LePage plan would pay funds owed hospitals
The Aroostook Medical Center would collect $12.4 million from state
By Scott Mitchell Johnson
Staff Writer
PRESQUE ISLE — The Aroostook Medical Center and Maine’s 38 other community hospitals will be paid the $484 million they are owed should the House and Senate approve Gov. Paul LePage’s emergency legislation.
Beginning in the mid-2000s, rapid expansions to MaineCare eligibility had hospitals providing services to more patients than the state’s monthly prospective payments covered. Instead of settling up at the end of the year, the state gave hospitals an IOU, which resulted in an artificially-balanced budget and a massive debt to Maine’s community hospitals.
Last Tuesday, the governor announced he has submitted emergency legislation to the Revisor’s Office that will authorize the state to immediately issue a revenue bond on its future liquor sales when enacted. The state will retain operational control over liquor sales starting in the summer of 2014 when the current 10-year private contract expires.
That revenue bond would cover the $186 million the state owes its hospitals for MaineCare services dating back to 2009 and immediately trigger a $298 million federal match.
“Maine people work hard to pay their medical bills. This plan puts Maine on the right track to do the same,” said LePage in a press release. “By paying the state’s bills, we strengthen our economy and the hospitals that care for and employ Maine people. Hospitals will now be able to pay new and existing employees and local vendors, pursue capital improvements and maintain the high level of service that has earned the state national recognition for quality care.”
With that debt erased, LePage said he will issue voter-authorized bonds, including $51.5 million for transportation infrastructure improvements and $53.5 million for conservation, clean water upgrades, and construction and energy efficiency at post-secondary educational institutions.
The governor has also proposed a $100 million facilities bond for the construction of new corrections facilities in Windham, to be paid from savings generated by more efficient operations.
As the bills have gone unpaid, many of the state’s hospitals have had to lay off employees and reduce benefits, borrow against lines of credit to meet payroll and other obligations, dip into savings and forgo interest, delay payments to local vendors like oil dealers and waste haulers, and eliminate services.
According to Bruce Sandstrom, vice president and chief financial officer at TAMC, lack of reimbursement funds over the years has posed challenges for the hospital.
“This underpayment issue has gone on now for probably a decade. In the past, we had to borrow money on a line of credit. We were able to pay that back when we got some of the prior years’ settlements, but probably most notably we’ve had to stretch our payments out to our vendors which affects their ability to have a viable business,” he said. “It will be great to catch all of our vendor payments up on a more current schedule.
“We’ve also held off on any significant capital projects, so we’ve deferred a lot of plans,” said Sandstrom.
One such plan is to increase the size of the hospital’s operating room suites.
“We have a long-term master facilities plan that has several components, but the biggest one we’re trying to accomplish is to increase the size of our operating room suites,” Sandstrom said. “As technology has developed over the years — and the amount of equipment that is necessary to be in the operating room suite is significantly more today than it was when these rooms were designed — the rooms need to be made more spacious.
“We have four operating room suites, and that’s fine, but each of them has to be made bigger,” he said. “Because of the nature of where they are located in our building — right in the middle of things — in order to expand them we’ll have to move several other areas. It’s probably a five-year plan to get there, and it will take several million dollars to do this, so some of the reimbursement money will go toward that project.”
The state’s figure shows TAMC receiving $12.4 million; however, Sandstrom’s records are closer to $11.3 million.
“Once the state is able to begin issuing these settlements, we’ll get more definitive information on what the actual number is,” he said.
Though optimistic TAMC will see funds in the future, Sandstrom said officials are taking a wait and see approach.
“It was very good news given the situation with the state budget; however, we’re kind of holding our breath because we know that we will be targeted in the next round of budget negotiations at the state level,” he said. “There’s a proposal out now that talks about further reductions in the hospital reimbursement rates and also increases in our taxes under the tax and match program.
“So we’re delighted in collecting our back-pay, but we’re also concerned about how we’ll manage and operate under the rates going forward,” said Sandstrom. “In my mind it’s far from a done deal, but we’re certainly encouraged.”
LePage said he aims to get his legislation enacted quickly to ensure the state capitalizes on the current federal matching rate before it falls farther.
“With the full support of the Legislature,” he said, “I intend to pay the hospitals and issue general bonds in a matter of months.”
The announcement was made at the construction site of what will be the state’s first dental school — the University of New England’s College of Dental Medicine Patient Care Center — in Portland.
