The South Peninsula Hospital has been looking for ways to fill a budget gap after the state made a 5-percent cut to Medicaid reimbursement rates in September.
The program pays for low-income patients’ hospital bills with state and federal dollars. The cut extends to both inpatient and outpatient care given since July 1, potentially costing the hospital over $1 million dollars.
“You know the ultimate impact on that 5 percent could be anywhere from about $1.2 million to $1.5 million,” South Peninsula Hospital CFO Holly Torres explained. “It just really depends on our Medicaid volume, what percentage of our population that’s coming to the hospital is coming from Medicaid.”
Torres said the cost of services won’t spike as a result of the cut and the hospital does not plan to cut staff. Administrative staff decided last week to forgo an upgrade to the hospital’s medical record software instead, which handles everything from billing to patient records.
“We made a decision as an organization to stay on our current platform as a hospital which is a huge savings and a way to offset that,” Torres said. “So, we’re just going to optimize and reinvest in that application and training.”
The hospital singed onto the older software system for another three years. South Peninsula Hospital’s specialty clinics, other departments and the Homer Medical Center have already made the switch to the new software, which helps staff streamline some of their work.
Torres said delaying the switch for inpatient and outpatient services will save the hospital millions of dollars in training and staffing costs.
The state adjusts Medicaid reimbursement rates every five years and gives hospitals small rate bumps annually to account for inflation, but the state cut those adjustments a few years ago.
“It was kind of a double whammy in that we’ve been locked in on our cost for several years, haven’t had any inflationary adjustments and so then now took a 5-percent across-the-board cut on both inpatient and outpatient reimbursement,” Torres added.
She said the state has also cut the list of Medicaid approved services, shifting part of the financial burden of patients who can’t pay for their bill onto the hospital.
The state Division of Health Care Services said the most recent cut was made to due to $30 million worth legislative cuts to the Medicaid program this fiscal year.