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Louisiana Hospital Association

Explore the significant financial contributions and challenges faced by hospitals in Louisiana, including their impact on job creation, tax collections, and healthcare coverage.

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Louisiana Hospital Association

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  1. Louisiana Hospital Association The Budget Challenge of Healthcare

  2. The healthcare sector in Louisiana represents almost 15% of total payrollin the state, totaling approximately $8.33billion. Hospitals employ99,351with a payroll of $4.4 billion, which accounts for 55% of payroll within the healthcare sector. Healthcare Economic Engine

  3. Economic Impact of LA Hospitals • 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.

  4. Economic Impact of LA Hospitals • 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.

  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. Economic Impact of Hospitals in the Lafayette Area 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)

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

  9. Medicaid Enrollment History Source - DHH Medicaid Annual Reports SFYs 1997-98 thru 2007-08

  10. Total Medicaid Hospital Service Lafayette Region & State • Lafayette Region • Community Hospitals 81% • Rural Hospitals 5% • State Hospital 13% • Statewide Totals • Community Hospitals 70% • Rural Hospitals 8% • State Hospital 22%

  11. Reimbursement 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

  12. Medicaid Inpatient Hospital Payments Compared to Medical Care Inflation 1997 2.6% 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 2009 3.5% 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) 2010 5% 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 12 12

  13. Patient Protection and Affordable Care Act - March 23, 2010 13

  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 2019. Costs an estimated $940 billion over 10 years (2010-2019).

  15. Medicare & Medicaid PaymentCuts – 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 • 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. 16

  17. FISCAL YEAR 12 . . . THE “CLIFF YEAR” 17

  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 AGENCY FEES 7% 1.7 B DEDICATIONS 18% $4.6 B 21

  22. The most versatile funding in the budget is the General Fund which can be used to pay for any expense of government GENERAL FUND 30% $7.7 B FEDERAL FUNDS 45% $11.5 B AGENCY FEES 7% $1.7 B DEDICATIONS 18% $4.6 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 NON- DISCRETIONARY FEDERAL AGENCY FEES DEDICATIONS 25

  26. Breakdown of Discretionary General Fund Budget 26

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