One hospital's struggle with Georgia's decision to reject Medicaid

For safety-net hospital, decision to reject expansion is a 'double whammy'

Topics: Market Trends, Strategy, Health Policy, Finance, Reimbursement, Medicaid

June 28, 2013

The Washington Post's Max Blau this week explained how Atlanta-based Grady Memorial Hospital is weathering Georgia's decision to hold firm against the Affordable Care Act's (ACA) Medicaid expansion.

Gov. Nathan Deal's (R) decision to opt out of the ACA Medicaid expansion is expected to cost Grady millions of dollars, Blau writes. The 950-bed facility has long been considered the "backbone" of metro Atlanta's health care system, treating about 600,000 patients annually—many of whom are uninsured—and training a quarter of the state's physicians.

Like other safety-net hospitals, Grady relies on federal disproportionate share hospital (DSH) payments to offset its uncompensated care costs. But, under the ACA, CMS will gradually reduce Medicaid DSH funds based on the expectation that the Medicaid expansion would offset the costs.

Matthew Hicks, Grady's vice president of government relations, anticipates that the hospital's annual DSH funding—approximately $90 million per year—will be halved within five years. Without the Medicaid expansion, the impending $45 million loss will not be offset.

Moreover, Grady CEO John Haupert points out that the expansion would have insured the more than 27,000 uninsured patients now seeking free treatment at the hospital. "It's a double whammy," says Hicks, adding, "you lose DSH funding, you don't have insured patients, and somehow you've got to make up the difference."

Cuts may force hospital to cut back services

Although Hicks and Haupert do not consider Deal's decision a "deathblow" for Grady, they say that it likely will eliminate the $27 million profit that the hospital turned in 2012.

Additionally, the hospital will be forced to scale back its operations. Grady will keep its level-one trauma center—the largest within 100 miles of metro Atlanta—but it will have to shutter its psychiatric program.

"You don't [cut expenses] by nickel and dime-ing the edges. You've got to wholesale eliminate clinical services to do that…Things like mental health, potentially obstetrics, and gynecology. Hard decisions to make," Hauper said in an interview with Blau, adding that "[a]ny elimination of clinical services in a safety-net hospital is going to impact somebody and impact somebody big" (Blau, "Wonkblog," Post, 6/26).

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