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State Issues


TORCH is recognized by state leaders and legislators as acting in the best interest of rural and community hospitals. Maintaining a cooperative relationship with key policy makers in state government, TORCH works collaboratively with state organizations interested in preserving and promoting rural hospitals and their endeavors to provide access to health care in rural Texas. Communities in Texas benefit from our activities as we help maintain an economic base while protecting patients by working for approval of adequate practice standards.

Current State Issues

REDUCING THE HIGH LEVEL OF UNINSURED – Texas hospitals continue to deal with high levels of uninsured – 25% statewide and as high as 40% in some rural and border counties. In fact, 14 of the 15 highest uninsured level counties in the country are Texas rural counties. The cost of treating those uninsured is born by hospitals and local property taxpayers. If the Texas Legislature continues to elect not to expand Medicaid under the Affordable Care Act, an alternative system must be found to increase the number of Texans with health plan coverage and lessen the financial burden on local taxpayers and hospitals. It is important to note that in the past, the Texas Health and Human Services Commission (HHSC) has estimated that with Medicaid expansion, coupled with full ACA implementation, Texas uninsured rate could drop to less than 10%.

MEDICAID INPATIENT PAYMENTS TO RURAL HOSPITALS – For more than 20 years, the State of Texas has recognized the financial fragility of rural hospitals and the high level of Medicaid patients they treat, in turn paying these rural hospitals for Medicaid inpatient services at rates closer to  the cost of providing the services. Medicaid inpatient payments to urban hospitals barely cover half the cost, and rural hospitals would have no other place to make up such a loss because of their lower volume operating challenges and dealing with higher levels of Medicaid and Medicare patients, as well as higher levels of uninsured. The Medicaid inpatient payment methodology for the rural hospitals has been prescribed in the HHSC budget as a rider relating to rural hospital Medicaid inpatient payments. HB 1 and SB 2, 84th session, call for removing the requirement from the state budget on the rational that the requirement is also in state administrative rules. To protect rural hospitals from potential future adverse policy decisions by HHSC, independent of the Legislature, the provision in the budget rider needs to remain.

MEDICAID OUTPATIENT PAYMENTS –All Texas hospitals continue to suffer from a 10% reduction in Medicaid outpatient rates ordered by the state in a 2011 budget. This cut has been especially challenging for rural hospitals that rarely have other means to cover the loss through other revenues. Rural hospitals are paid by Medicaid close to their cost for inpatient services; however outpatient services have never been included in the special Texas rural hospital payment provisions. This policy is contrary to Medicare, which pays at higher rates for many rural hospitals on both inpatient and outpatient services. The situation is aggravated even further as more services in Medicaid shift from inpatient classification to outpatient classification meaning rural hospitals are being paid less for the same services. Medicaid outpatient services need to be added to the rural hospital inpatient budget rider provisions. While it is near impossible to calculate the loss from the disparity between then inpatient and outpatient payment methodologies, the combined annual loss for all Texas rural hospitals from the previous 10% cut is estimated at almost $20 million. Slightly increasing outpatient Medicaid payments to rural hospitals would have negligible impact on the state budget.

MEDICAID HOSPITAL EMERGENCY ROOM PAYMENT CUT – Blaming it on a directive from the Texas Legislature, in September 2011 the Texas HHSC reduced Medicaid payments to all hospitals by 40% when an emergency room visit is deemed a non-emergency. This policy disproportionately harms rural hospitals where communities have lower availability of alternative primary care, especially at night and on weekends. Hospitals are caught between this bad policy and federal law which requires Medicare-participating hospitals that offer emergency services to provide a medical screening examination and stabilization for any person claiming to have an emergency. The financial loss to rural hospitals is estimated to be tens of thousands of dollars annually for each rural hospital.

