Public, Private Hospitals to Negotiate Financing With Dewhurst

Updated May 2, 1:30 p.m.

Officials from more than a dozen hospital systems — some private, some public — will gather at the Capitol with Lt. Gov. David Dewhurst on Friday afternoon to try to iron out a solution to how they are reimbursed for uncompensated care. 

Dewhurst spokesman Travis Considine said in an email that the gathering will include representatives from public hopsitals in Travis, Bexar and Dallas counties, plus private hospital officials with Baylor Health Care System, CHRISTUS Health, Memorial Hermann and HCA, among several others. 

Also at the table: Senate Finance Chair Tommy Williams, R-The Woodlands, Senate Health and Human Services Chair Jane Nelson, R-Grapevine, and the Texas Hospital Association. 

Private and public hospitals are at odds over how they should be reimbursed for uncompensated care. The House version of the budget includes a rider private hospitals support: It calls for the state to fully maintain the Disproportionate Share Hospital program, or DSH, under which the state’s large public hospital systems use local taxpayer dollars to draw down federal matching money to cover indigent care at both public and private hospitals.

The Senate version of the budget, preferred by the public hospitals, does not contain such a measure. Because the state received a waiver from the federal government last legislative session to reform Texas’ health care delivery system, public hospitals now have different options other than DSH to draw down federal funding.

"DSH funding is an issue that needs to be resolved before they close the budget," Considine said, "and senators asked Lt. Gov. Dewhurst to get both sides together to discuss solutions."

Original story: 

Private and public hospitals are at odds over how they should be reimbursed for uncompensated care — and at the crux of the fight is a budget provision hitting the House floor on Thursday.

The budget rider, backed by private hospitals, calls for the state to fully maintain the Disproportionate Share Hospital program, or DSH, under which the state’s large public hospital systems use local taxpayer dollars to draw down federal matching money to cover indigent care at both public and private hospitals.

Because the state received a waiver from the federal government last legislative session to reform Texas’ health care delivery system, public hospitals now have different options to seek federal funding, which private hospitals and the House's lead budget writer say gives them less incentive to help draw down dollars under DSH.

“It is the county’s money, and they should be able to put up that money to retrieve federal dollars as they wish or not,” said Robert Earley, president and CEO of JPS Health Network, the public hospital system in Tarrant County. The private hospital-backed rider “grasps onto an archaic system of funding.”

The budget proposal also calls for any such federal indigent care funding to be distributed equitably to public and private hospitals based on the “ratio of uncompensated care provided by each group.” Private hospitals argue they provide 78 percent of the Medicaid services and 60 percent of treatment for the uninsured statewide, and that without DSH funding, many of them would struggle to provide uncompensated care.

“Private hospitals do the great majority of the care rendered in the state, and private hospitals wish to continue to be part of the care delivery for these types of patients,” said Dan Wolterman, president and CEO of the private, nonprofit Memorial Hermann Healthcare System in Houston. “The only way we can continue to see these patients is to receive these federal supplemental matching funds.”

House Appropriations Chairman Jim Pitts, R-Waxahachie, said that despite the disagreement, he doesn’t expect any of his colleagues to try to strike the rider during Thursday’s budget debate. “What I want to do is bring down the maximum amount of money that we can, the maximum amount from the feds,” he said, adding, “I also want the private hospitals who do 70 to 80 percent of all the indigent care in the state of Texas to be reimbursed.”

Private hospitals say their financial model has taken a beating in recent years, as the state has worked to contain costs under Medicaid and the federal government has reduced payments under the Affordable Care Act. When state lawmakers expanded Medicaid managed care in the last legislative session as a cost-saving measure, other supplemental Medicaid funds called UPL (upper payment limit) dollars were slated to disappear. That was until the state received a so-called 1115 waiver from the Obama administration, which dramatically restructured Texas’ health care delivery system and provided a range of other funding mechanisms, in addition to keeping UPL on the books. 

Earley said the new funding mechanisms laid out under the 1115 waiver — which incentivize reducing readmission rates, providing better care for mental health patients and other outcomes — are “much more accountable, much more transparent” than the DSH program.

Under the 1115 waiver's funding pools, “you put up dollars, you get your outcomes, you get paid,” he said. “It’s a much smarter way to be than the older system of DSH payments that basically says, 'Put up your money, get the following money back and do what you want with it.'”

The problem under the 1115 waiver, private hospitals say, is that public hospitals — and in particular, the hospital districts that use taxpayer dollars to support them — no longer have an incentive to fully fund DSH. While the federal dollars drawn down through DSH must be distributed proportionately to the amount of uncompensated care hospitals provide, the private hospitals say, the new funding pools under the 1115 waiver don’t come with such requirements.

Wolterman said the budget rider would require hospital districts to fully fund DSH before funding 1115 waiver programs — and would make the new funding pools under the waiver proportional, like DSH. 

“Even under the rider provisions, the public hospitals will come out immensely ahead of where they have historically been under these programs,” Wolterman said. “They’re not harmed at all. They will have a huge incremental pick-up of dollars.”

Earley said some health care observers want to make the public-private hospital disagreement out to be a “Hatfield and McCoy fight.” He said that’s a red herring to avoid talking about how to better deliver and pay for care. 

Some hospitals “don’t like the level of accountability” established by the 1115 waiver, he said. “They want to keep funding an old system that the feds have said, ‘We don’t really want to fund much more.’” 

Becca Aaronson contributed to this story.