FOR IMMEDIATE RELEASE
(Hartford, CT) – The Office of Health Strategy released its Annual Report on the Financial Status of Connecticut’s Short Term Acute Care Hospitals for Fiscal Year 2023 pursuant to CGS § 19a-670. “The report shows that 2023 saw general improvement in the financial health of our hospitals. In 2022 Connecticut’s hospitals had an overall negative profit margin, but 2023 saw that average turned around to a positive margin of 1.65%.” Seventy percent (70%) of hospitals had a positive five-year total margin,” said Deidre Gifford, MD, MPH, Commissioner. “Hospital net assets increased to $10 billion in FY 2023.”
“While the picture shows improvement, there are some important exceptions. We know that some small and independent hospitals, as well as the ProspectCT hospitals, continue to struggle,” said Gifford. “We are working with these hospitals and health systems to understand the real drivers of their financial losses and come up with lasting solutions.” Connecticut’s large health systems, including Yale New Haven Health, Hartford Healthcare and Trinity continue to report positive margins over the past 5-year period. OHS also published a new report providing additional context on health system financial status this year. Governor Lamont has proposed legislation that will allow the Attorney General and OHS to review and address some of the financial and investing practices that have led to some hospitals’ financial struggles.
Medicaid and Hospitals
This year the report also features an important change in how the state measures Medicaid payments and patient care costs. The change was developed in collaboration with the Office of Policy and Management (OPM) and Department of Social Services (DSS).
The result? Medicaid covers 87% of patient care costs, a significant difference from the 62% reported for FY 2022. “When accounting for all of the Medicaid payments, appropriately attributing the state's hospital user fee portion of the user fee, and counting only Medicaid costs directly related to patient care, the state actually pays hospitals 87 cents on the dollar for care provided to individuals with Medicaid insurance,” said Commissioner Gifford. “Is this enough? It’s certainly in line with what other states pay, and also in line with our estimate for what Medicare pays. There is time to talk about reasonable Medicaid rates, and where the state’s limited Medicaid dollars are most needed. But let’s have a conversation based on the best facts, not on outdated measures that don’t paint the true picture.”
What changed?
“As our healthcare delivery and payment systems continue to evolve at a dynamic pace, our analyses must also change to ensure we invest in strategies and policy initiatives that keep healthcare affordable for state residents and allow us to direct limited resources where they are most needed,“ said DSS Commissioner Andrea Barton Reeves, JD. “It was time to adjust the methodology to ensure that all of the Medicaid revenue hospitals receive and only expenses related to patient care are included in the calculation.”
This approach brings Connecticut’s methodology in line with how the Centers for Medicare and Medicaid Services (CMS) ask states to report payments and costs. The revised calculation better reflects hospitals’ true Medicaid revenue and allowable patient care expenses. Specific changes better reflect hospitals’ true Medicaid revenue and allowable patient care expenses. Specific changes include:
- Requires hospitals to include Medicaid supplemental payments, such as disproportionate share hospital payments and graduate medical education payments in Medicaid revenue reporting – Medicaid supplemental payments total more than $610 million annually and have been undercounted
- Closer alignment with the Medicare formula for calculating costs (the “Cost to Charge ratio”), which only allows expenses directly related to patient care, and excludes other costs, like advertising, from being included as patient-care costs
- Appropriately attribute the "hospital user fee" across all payer: Allows hospitals to subtract only the Medicaid portion of user fees from total Medicaid revenue, no longer allows hospitals to subtract user fees applied to revenue from other payers (such as Medicare or commercial payers)
“To effectively address community needs, it is essential to have financially stable hospitals and health systems. Even more important is access to quality care,” said DSS Commissioner Andrea Barton Reeves, JD.” We know some will disagree with this new report, but even if we use the old calculation the amount Medicaid covers is 78 cents on the dollar.”
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