Hospitals in our state have faced financial challenges since passage of the Balanced Budget Act in 1997. Most hospitals in Rhode Island reported an operating loss in 2011, a trend that is becoming all too familiar. In addition, the statewide margin was negative for the first time ever with nearly $4 million in losses. Year-after-year operating margins in Rhode Island are well-below regional and national averages, and we now have two hospitals in receivership. Many wonder why our hospitals report margins well below the national average of 7 percent – let’s examine the evidence.
The weak economy has led Rhode Island to one of the highest unemployment rates in the nation, 11 percent at the end of 2011. As people lose their jobs, they also lose their health insurance. More than 119,000 Rhode Islanders lack health coverage.
The mission of hospitals is to respond to the needs of the community, treating all citizens, at any time, regardless of their ability to pay. Hospitals provided more than $160 million in uncompensated care to Ocean State residents last year, with hospitals in our capital city providing $314,000 in uncompensated care each day. In addition, hospitals pay more than $140 million a year in taxes to the state.
Hospitals in Rhode Island are reimbursed 91 cents for each dollar of care provided to Medicare patients. During 2010, this totaled a $45 million shortfall for our hospitals. Meanwhile, deficits from the Medicaid program top $17 million each year.
These shortfalls continue with provisions of the Affordable Care Act. Hospitals in Rhode Island will have to absorb $574 million in payment reductions related to health reform over the next 10 years. In addition, the federal deficit reduction plan calls for $106 million in reduced payments to hospitals in our state. In total, hospitals face more than $680 million in reduced payments from the federal government in the next decade.
External factors continue to place stress on the hospital mission of delivering comprehensive, high-quality health services. Weak margins leave little funds available to invest in infrastructure and technology improvements that our patients expect and deserve. Hospitals that report negative margins, as most hospitals in Rhode Island do, must make careful considerations that could include eliminating services or reducing the workforce.
Hospitals deeply appreciate the challenges of local and state budget deficits, but we are also trying to stop the bleeding. As a major economic engine and source of 21,000 jobs, we provide an annual economic impact in Rhode Island of more than $6 billion. With the support of lawmakers, we can continue to serve our community with quality care and actively contribute to a healthy and strong Ocean State. •
Edward J. Quinlan is the president of the Hospital Association of Rhode Island.