, be it trauma facilities or otherwise, and that would be a problem,” he said.

Hudson is among those wondering why counties would continue taxing their residents to get a match that goes elsewhere.

“If they don’t get that guarantee, why would you do it?” he said. “It doesn’t make great sense.”

While legislators could rework the formula this session, it’s unclear how high a priority it will be. After all, the plan does create winners, too.

Broward is one of several counties that stand to gain money, according to new figures from the Safety Net Hospital Alliance of Florida. Broward Health and the Memorial Healthcare System would see their budgets increased by $16.7 million and $12.8 million, respectively, according to the analysis.

Broward County funds its public hospitals through special taxing districts. But its public hospitals make money under the tiering system in part because they fall into the second category with only a few other healthcare institutions.

Leaders at both hospitals still don’t like the law.

Sacco, the Memorial CEO, is especially concerned about the effect it will have on Jackson.

“Why would we want to devastate the largest safety net provider in the state of Florida?” he said. “We wouldn't want it to happen to us. We understand that we need to hold the line on this one.”

Taken as a group, the state’s safety-net hospitals would be the biggest losers, enduring a total $300 million hit.

For-profit hospitals don’t lose nearly as much. Most are not located in counties where Medicaid dollars are being distributed. But they’re still expected as a group to pull in $77 million less under the new arrangement.

Throughout Miami-Dade County, the reductions would be steep.

The University of Miami hospital division, which includes Bascom Palmer Eye Institute and a variety of clinics, would see its funding drop by about $26.6 million.

Miami Children's Hospital stands to lose $12.8 million, according to the Safety Net Hospital Alliance.

“If the cuts occur, we will, of course, continue to enhance efficiency to maintain our level of excellence in patient quality,” Miami Children’s Chief Executive Officer Narendra Kini said. “However, there is no question that cuts could ultimately affect the services that we provide to children.”

Even Baptist Health South Florida, a private nonprofit healthcare system, would see cuts of more than $16.3 million.

That would mean a $6.6 million reduction for the 142-bed Homestead Hospital.

“A hospital like Homestead should receive fair reimbursements because of the tremendous amount of charity care it provides and the large Medicaid population that it serves,” said Vice President of Community Relations Phillis Oeters. “It is the second busiest emergency room in the county.”

All this comes as hospitals already face financing changes.

They’re still adjusting to the state’s new Medicaid payment system, which is based on services performed instead of the length of a patient’s stay. In addition, the federal government hasn’t yet told the state whether it will approve other changes to the Medicaid program, making it hard to plan for next year. State and federal officials are fighting openly over a state effort to limit payment for some Medicaid patients’ emergency room visits.

Nonprofit hospitals tried to draw attention to consequences of the new distribution plan last year, but were overshadowed by other matters. Now they’re running out of time.

Tony Carvalho, president of the Safety Net Hospital Alliance of Florida, says the new funding system should be repealed. “We believe that it’s an arbitrary methodology without a lot of basis in policy,” he said. “And we believe the state is best served by deleting the whole section of law.”

Miami-Dade lawmakers say they will do what they can to help.

“That is arguably the most important Miami-Dade delegation priority,” said Rep. Jose Felix Diaz, R-Miami. “This is the opposite of Robin Hood. It is stealing from the poor to give to the rich.”

Miami Herald staff writer Daniel Chang contributed to this report. Contact Kathleen McGrory at