A state task force has proposed sweeping changes to bolster Connecticut’s struggling hospitals, including more than $600 million in public financing for capital improvements.
The draft report from Gov. M. Jodi Rell’s Hospital System Strategic Task Force also suggests expanded reimbursement for hospital services for low-income patients and a multi-pronged effort to stem worsening shortages of doctors and nurses.
And although the General Assembly adopted a complex measure two years ago to address skyrocketing malpractice insurance rates, the report says the high cost remains a significant problem for care providers.
“Our hospitals are the safety net for the communities they serve, and their ability to remain financially viable ensures continuous access to necessary services,” according to the 21-member task force, which includes department commissioners and other executive branch officials, state legislators, industry representatives, and labor leaders.
Many of the state’s 30 acute-care hospitals lost money or made thin profits last fiscal year, according to the report. Revenue from hospital operations totaled about $7.14 billion last year, $45 million more than operating expenses. Operating margins ranged from 9 percent to negative 8 percent.
Public-Private Partnership?
One of the recommendations that may spark the most debate involves what role the state should play in financing the capital needs of private hospitals.
Though both the state and the federal governments reimburse hospitals for some of their operating costs for treating poor and needy patients, long-term borrowing for new construction, equipment, and other capital needs primarily has been the hospitals’ responsibility.
The state has helped hospitals obtain favorable interest rates. The quasi-public Connecticut Health and Educational Facility Authority, or CHEFA, can use its status to help the hospitals obtain tax-exempt financing, but the hospitals incur the debt.
The task force, though, says that unless the state starts footing a major portion of the debt, quality of care will slip. According to a Connecticut Hospital Association analysis, Connecticut facilities need $1.1 billion in capital investments just to match the national average in terms of the condition of the buildings and the range of services provided.
The draft calls for the state to bond at least 60 percent of that figure — which would mean about $660 million. State government then could provide those funds to hospitals for capital programs as direct grants and as low- or no-interest loans.
Stephen A. Frayne, senior vice president for health policy at the Connecticut Hospital Association, said the legislature and the Rell administration made important strides in June when they increased reimbursement for care provided to the needy by $46 million this fiscal year and an additional $30 million in 2008-09.
Hospitals, which were facing a $250 million reimbursement gap in this area, at least won’t lose any ground.
Big Job
But Frayne added that unless hospitals can begin addressing deferred maintenance and can remain competitive by opening new units and providing new services, the additional Medicaid dollars won’t be enough to preserve quality care.
“We’re beginning to try to turn around an aircraft carrier in the harbor,” he said. “It’s going to take a lot of effort.”
Office of Policy and Management Secretary Robert L. Genuario, Rell’s budget director and co-chairman of the task force, said it’s premature to form conclusions about any proposals.
Genuario said that while he recognizes the capital needs of hospitals, “any time the state would be sustaining a lot more debt would be of concern to me.”
With a bonded debt of about $14.5 billion, Connecticut is one of the most indebted states, per capita, in the nation, according to both executive and legislative branch fiscal analysts.
Genuario added that if the state can continue helping hospitals meet operating costs, hospitals could afford more debt service and, therefore, launch more capital improvements.
Other draft recommendations include:
• Conducting a study of state reimbursement programs.
• Expanding loan forgiveness programs to medical and nursing students to help hospitals deal with staffing shortages.
• Forming a working group to develop a proposal to reduce medical malpractice costs.
The panel must report its final recommendations to the governor by Dec. 15. That report also is expected to get a close analysis by legislators during the 2008 General Assembly session, which starts Feb 6.
