Arizona hospitals experiencing operating losses

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Operating margins at Arizona hospitals are declining despite a recent financial boost from an expanded Medicaid program, according to a new report.

The report by the Arizona Hospital and Healthcare Association says expenses are up although uncompensated care in Arizona hospitals dropped by one-third since the Medicaid expansion, the Arizona Daily Star newspaper in Tucson reports.

In addition, the report shows that nearly a third of the state's hospitals incurred a loss from operations in January.

Also, the data shows a drop in average hospital operating margins from 3.3 percent for all of 2013 to 2.2 percent in 2014. Seventy-five percent of the state's hospitals responded to the hospital association survey.

The group is blaming the drop in revenue on low reimbursement rates by Arizona's Medicaid program.

Medicaid in Arizona is called the Arizona Health Care Cost Containment System, or AHCCCS. Last year Arizona expanded qualifications for AHCCCS to 133 percent of the federal poverty level and at the same time restored childless adults to the program.

AHCCCS officials say it's hard to measure reimbursement rates against cost because providers influence their own costs. For that reason, they would not confirm any specific reimbursement rates per dollar charged.

But Arizona Hospital and Healthcare Association President and CEO Greg Vigdor said hospitals are getting about 70 cents for every dollar it costs hospitals to provide services to Medicaid patients.

And by Vigdor's calculation, that reimbursement rate could worsen. Gov. Doug Ducey's budget for the upcoming 2016 fiscal year calls for reimbursement cuts of up to an additional 5 percent.

AHCCCS spokeswoman Monica Coury noted that the 5 percent is actually an aggregate, meaning the agency has the flexibility to reduce rates at a lower level for certain providers and a higher level for others, including going above 5 percent. But the state will ask for input before making such decisions, she said.

"These decisions will be based on a thorough access to care analysis," she wrote in an email to the Daily Star. "We will be seeking broad stakeholder input so providers can precisely give us information about how the rate reductions may impact them. This process will begin April 1, with the reductions expected to be implemented by October 1."

Tucson Medical Center spokeswoman Julia Strange said it seems counterintuitive that hospital operating margins went down as more people got insurance through the Affordable Care Act and enrolled in AHCCCS.

Tucson Medical Center's operating margin in 2013 was 3 percent. In 2014 it dropped to 1.4 percent.


Information from Arizona Daily Star.

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