Federal cuts made ill TGH worse

When Medicare reimbursements were reduced, a bad fiscal situation at Tampa General Hospital exacerbated.

By WAYNE WASHINGTON

© St. Petersburg Times, published February 20, 2000

TAMPA -- Bruce Siegel could have said the sky is blue and some local politicians would look up and expect to see purple.

They distrusted him when Tampa General Hospital lost $29-million instead of making $57.8-million after it went private. They despised him when he sparked a federal investigation of the County Commission over its refusal to restore lien authority, which hospital executives initially said was unimportant but later acknowledged was worth $1-million a month.

So when Siegel said drastic cuts in Medicare reimbursements were a main reason for Tampa General's financial problems, few listened.

It was just another Siegel statement, critics thought, thrown on the pile of threats and broken promises that ultimately cost him his job.

Siegel's complaint, however, wasn't a Chicken Little imitation. The Medicare reimbursement reductions, part of the 1997 balanced budget agreement, have been an unmitigated nightmare for hospitals like TGH.

"This has really been an earthquake, an 8 on the Richter scale," said Carmela Coyle, American Hospital Association senior vice president for policy.

The Florida Hospital Association estimates that TGH will lose $53.3-million from 1998 to 2002 because of the budget agreement. And most of those projected losses haven't been felt yet.

"It's like a steam shovel that scoops out more and more," FHA President Charles Pierce said. "There are bigger bites each year."

Like other hospitals, TGH is getting a smaller share of its revenue from Medicare. In fiscal 1999, for instance, 36 percent of the hospital's revenue came from Medicare. During the first quarter of this fiscal year, Medicare comprised 30 percent of the revenue.

Privatization, it turns out, couldn't have happened at a worse time. Siegel campaigned to take the hospital private and got it -- two weeks before Congress approved the budget agreement.

Tampa General suffered a double blow because the budget agreement also slowed the growth of payments to teaching hospitals.

It wasn't alone. Florida, where 19 percent of residents were on Medicare in 1998, was hit particularly hard by the cuts.

An analysis by the Florida Hospital Association found that the budget agreement will cost Florida hospitals $4-billion from 1998 to 2002.

Bayfront Medical Center in St. Petersburg will lose $25.5-million, the FHA said, and St. Joseph's Hospital in Tampa will lose $45.8-million.

Hospitals across the country are scrambling to make up for the billions in revenue lost because of reduced Medicare reimbursements. They are slashing jobs and curtailing services.

Siegel announced in June 1998 plans to eliminate 200 jobs at TGH through "voluntary layoffs." At the time, he blamed the County Commission's unwillingness to restore lien authority, which would allow the hospital to make the initial claim against insurance settlements for patients who previously were unable to pay for the care they received.

Hospital officials have since scaled back their estimate of how much lien authority is worth, claiming it would bring in between $6-million and $8-million per year. Still, even that puts Tampa General in a tight bind.

Congress has backtracked as hospitals rack up multimillion dollar losses.

The American Hospital Association released a detailed study earlier this month claiming that the changes in Medicare reimbursement will cost hospitals $76.7-billion from 1998 through 2002.

"The level of impact has been larger than what was expected by the Congressional Budget Office," said U.S. Rep. Jim Davis, D-Tampa.

Spending on Medicaid, designed for the poor, was reduced by $10-billion in the budget agreement, but the changes in Medicare are what have alarmed hospital officials most.

Those changes have hit hospitals in myriad ways. For example, the government helps hospitals pay for capital improvements based on how many Medicare patients are treated at the facility. The budget agreement calls for the government to decrease the amount hospitals get for capital improvements.

Also, the government will now cover just over half of the bad debts hospitals acquire in treating Medicare patients. Those debts were once covered in full.

Davis supported legislation passed last year that restored some of the funding. TGH got $3.6-million, but Siegel and other hospital executives said more is needed.

"These hospitals are getting hammered," said Russ Molloy, vice president of government affairs for the University of Pennsylvania Health System, which expects to lose $175-million over the next four years because of the budget agreement.

Medicare has long been a prized source of revenue for hospitals, particularly large, older ones in big cities that have a high number of poor, uninsured residents.

The federal health care program for seniors and the disabled has softened the financial blow hospitals take to provide care for the poor, who often require more expensive treatment because they can't afford preventive care.

State Sen. Tom Lee, R-Brandon, said it's hard to criticize Siegel for not realizing the impact Medicare cuts would have. "It's a good chance Congress didn't even know what they did," Lee said.

In the privatization fight, the assumption was that a hospital freed from the burdens of public disclosure of its financial plans would be better able to compete in the ever-changing marketplace.

Stronger ties to government, however, might actually have helped TGH survive the mammoth changes brought on by the budget agreement.

"I think they're far worse off today as a private hospital than as a public hospital," Lee said.

Lien authority would have helped. Local politicians also might have been more willing to help its public hospital cope with losses from Medicare changes.

With more public disclosure of its problems and plans, for instance, Commissioner Chris Hart said he would have been willing to consider using local indigent health care tax money or asking the Legislature to support TGH as a teaching facility.

Instead, elected officials listened with damning disbelief as Siegel complained about the changes in the industry and how the budget agreement was crippling the hospital.

Although Siegel had promised that a private TGH would make $57.8-million by 2000, he conceded in later interviews that no one at the hospital expected the Medicare changes to be so damaging.

Instead of posting the big profits Siegel promised, TGH's financial condition deteriorated.

The hospital lost $12.7-million in its first full year as a private institution, and the losses never stopped. Siegel announced last month that the hospital lost $6-million in the first quarter of fiscal year 2000, $2-million more than expected.

In announcing the losses, Siegel renewed pleas for local and state government assistance. The politicians who controlled government's purse strings, however, had long since soured on Siegel. They said they could not support giving public money to the hospital as long as Siegel was at the helm.

Clearly, however, the hospital's financial problems extend beyond Siegel's inability to successfully lobby for local and state funding.

In ways large and small, TGH was being squeezed by changes in the health care industry and the balanced budget agreement.

One threatening change in the industry is the emergence of HMOs as a main source of health care for patients.

With their large blocs of patients, health maintenance organizations negotiate lower payment rates with hospitals.

Tampa General, like many other hospitals, gets more and more of its revenue from HMOs. During fiscal 1999, TGH received about 25 percent of its revenue from HMOs. In the first quarter of this fiscal year, the share had risen to about 33 percent. Medicare revenue, meanwhile, was on the way down.

Ken Sharigian, chief financial officer of the Stanford Medical Center in Palo Alto, Calif., said hospitals have tried to survive the squeeze by treating more patients and cutting costs.

"I think it's fair to say costs can be taken out," Sharigian said, "but you have to be very careful where you do it and how you do it."

© St. Petersburg Times. All rights reserved.