For most New Hampshire residents, last Friday was the end of a short, post-Columbus Day week. But for 100 employees of Dartmouth-Hitchcock Medical Center, last Friday was their last day at work.
Like most large hospitals in the state, DHMC says changes the legislature made this summer in how the state compensates providers for Medicaid patients has forced it to take extreme measures. Unlike Catholic Medical Center, Exeter Hospital, Southern New Hampshire Medical Center, and others, which laid-off hundreds of workers between them, DHMC went the early retirement route. Dartmouth-Hitchcock spokesman Rick Adams told StateImpact that 735 employees were offered the early retirement option.
291 workers took it.
“It’s pretty close to being on target,” Adams said. “We had been told that we could expect anywhere from about 15 to about 40 percent positive response, and that’s sort of an industry average. 291 out of 735 is about 40 percent. So it’s pretty close to what we had hoped for.”
Adams said the people who qualified for early retirement spanned all areas of the institution, “except for doctors and bedside nurses.” Some select employees in highly specialized administrative positions were also not offered early retirement. Other than those exceptions, Adams said workers who were 55 years old and older and had at least five years of vested service in the hospital’s pension plan qualified. He noted that besides the main facility in Lebanon, some employees at DHMC community group clinics in Concord, Manchester, Nashua and Keene took early retirement as well.
While 100 people left Dartmouth-Hitchcock last Friday, Adams said the other 191 will leave gradually over the next couple of months as they finish grant-funded work and other long-term projects. He told StateImpact that administrators are still crunching numbers to find out how close the hospital is to closing a $100 million budget gap.
So where did this $100 million come from?
Here’s how Adams explained it to us: “In FY 2010…we provided about $88 million in care to Medicaid patients. The state reimbursed us $28 million for that care. And so there is a $60 million hole, for starters,” he said.
“Now…we’re taxed by the state $40 million, and much of that was returned through the Disproportionate Share payment. The legislature, through the budget that was passed effective in July, eliminated the Disproportionate Share payments. So we’re paying in another $40 million. We’re now in a situation where we’re paying more back to the state than we’re getting back in reimbursement. We’re now a net payer to the state, to the tune of $100 million.”
So what’s this Disproportionate Share payment Adams was talking about? For hospitals all over the state, it’s a huge deal. When the legislature made the decision to cut those payments back to hospitals, reporter Elaine Grant filed a piece for NHPR that explained it this way:
“Picture three buckets of money. The first bucket is a provider tax that the hospitals paid the state. For the sake of simplicity, we’ll say it totaled about $100 million dollars a year.
The second bucket came from the state treasury and went to the hospitals. The trick is that the buckets had exactly the same amount of money in them.
And they changed hands every year on October 15th.
‘We’d get a wire for $37 million, let’s say.’
That’s Frank McDougall of Dartmouth Hitchcock. Later the same day, he says, ‘We’d pay a tax of $37 million.’
It didn’t cost anybody anything. It didn’t even show up on a hospital’s books.
Then the state would turn to the federal government and say hey, we just paid the hospitals $100 million dollars to care for needy people. ‘Will Medicaid match it?’
And every year, the federal government said, ‘sure.’
And that’s the third bucket of money.
They sent New Hampshire a 50 percent match.
The stated intention was to have those federal dollars go to the hospitals that had the largest number of poor patients. But a loophole allowed it to go straight to the state treasury instead.
‘People called it Medicscam, and over 20 years it’s brought in at least 2 billion dollars,’ says Steve Norton, executive director of the New Hampshire Center for Public Policy Studies. ‘It was a big source of revenue for the state, and it really many say, saved the state in the recession of 1990.’
When HHS commissioner Harry Bird and then-governor Judd Gregg proposed the idea, the hospitals were nervous. They didn’t want to be stuck with the tax if the payment ever disappeared.
So Bird wrote a letter to the hospital association – it’s on our Web site — saying we’ll repeal the tax if that ever happens. But that was 20 years ago.”
So what hospitals like Dartmouth-Hitchcock feared back in the ’90′s is exactly what happened this summer. They’re supposed to give the state its money, but won’t get anything back. Because that money’s due by the middle of next month, hospitals have been cutting down where they can to raise the needed funds. For DHMC, that’s early retirement. And it’s obvious that the hospitals aren’t happy about this situation. For starters, as we noted in an earlier post, ten of the state’s largest hospitals are suing to get that money back.