As Gov. Dannel Malloy’s July budget approaches the end of its first fiscal quarter, employees of the Yale-New Haven Health System expect and are bracing themselves for further expenditure cuts.
The budget includes a $67 million reduction in Medicaid payments and has already led to the closures of two YNHHS clinics in Branford and East Haven. The initial proposal levied a $165 million tax on hospitals and reduced the pool of eligible Medicaid recipients in Connecticut by 34,000. When it was first presented in February, the budget received almost immediate opposition from YNHHS.
According to Patrick McCabe, senior vice president of corporate finance at YNHHS, the only way to cope with the cuts is to reduce expenditures using methods including leaving vacancies unfilled. In an April interview, he said the system was not looking to lay off any workers. But since the closure of the two clinics, he has declined to comment on whether this has changed.
Because YNHH is a large nonprofit that reinvests all its excess revenue into the existing enterprise and community, revenue decreases — particularly those due to lower reimbursement — limit the hospital’s ability to keep investing in the community, said Howard Forman, professor of diagnostic radiology, management and public health.
In an April interview with the News, YNHH Senior Vice President of Public Affairs Vince Petrini echoed these sentiments, adding that the state budget that was passed in 2013 had harsh effects on YNHH, but the hospital was able to make up for it through its merger with the Hospital of Saint Raphael in 2012. This time, YNHH has no such option.
YNHH had a total operating revenue of roughly $2.5 billion in 2014, with a net income of just 6.6 percent. With one of the busiest emergency rooms in the country, YNHH saw 292,000 Medicaid beneficiaries in 2013 and provided $350 million worth of uncompensated care in 2014.
Forman said patients exist along a spectrum of profitability: When revenue for any patient group is reduced, he said, it will ultimately impact the hospital’s ability to provide charitable care.
“We see every patient without regard to ability to pay, and we can’t cut back on that,” Forman said. “If we receive less revenue, it’s not like we can cut off the less profitable patients.”
But David Dearborn, communications director at the state Department of Social Services, said revenue at hospitals across Connecticut have been growing since 2009.
The state Office of Health Care Access reports that Connecticut’s short-term acute care hospitals made $95 million more in operational income in 2013 as compared to 2009. The state is also spending a greater amount on Medicaid annually at hospitals, increasing from $785 million in 2005 to $1.72 billion in the most recent fiscal year, Dearborn said.
“Meanwhile, executive compensation at CT hospitals continues to be robust, for lack of a better term,” he added.
For instance, Marna Borgstrom, president and CEO of YNHH, made approximately $3.5 million in compensation last year, making her the highest paid hospital official in the state, according to state filings.
Between July 2012 and July 2015, the state covered roughly 150,000 more Medicaid recipients than it had previously. Dearborn said the additional cost that comes from that will be offset by the rise in privately and publicly insured patients that has come with the introduction of Access Health CT, the state’s health insurance exchange.
“The fact is that as more [Connecticut] residents have health coverage overall, the more revenue sources hospitals see and the less uncompensated care they have to provide,” he said. Total reimbursements to hospitals increased under HUSKY D — the state Medicaid expansion for low-income adults — from $331.4 million in the 2012 fiscal year to $408 million the following year, he added.
But Forman said improvements in the number of insured patients are unlikely to offset the state’s reduction in Medicaid reimbursements, leaving YNHH with less money to provide charitable care. Last year, YNHH lost $221 million to Medicaid underpayments.
Dearborn said the state is reducing hospital payments because an increased emphasis on primary and preventative care is slated to decrease overall costs.
“[Medicaid expenditures for hospital care] probably would have been higher, if not for the focus on primary/ preventive care, and intensive care management initiatives,” he said. “This is not just a Connecticut phenomenon.”