Fight over Obamacare helps lead to Parkland's $100M budget shortfall, officials say

The standoff between the federal government and Texas over health care reform has left Parkland Memorial Hospital's finances in trouble, the public hospital's CEO said Tuesday.

"The last thing I want to do is cut services," Dr. Fred Cerise told Dallas County commissioners at a budget hearing. But "that's a distinct possibility in this budget year, given where we are right now."
The hospital is projecting a $101 million deficit. Cerise said that figure is similar to estimates in past years at this time -- deficits that were resolved by September. But he said it's more concerning this year because leaders aren't proposing any programs that could be cut.

"It's the most challenging budget I've had in my three years," Cerise said.

The budget gap comes despite a projected jump in property taxes that hospital officials expect to bring in at least an extra $40 million. Officials project Parkland will get $575 million from property tax revenue next year. The hospital's total budget for the coming fiscal year is $1.7 billion.

Some of the shortfall -- at least $24 million -- would come from changes to the federal government's reimbursements. Parkland expects to see fewer dollars from Medicaid supplemental payment programs for the poor, the uninsured and nursing home residents, Cerise said.

The supplemental Medicaid payments Parkland relies on are shrinking largely because the federal government is trying to pressure the state to expand Medicaid, Parkland officials said.

Texas is one of 19 states that declined the expansion offered under President Barack Obama's health care law. Gov. Greg Abbott and state leaders have said expanding Medicaid would lock Texas into a bloated, costly system that doesn't work.

But Michael Malaise, a Parkland spokesman, said the feds are now telling the state: "You're asking for supplemental payments for patients who we've already offered coverage through Medicaid expansion."

Medicaid already reimburses Parkland for less than the hospital's cost to treat the uninsured and Medicaid recipients, Cerise said. But next year the federal dollars the hospital receives will drop significantly, creating deeper deficits in the cost of providing care.

Half of Parkland's patients are uninsured. An additional 25 percent are on Medicaid.

Only 8 percent of Parkland patients have private insurance. That tiny chunk, coupled with property taxes, represent the only revenue streams for Parkland that are rising.

Meanwhile, Parkland's costs are increasing. The hospital is seeing about 6 percent more patients this year compared with last year. More patients means more cost to Parkland because of the low reimbursement rates, Cerise said. In addition, he said, prices for drugs and other health care equipment are always rising.

To address the deficit, Cerise said, officials are looking for places to cut costs throughout the hospital. One option is staffing changes. Parkland also may dedicate less money to pay for the depreciation of its new $1.3 billion hospital. Cerise presented a budget that showed $105 million set aside for next year for that expense, both for new capital spending and to save up for a new building in 40 years.

But Cerise said the hospital could operate next year with only $45 million set aside for that, as that's how much the hospital needs for replacing aging equipment and technology expenses. That's not a good accounting practice for the long term, he said, but it could work if money is tight.

County Judge Clay Jenkins, who is trying to limit property tax increases for the county and Parkland to 7.5 percent, sought to play down the projected deficit. "It's an accounting thing, not a real expense," Jenkins said of the depreciation numbers.

But Commissioner John Wiley Price disagreed. He advocates for not changing property tax rates even if values rise more than 7.5 percent. The county expects values to rise 8.9 percent when the tax rolls are certified July 25.

"At the end of the day, you got a $100 million-plus gap," Price told Cerise. "I don't see anything close to you being able to approach closing that gap."

Commissioner Mike Cantrell said the hospital should cut services. "Our business model ought to correspond to what we can afford, not to what we want to afford, or should afford."

But Cerise made clear he considered that option his last resort.

source