Fixing budget requires special session [The Day]

September 25, 2015

The Day Editorial

The draconian cuts inflicted by Gov. Dannel P. Malloy on the state’s nonprofit hospitals is evidence he signed into law a budget that contained unrealistic revenue projections, called for no sacrifice from within the ranks of government and left the state far too vulnerable to the vagaries of the financial markets.

The administration points to concerns about the recent drop in stock prices its potentially adverse impact on income tax receipts for the state. However, this crisis coming so soon after the budget’s enactment demonstrates it was flawed from the start.

Less than three months into the fiscal year, Gov. Malloy last week used his executive authority to implement $103 million in emergency cuts, targeting hospitals and municipal aid for the bulk of the pain. This was perhaps the easiest approach for the governor — more politically palatable than demanding sacrifice from the state workforce and his friends in the state labor movement — but it was not the right approach.

The governor has repeatedly turned to cutting aid and increasing expenses on hospitals as a way of protecting growth in state government, about $556 million in increased taxation and spending cuts in the last five years. Including the loss of federal matching funds, the collective hit to the state’s hospitals from the latest emergency cut will be another $192 million.

Looking at it another way, in 2012 Connecticut hospitals could expect to receive a 71-cent reimbursement for every $1 of care provided under Medicaid, a net loser but a manageable one. With the latest emergency cuts, that drops to 42 cents on the dollar, according to the Connecticut Hospital Association.

“We can’t survive on 42 cents on the dollar,” said Lawrence + Memorial Hospital President and CEO Bruce Cummings in a recent meeting with the editorial board.

With the stroke of his pen, Gov. Malloy achieves an outcome he could not obtain through the legislative process. In the last legislative session, the Democratic majorities in the state House and Senate pushed back on the Democratic governor and restored hospital funding the Malloy administration sought to cut. Now the governor gets his cuts without a vote.

Pointing to the hospital and municipal aid cuts, House Speaker J. Brendan Sharkey, D-Hamden, told the Connecticut Mirror he was “disappointed” about “cuts targeting some of the very areas we sought to protect.”

The speaker said he would look to mitigate the cuts in next year’s legislative session.

Much damage will occur in the meantime.

Senate Minority Leader Len Fasano, R-North Haven, has the better idea; call the legislature into special session and reorient the budget so that more than the hospitals and municipalities share the sacrifice.

The added cuts in Medicaid assistance for hospitals come at a time when the number of patients insured under Medicaid is dramatically expanding, due to the Affordable Care Act with its goal of expanding the ranks of the insured. In 2012, Medicaid enrollment in the state stood at 580,000. In fiscal-year 2016 it will approach 748,000, according to the Connecticut Hospital Association.

Squeezed by these budget moves, hospitals will face difficult decisions about reducing staffing, eliminating some services, and ending or decreasing community health programs. To some degree, patient care will suffer.

The Malloy administration can point to the fact that most hospitals in the state do operate in the black and so arguably can absorb another cut as the state tries to keep its own books in balance. This ignores the reality, however, that a modern hospital system works with a number of affiliates, some that operate at a loss, but which are necessary.

The L+M corporate structure, for example, includes L+M Medical Group, the team of doctors who provide much of the care in our region. Any hospital that expects to attract and maintain a network of qualified doctors needs to offer a physicians’ group. Given the modern complexities of record keeping, insurance reimbursements, workers compensation and the like, few doctors opt for private practices, electing instead to become employees in a medical group.

Such groups are loss leaders, noted Mr. Cummings, with the L+M Medical Group projected to lose $18.4 million in the coming fiscal year. These networks cannot operate in the black and still meet the nonprofit community hospital’s mission of providing care regardless of ability to pay, accepting all patients despite knowing Medicaid insurance will not cover costs.

“Our ability to do that is now at risk,” said Mr. Cummings.

To address this state budget situation properly will require a reordering of priorities.

That means a special session.