Virginia nonprofit hospitals doing well without Medicaid expansion

Jason Hart – Watchdog.org – Charity care and other uncompensated costs haven’t prevented Virginia’s nonprofit hospitals from taking in revenue far in excess of their expenses, with 88 percent turning the nonprofit equivalent of a profit.

A Watchdog.org review of 2012-13 financial reports from 25 nonprofit members of the Virginia Hospital & Healthcare Association found that the nonprofits averaged $30 million more in revenue than expenses.

“These guys cry wolf just a little too often,” Mike Thompson, president of Virginia’s free-market Thomas Jefferson Institute for Public Policy,  told Watchdog.org. “Overall the hospital industry is making good profit.”

All but three of the 25 hospitals and hospital networks had positive revenue less expenses — what would be reported as profit by for-profit businesses. On average, uncompensated care costs amounted to 11 percent of the nonprofit VHHA members’ total expenses in 2012-13, the most recent year for which complete figures are available.

Hospitals’ uncompensated care costs include charity care provided to the poor free of charge, unreimbursed Medicaid costs incurred because the program underpays for the services Medicaid enrollees receive, and bad debt from billed patients who fail to pay.

For nonprofit Virginia hospitals, charity care averaged 4.2 percent of total expenses, unreimbursed Medicaid averaged 2.7 percent of total expenses, and bad debt averaged 4.1 percent.

Norfolk-based Sentara Hospitals reported $146 million in revenue less expenses in 2013, and Inova Health Care in Falls Church netted $145 million.

VHHA lobbies for additional government assistance with uncompensated care by encouraging state lawmakers to implement policies such as the 2010 federal health insurance law’s optional Medicaid expansion.

Julian Walker, VHHA vice president of communications, directed Watchdog.org to a November press release stating that 25 percent of acute care facilities and nearly 42 percent of rural hospitals in Virginia finished 2014 in the red.

“Beyond government health care mandates, cuts due to the Affordable Care Act and sequestration that are not being offset by available resources stand as additional threats,” the statement warned.

Obamacare’s Medicaid expansion adds working-age adults with no kids and no disabilities to the Medicaid rolls, with the promise of new federal deficit spending to pay for no less than 90 percent of enrollees’ benefit costs.

In a December letter to Democrat Gov. Terry McAuliffe — an Obamacare expansion supporter — and the Virginia General Assembly, VHHA offered conditional support for a new hospital fee to help cover Virginia’s share of Medicaid expansion costs in order to bring billions in federal matching funds to the state.

But the same VHHA letter emphasized the negative impact of low reimbursement rates from the existing Medicaid program.

“For hospitals, things have gotten worse over time. In 2002, for instance, Medicaid reimbursed hospitals and health systems at 79 percent of a patient’s cost of care,” VHHA president Sean Connaughton wrote. “This rate has fallen further since then and is now down to 66 percent.”

Thompson of the Thomas Jefferson Institute isn’t convinced the state’s hospitals need the infusion of new federal welfare spending an Obamacare expansion would bring.

Nonprofit VHHA members, Thompson noted, are expected to provide charity care in exchange for state sales and property tax exemptions. But the hospitals want the state to opt in to Obamacare’s Medicaid expansion to shift more charity care and bad debt costs to federal taxpayers.

“The hospitals foisted on all of us what we have today with Obamacare in order to protect themselves,” Thomspon added. “They made a deal with the devil, and now they’re complaining.”

Thompson thinks expanding Medicaid would be a short-sighted mistake. With the federal government $19 trillion in debt, “we know there’s a financial brick wall out here in the fog somewhere, and we’re going toward it pretty quickly but we don’t quite know where it is,” he said.

McAuliffe has been lobbying for Obamacare expansion for several years, but Republicans in the Virginia General Assembly again refused to include the expansion in their latest budget.

Uncompensated care details for the Virginia hospitals whose tax year 2013 (or tax year 2012, for hospitals with a tax year starting before Jan. 1) IRS Form 990 filings are available from GuideStar are listed below.