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Maine Hospitals Welcome Gov's Promise to Pay Off Debt
01/15/2013   Reported By: Patty B. Wight

Maine hospital officials, not suprisingly, welcomed Gov. Paul LePage's plan to pay them nearly $200 million in outstanding debt, which will trigger about a $300 million federal match. It amounts to almost half a billion dollars in past due payments that date back to 2009.  And as Patty Wight reports, the debt has cost hospitals more than just the amount owed.

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Originally Aired: 1/15/2013 5:30 PM

The hospital with the largest unpaid bill is Eastern Maine Medical Center in Bangor, at $76 million. The debt has grown over the course of four years, and Chief Financial Officer Mer Doucette offers this analogy to describe the situation:

"If you're working and you're getting paid and your employer says, 'I can't pay you the full amount I owe you this week, I'm just going to have to defer that and you'll have to accept that lowered amount and at some future date I will pay you the balance.'"

Doucette says because the state paid only two-thirds of what was owed, the hospital was forced to hold off on capital improvement projects and delay paying local vendors. It's a story shared by many Maine hospitals, including Central Maine Medical Center in Lewiston, which is owed $50 million. Spokesman Chuck Gill says CMMC, like other hospitals, had to take out a line of credit to help pay the bills.

"So not only have we had to pay interest when we borrow money, but, you know, $50 million - that's $3 million a year in lost interest, so we're losing money all the way around on this," Gill says. "And also, we see a lot of cuts coming at the federal level, so we need the resources to manage through all these drastic changes going through on health care."

This hospital debt problem goes back years, and it's tied to Medicaid reimbursements. The state used to pay a flat fee to hospitals every week based on their projected number of Medicaid patients, settling any differences at the end of the year.

But when the state expanded Medicaid in the mid 2000s, it didn't increase weekly payments enough to match the new patient load, and it also failed to settle up at the end of the year. Two years ago, hospitals got a minor reprieve when Gov. LePage paid off part of the debt.

"If he hadn't taken that step, then frankly we'd be in the same diffcult position that a lot of hospitals in northern and eastern Maine are today," says Frank McGinty, executive vice president of Maine Health, which has nine member hospitals, including Maine Medical Center in Portland.

All told, Maine Health is owed $155 million. McGinty says Gov. LePage has stemmed further hospital debt by changing to a pay-as-you-go reimbursement model. Paying off the existing debt, McGinty says, will be good for the entire state, not just the hospitals.

"I understand that the rating agencies have now again clearly stated that the failure of the MaineCare program to fulfill its obligation to hospitals puts a cloud over the state's debt rating," McGinty says. "So solving this problem is good for hospitals, to be sure good for our patients, but also good for the state itself and for all state taxpayers."

Aroostook County Medical Center CFO Bruce Sandstrom agrees, but he says there are more challenges ahead for Maine hospitals.

"The issue that we've had to date has been largely the bills that were owed us were not paid,"Sandstrom says. "Going into the future, we're looking at further cuts to reimbursement rates."

That's because, Sandstrom says, even when hospitals are paid promptly for their Medicaid patients, they only receive about 75 cents for every dollar of care provided.



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