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Tennessee Hospital Association seeks reinstatement of DSH payments

TERESA HICKS • Feb 28, 2007 at 11:42 AM

Tennessee's hospitals would find it easier to sign on to programs like CoverTN if they could count on some financial aid from the federal government, Tennessee Hospital Association officials said Wednesday.

Hospitals across the state have been reluctant to sign on to Gov. Phil Bredesen's new insurance program for the working uninsured, citing low reimbursement rates as a primary reason. According to THA President Craig Becker, that reluctance might not be so strong if Tennessee hospitals received disproportionate share hospital (DSH) payments - a funding source enjoyed by every other state in the nation except Hawaii.

"It really is designed to cover the recognition that we take care of people who have no insurance. It also recognizes the fact that most states don't pay what it totally costs to take care of a Medicaid patient - in our case, a TennCare patient," Becker said. "What I've been saying all along is that if we had a permanent DSH as other states do, it would make it that much easier to take on these money-losing programs."

Tennessee gave up its DSH payments in the early 1990s with the establishment of the TennCare waiver, in which the state gave up certain federal benefits in exchange for federal matching dollars to support TennCare.

"We said, ‘We're going to take all those DSH dollars, and we're going to insure another 500,000 Tennesseans who are uninsured, and therefore charity care and bad debt is going to go away.' Of course as you can tell, it hasn't," said Becker.

Hospitals across the state now lose about $560 million a year due to charity care and bad debt expenses, Becker said, "and when you tie in TennCare losses and Medicare losses, that gets to be about $1.3 billion statewide."

Now THA officials are lobbying in Washington to establish a $415 million DSH fund to help offset those losses. They are pointing to states like Georgia and North Carolina, which have similar Medicaid enrollment figures and receive $425 million and $421 million in DSH payments, respectively.

"Last year, we pushed very hard for it, particularly with Senator (Bill) Frist being the majority leader, we had a better shot of getting through. But clearly there was not a stomach to do it because the price tag that was put on it by the Congressional Budget Office was roughly $2 billion," Becker said.

The federal government has saved about $2 billion on health care expenses in Tennessee as a result of Bredesen's TennCare reform process, and THA officials would like to see some of that money come back to the state in the form of DSH dollars.

Last year, Tennessee hospitals received a one-time subsidy from the federal government of $20 million, which was shared among the state's "essential access" hospitals.

"They were defined as those that provide high amounts of charity care and high amounts of unreimbursed TennCare," Becker said. "Out of the 134 hospitals in the state, about 100 of them got some form of payment."

Mountain States Health Alliance got about a $3 million share last year.

"That sounds like a lot, but when you're talking about 40-some-odd million dollars worth of bad debt, that's not a whole lot," Becker said.

Ultimately, the success or failure of THA's efforts to establish a DSH fund for Tennessee will likely hinge on a congressional budget amendment.

"We got the governor, the majority leader, the director of (the U.S. Office of Management and Budget) and the secretary of (the U.S. Department of Health and Human Services) all in one room, and they all agreed that Tennessee should have a DSH. They signed off on it, and as they walked out the door, they said, 'All you need to do now is find the money.'"

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