CONTINUED AND INCREASED STATE FUNDING FOR DSHState match funding used to bring in federal dollars for the Disproportionate Share Hospital (DSH) program will expire September 1, 2015 and needs to be renewed and increased. DSH is a joint federal-state (and local) program within the Medicaid system that provides supplemental funding to hospitals to partially offset their losses from uncompensated care. Dollars from this program, combined with the 1115 waiver, keep the doors open for many rural hospitals. The state’s portion of matching dollars under the DSH program is estimated to be $555 million; however Texas only provided $140 million in FY 2015 with local hospitals making up much of the difference. The state didn’t provide any matching dollars until FY 13. When hospitals provide some or all of the matching dollars (instead of the state) that grossly dilutes the financial effectiveness of the program resulting in less net dollars for participating hospitals and pushing some of the financial burden of providing uncompensated care back on hospitals and local taxpayers. The Texas Legislature must renew their matching dollars during the 2015 session and give consideration to raising state appropriations the full $555 million matching fund level. The DSH funding is critical to rural hospitals it one of the few sources of supplemental funding to help cover uncompensated care, especially in view of the Texas position to not expand Medicaid.

RENEWAL OF THE 1115 WAIVER – It is financially critical for Texas rural hospitals that the 1115 waiver supplemental payment program be renewed when it expires in 2016. For many rural hospitals, funds from the 1115 waiver and the related DSH program are what keep the doors open. Upon renewal, adjustments should be made in the program to assure rural hospitals (which are far more financially vulnerable than urban hospitals) receive appropriate and fair levels of funding for each individual participating rural hospital and for rural hospitals as a whole.  The current 1115 waiver cycle resulted in less funding for some rural hospitals than with the previous UPL program. One pot of funds under the 1115 waiver, known as the Delivery System Reform Incentive Payment (DSRIP), appears weighted toward urban areas and programs – 15% of the state’s population resides in a rural Texas but less than 5% of the DSRIP dollars are being directed to rural areas. The waiver is a modification from the former federal Upper Payment Limit program which channeled supplemental Medicaid payment dollars to hospitals to offset some of their losses from treating high levels of Medicaid patients. However, unlike traditional Medicaid payments, the hospitals provide the state’s match dollars used to draw down federal funds. The Texas Legislature needs to set aside dollars for the state match under this program (relieving hospitals of that financial burden) and the Texas Health and Human Services Commission needs to make adjustments to more fairly fund rural hospitals under the program. (Note – 1115 refers to the section of the Social Security Act by which states may operate special and unique Medicaid related programs with permission from the federal government). The 1115 waiver funding is critical to rural hospitals it one of the few sources of supplemental funding to help cover uncompensated care, especially in view of the Texas position to not expand Medicaid.

MENTAL HEALTH - Limited or no access to short-term mental health facilities for much of rural Texas remains an ongoing problem for many rural hospitals. Mental health patients in rural areas often end up in the local hospital emergency room where there is not appropriate staff and facilities to address patient needs, especially for more aggressive or violent patients. The problem is compounded when mental health patients must be held for a mental commitment court hearing (which can take days or even weeks) and there are no local or regional inpatient mental health facilities. Despite provisions in Chapter 574 of the Texas Health and Safety Code repeatedly referencing that persons with mental health issues being held in protective custody or pending civil court commitment are to be held in mental health facilities, the reality in rural Texas is these patients are often taken to the local hospital. Over the past few Texas legislative sessions, well intentioned bills have been filed to address various problems in the mental health system, and many of these bills would have had unintended and costly consequences for rural hospitals. Rural hospitals have been especially concerned about past proposed legislation that would remove jails as the last resort holding facilities fearing it will result in rural hospitals being forced to hold more aggressive mental patients and for longer periods of time. While hospitals concur that jails are not appropriate facilities for mental patients, without that option the only remaining facility in most rural communities will continue to be the local hospital. Any legislation which alters the fragile and underfunded mental health system must take into account the problems it may create for Texas rural areas where the issue is profoundly different.

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