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Louisiana Hospital Association The Budget Challenge of Healthcare.

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Presentation on theme: "Louisiana Hospital Association The Budget Challenge of Healthcare."— Presentation transcript:

1 Louisiana Hospital Association The Budget Challenge of Healthcare

2 The healthcare sector in Louisiana represents almost 15% of total payroll in the state, totaling approximately $8.33 billion. Hospitals employ 99,351with a payroll of $4.4 billion, which accounts for 55% of payroll within the healthcare sector. Healthcare Economic Engine

3 Hospitals average about $469 million in building construction each year, leading to the creation of more than 8,042 new jobs yearly in sectors other than healthcare. The overall economic activity that is supported by hospital expenditures leads to $487 million in state tax collections and $325 million in local tax collections. Economic Impact of LA Hospitals

4 Overall hospital expenditures are estimated to be $8.8 billion; and overall business transactions as measured by business sales, including the direct hospital expenditures, are $18.6 billion. The number of jobs related to hospital expenditures is 182,586. The healthcare industry in Louisiana employs more than 269,184 people, over 16.3 percent of the total workforce and approximately 15.3 percent of the state’s total private payroll. Economic Impact of LA Hospitals

5 Each job in a hospital supports almost one additional job. Every dollar spent by a hospital supports $1.14 of additional business activity. Healthcare Economic Engine

6 In the most recent cost report year 2009, 16 Lafayette region hospitals had: FTEs 4,430 Total Salaries$181.9 million Total Operating Expenses$830.8 million Net Patient Revenue$667.9 million Average Hourly Wage $21 - $27 (Some hospitals had not reported salary information) Economic Impact of Hospitals in the Lafayette Area

7 Healthcare Coverage in Louisiana 1.7 million have commercial health insurance 1.2 million rely on Medicaid 653,000 rely on Medicare 813,000 have no insurance coverage

8 8 57% of hospitals surveyed had total operating margins of less than 1%. 43% of hospitals surveyed had negative total operating margins. Louisiana Hospital Operating Margins Source: LHA 2009 Annual Survey

9 State FYEnrolledState FYEnrolled SFY ,898SFY ,067,188 SFY ,813SFY ,113,410 SFY ,734SFY ,142,280 SFY ,646SFY ,154,533 SFY ,154SFY ,174,215 SFY ,010,201Estimated Today1.23 million Medicaid Enrollment History Source - DHH Medicaid Annual Reports SFYs thru

10 Total Medicaid Hospital Service Lafayette Region & State Lafayette Region –Community Hospitals81% –Rural Hospitals 5% –State Hospital13% Statewide Totals –Community Hospitals70% –Rural Hospitals 8% –State Hospital 22%

11 In Louisiana: Medicaid payments to community hospitals (non-state, non-rural) are $153 million below the cost of the care provided. (In Lafayette Region alone, $28+ million) In addition, these same community hospitals provided over $186 million in net un-reimbursed costs to uninsured patients.¹ ¹Net un-reimbursed costs equal gross costs less patient payments before uncompensated care payments. Source: DHH/ Myers and Stauffer Analysis Reimbursement

12 12 Medicaid Inpatient Hospital Payments Compared to Medical Care Inflation % Medicaid rate increase 2001 $25 million appropriated for 2.5% Medicaid rate increase 2006 $38 million appropriated for 3.8% Medicaid rate increase 2007 $33 million appropriated for 4.75% Medicaid rate increase % mid-year reduction in February and 6.3% IP / 5.65% OP reduction in August (approximate $90 million total impact to hospitals including outlier reductions) % mid-year reduction in February (approximately $50 million impact to hospitals) and 4.6% estimated reduction passed in recent state budget (estimated impact of $46 million at present pending additional data) Medical Care CPI projected for 2009 and 2010 using average of the three previous years; Medicaid Enrollment Increases for 1995 and 1996 based on average of three subsequent years; Medicaid Enrollment Increases for 2009 and 2010 based on average of three previous years

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14 Health Reform Becomes Law The Patient Protection and Affordable Care Act (PPACA) was signed into law March 23. It was amended by the Health Care & Education Affordability Reconciliation Act, which was signed into law March 30. Together, the legislation: Provides coverage to 32 million uninsured people by Costs an estimated $940 billion over 10 years ( ).

15 Medicare & Medicaid Payment Cuts – Paying for Reform Nationally, hospital payments will be cut $155 billion over 10 year period beginning in 2010 to help pay for expanding coverage to 32 million.

16 State Burdens Under National Health Reform 16 At 133% of Federal Poverty Level, nearly 42% of all Louisiana residents would qualify for Medicaid! 260,000 residents could be added to Medicaid rolls. This alone could cost the state an additional $614 million in state dollars.

17 17 FISCAL YEAR THE “CLIFF YEAR”

18 Misunderstanding…. “Why is it so hard for the legislature to cut $1.6 billion out of a $25.5 billion budget. That’s a cut of only 6% and who out there couldn’t manage to cut their budget by 6%?” 18

19 Federal Funds cannot be cut to deal with the shortfall FEDERAL FUNDS 45% $11.5 B 19

20 For various reasons, the legislature and in some cases the citizens, have chosen to dedicate certain revenues for specific services. Dedicated funds are not generally considered to be available to offset a shortfall FEDERAL FUNDS 45% $11.5 B DEDICATIONS 18% $4.6 B 20

21 The legislature allows some agencies to charge a fee to offset some or all of the cost of their operations. These fees are not generally considered to be available to cover a budget shortfall in the General Fund FEDERAL FUNDS 45% $11.5 B DEDICATIONS 18% $4.6 B AGENCY FEES 7% 1.7 B 21

22 GENERAL FUND 30% $7.7 B The most versatile funding in the budget is the General Fund which can be used to pay for any expense of government FEDERAL FUNDS 45% $11.5 B DEDICATIONS 18% $4.6 B AGENCY FEES 7% $1.7 B 22

23 Because there are restrictions on the use of the other sources of funding in the budget, the General Fund is where most of the cuts will have to be made to deal with the $1.6 billion shortfall GENERAL FUND 30% $7.7 Billion Cutting $1.6 Billion out of this area of state funding would amount to a 20% across-the- board cut 23

24 However, there are even restrictions on the General Fund and those restrictions protect $5.1 billion of the total $7.7 billion from cuts. This “uncuttable” part of the budget is referred to as “non-discretionary” spending $2.6 Billion $5.1Billion 24

25 This leaves 10% of the total state budget or about $2.6 billion to absorb the $1.6 billion in cuts needed to eliminate the $1.6 billion projected FY 12 shortfall $2.6 Billion FEDERAL DEDICATIONS AGENCY FEES NON- DISCRETIONARY 25

26 Breakdown of Discretionary General Fund Budget 26


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