Report Backs Hospitals' Case

Shows That Half Face Deficits; Could Lead To Changes In State Payments

October 25, 2006
By HILARY WALDMAN, Courant Staff Writer

For more than a decade, officials at Connecticut hospitals have complained that continuous financial bleeding was threatening their institutions.

A new legislative report suggests they may be right.

"Connecticut's hospitals appear not as healthy financially as hospitals in the rest of the country," the report, currently under review by the Legislative Program Review and Investigations Committee, said.

Although the figures have not been finalized, data from about half of the state's 30 nonprofit hospitals forecast deficits for the fiscal year that ended Sept. 30, according to the Connecticut Hospital Association. Even those that finished in the black merely squeaked by.

The reasons include high costs for energy, salaries and malpractice insurance, as well as the expense of maintaining and upgrading buildings that are older than the national average. Legislative researchers who examined the hospital finances reserved judgment on hospital leaders' biggest complaint: that skimpy state payments for treating low-income patients are the main cause of the sinking bottom line.

Stephen A. Frayne, a senior vice president at the hospital association, said the underpayment costs hospitals $250 million a year as the state pays hospitals 72 cents for every dollar they spend to treat low-income residents covered by state health insurance programs such as Medicaid.

"We're treading water," Frayne said.

The impact of state Medicaid payments will be addressed in the final report, in December or January. Hospital leaders said they are confident the report will show that they need more state money. It could lead to changes in the way the state pays for hospital care.Under the current system, hospitals have overcharged privately insured patients and dug into endowments and investment income to make up for the shortfall.

At Windham Community Memorial Hospital, for example, the charitable hospital auxiliary recently donated $90,000 to bail out a program that provides breast and cervical cancer screening for woman who cannot afford mammograms and Pap tests.

In the past, auxiliary donations have paid for extra goodies such as new equipment. But with the cancer screening program running a $150,000 deficit because of low state payments, the hospital chose to try to keep the program afloat this year instead.

It is the first time the auxiliary has been asked to cover the operating costs, said Richard Brvenik, Windham Community Memorial's president and CEO.

"In essence, hospitals are borrowing from the future to cover today's expenses," said Frayne.

Because the cost of Medicaid is shared equally between the state and federal governments, the hospitals contend that increasing the rates would be the cheapest way to go. The state would have to come up with $125 million a year to pay hospitals what they need to care for low-income patients, while Washington would cover the rest.

Although the hospitals have long complained about under-funding at the Capitol, Kevin Kinsella, a vice president at Hartford Hospital, said he feels optimistic this time. Kinsella said state and national talk about universal health insurance combined with the state's projected budget surplus might finally bring more money to struggling hospitals.

And state Sen. Toni N. Harp, a chairman of the legislature's powerful appropriations committee, which signs off on state spending, agreed.

"We should look at all of our Medicaid rates because [some] provider rates have not changed in 20 years," Harp said.

She said the state needs to embark on a Medicaid modernization program that brings all state medical payments for doctors, dentists and hospitals in line with what private insurers pay.

"They really are in a vise," Harp said of state hospitals, doctors and dentists. "At some point we ought to pay our fair share."

But state Sen. Cathy Cook, R-Mystic, the co-chairwoman of the program review committee, said she is not convinced that the hospitals need more state money. Certain hospitals have a high percentage of Medicaid patients, she said, but nonetheless manage to make ends meet.

Once a final report is complete, the program review committee is expected to propose changes to the state's hospital financing system.