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Maine's Debt to Hospitals

A Fact Sheet from the Maine Hospital Association (MHA)

The State Owes Hospitals an Estimated $450 Million for Overdue Bills

Despite changing the payment system for most hospitals in 2011 and 2012, the state of Maine still owes hospitals an estimated $450 million for care provided to MaineCare recipients as far back as 2009.

How We Got Here

The MaineCare hospital debt is the result of MaineCare hospital Prospective Interim Payments (PIPs) that did not keep pace with growth in MaineCare enrollment and accompanying utilization increases. Until recently, the State paid hospitals a flat rate each week for the care they provided patients on Medicaid. That payment was supposed to be based on the estimated number of Medicaid patients a hospital treated in a given year, divided by 52 weeks. If the hospital treated fewer patients than the estimate, it owed the state money. If it treated more patients than the estimate, the State owed the hospital money. The two sides would settle up at the end of the year.

The problem arose when MaineCare eligibility expanded bringing more people into the system. More people had MaineCare cards and used them to obtain services at hospitals. But the State didn’t increase payments to hospitals sufficiently enough to correspond to this increase in the number of Medicaid patients. The state not only failed to increase the monthly payments to hospitals enough to better reflect reality, it stopped fully settling up at the end of the year. As a result, the debt to hospitals kept increasing.

In 2011 and 2012, the state changed its payment system for inpatient and outpatient services at Maine’s largest hospitals to a pay-as-you-go system. Now, hospitals are being paid shortly after they deliver services to MaineCare recipients. Hospitals still only receive 75 cents in MaineCare reimbursement for every dollar of care provided. But at least that 75 cents is being paid on time now.

Nevertheless, the state still owes hospitals $450 million for care provided in 2009, 2010, 2011 and 2012, before the reform in the payment systems was complete. This debt needs to be paid.

MHA Fact Sheet

This Debt Has Consequences

The consequences of this debt are dire. Having to shoulder a debt caused by nonpayment of services has serious impact on hospitals’ bottom line. As a result, access to health care is being jeopardized. Since this debt began accruing in the past 10 years hospitals have:

  • Eliminated services, including, in at least one case, closing the maternity ward,
  • Laid off more than 300 employees,
  • Froze wages and cut benefits to employees.
Not all these actions are solely attributable to the outstanding MaineCare debt. But, carrying a half-billion- dollar unpaid bill on the books doesn’t help. Maine hospitals’ operating margins are very thin—averaging about 2 percent. Yet these margins are calculated assuming that the state’s bill was paid. When it’s not, the reality is that many hospitals are operating at a loss. These hospitals have to borrow against lines of credit, delay payments to vendors and ignore necessary capital and maintenance projects because of a cash shortfall.

This Debt Must Be Paid

Paying hospital debt must be a priority. While hospitals appreciate the efforts made by lawmakers and the Administration to stop the accumulation of debt, the fact is that hospitals are owed more than $450 million for services they provided MaineCare patients in good faith. This isn’t a rate hike or a bailout. This is a bill for services that must be paid. Failing to pay this debt means hospitals will lay off even more employees, eliminate more services, delay payments to vendors and borrow against lines of credit, using precious resources on interest payments. Failing to pay this debt ripples across the entire state economy. These payments can no longer be delayed.

Even as the debt accumulated over the past decade, the state made payments each biennium ranging from $140 million to $400 million. In 2012, the state paid hospitals only $25 million and 2013 payments are contingent on there being cascade funding. The state must find resources to make meaningful debt payments in the upcoming legislative session.

Maine Hospital Association
33 Fuller Road
Augusta, ME 04330 207‐622‐4794
jausn@themha.org
www.themha.org

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