Baystate Health, Berkshire Health systems seek bigger ‘safety net’ as state readies 5-year Medicaid plan

SPRINGFIELD — Baystate Health, Berkshire Health Systems and other hospitals outside Boston caring for Medicaid recipients, and losing money doing so, say they risk being further shortchanged as the state prepares to send a new five-year Medicaid waiver plan to the feds.

Waivers like this allow states to customize Medicaid. In Massachusetts, it governs things like new accountable care organizations and could also put more money into health care for inmates in county jails.

But it’s the safety net funding that is at issue, specifically a provision meant to close the gap between what it costs to provide care for recipients of Medicaid, called MassHealth here, and the money hospitals get for providing care.

It’s a two-tiered system where seven hospitals — mostly in Boston but also including Holyoke Medical Center and Mercy Medical Center in Springfield — that share high numbers of Medicaid patients, but don’t have as many commercially insured patients as Baystate or Berkshire, are in line to get $238 million a year in supplemental safety net funding under the Baker administration’s proposal.

But in an example of how byzantine the state-federal Medicaid partnership is, the state and Baystate don’t even agree on how much those hospitals — called Group 1 — share. The state says it is $153 million but Baystate and its allies include another a $85 million in funding from another Medicaid source specifically for Cambridge Health Alliance (CHA), which has different rules because it is city owned.

The other group of 18 hospitals, including the Baystate and Berkshire systems and Athol Hospital, would — under the state’s current proposal — share in just $40 million a year in safety net funds. That would be just a tenth of what those Group 1 hospitals receive, according to state documents and figures provided by Baystate Health.

That $40 million for Baystate, Berkshire and other Group 2 hospitals is a proposed increase from the $20 million a year they get now.

But a subset of those Group 2 hospitals, including Baystate, Berkshire, Southcoast Health in New Bedford and Wellforce in Burlington, is asking that the number be increased to a new total of $60 million. Because of the federal share in Medicaid, the additional funding would cost the state general fund just $17.2 million. The Group 2 hospitals aren’t asking the state to take from Group 1′s supplemental payments.

“Baystate is a safety net hospital and it is also a tertiary referral hospital,” said Dr. Mark Keroack, president and CEO of Baystate Health.

What he means is that Baystate Health not only provides care to the poor, but also to those with insurance. It also has the regional trauma center, and it provides transplants and cares for families in high-risk delivery.

“I think it’s fair to say they have overlooked hospitals like Baystate and hospitals in struggling areas, and they have overlooked Western Massachusetts when it comes to this issue,” he said.

The Group 1 hospitals spend $1.05 billion to provide Medicaid services and share $238 million in supplemental safety net funding, while the Group 2 hospitals spend almost as much, $992 million, yet share only $40 million in safety net funding and are reimbursed at one-sixth the rate, Keroack said.

In Boston, there are hospitals that provide Medicaid-funded care to the poor and other high-level hospitals that do transplants and trauma care.

“The current system was designed to maintain a two-class system in Boston,” Keroack said. “We are the safety net hospital, And, quite frankly, we are proud of it. But it really shouldn’t imperil the services that we provide.”

Baystate Health hospitals provide $300 million a year in services to Medicaid patients. That’s three times more than Mercy Medical Center and four times more than Holyoke Medical Center. Baystate is underfunded by about $75 million each year, against which it receives $12 million in supplemental payments. Every year, the $63 million shortfall has to be made up, Baystate officials said this week.

The state’s proposals would essentially make the Group 1 hospitals whole, said Scott St. George, chief financial officer of Berkshire Health Systems

“We are not asking to get up to the full level that the Group 1 hospitals are at,” St. George said. “We are asking to get to something that’s more equitable.”

If the hospitals like Berkshire and Baystate get their increase to $40 million a year, it would work out to about $3.6 million a year for Berkshire, he said.

“That might not sound like much on a $800 million annual budget,” St. George said. But it’s important.

“As you can tell, we live on fractions of that $800 million,” he said. “We are just slightly better than break-even. Every one of those dollars is important.”

Darlene Rodowicz, executive vice president of Berkshire Health Systems, said hospitals are also starting to run up against caps on what they can charge commercially insured patients. They normally use money from the insured to subsidize Medicaid care.

“We would like to have that guarantee of a safety net,” she said.

Baystate’s Keroack said the safety net is even more important now that COVID has driven up costs and stressed the system.

“Another five years of a starvation diet” of Medicaid reimbursements, says Keroack, threatens Baystate’s ability to move forward in its efforts to advance care for the region, including its ability to recruit and retain physicians, as doctors now go to Boston and Hartford where the pay is better. The safety net inequity hurts Baystate’s ability to expand services in needed areas and its ability to address aging facilities like the community health centers in Springfield’s tougher neighborhoods.

“It’s kind of like treading water and hanging on by your fingernails,” Keroack said. “We’ve reached a pinch point which is particularly heartbreaking to see.”

“We feel we are stepping up meet our responsibility,” he said.

Keroack said the existing reimbursement formulas have required Baystate make itself a “very low cost system on a discharge and per-capita basis.”

The state backs up its proposal by saying Baystate Health, in particular, can still negotiate more money from commercial insurers compared toHolyoke and Mercy.

As a result of these two factors, the state says, Group 2 hospitals have a higher financial margin than Group 1 hospitals. For example, as of March the Massachusetts Center for Health Information and Analysis reported that Baystate Medical Center had an overall positive margin of 12%, while Holyoke Medical Center and Mercy Medical Center both had negative margins.

Mercy president Deborah Bitsoli said the Medicaid waiver proposal recognizes the hospital’s role as a safety net provider.

“We have and will continue to engage with the Massachusetts Executive Office of Health and Human Services and MassHealth, as well as our federal and state legislative delegations regarding the need for increased safety net funding to allow Mercy to continue to serve the needs of the community,” Bitsoli said.

Executive Office of Health and Human Services MassHealth staff have been actively working with the Massachusetts Health and Hospital Association regarding the safety net care pool and hospital funding for the upcoming Medicaid waiver, a department spokeswoman told The Republican.

“MHA has assembled a workgroup of hospitals, in which Baystate participates, to provide formal feedback to the state,” she said. “We look forward to the details of the work group’s collective proposal and will work toward resolution with all of hospital partners.”

The Group 2 hospitals are making their case, but are meeting with some frustration

“I don’t know if we fully understand what the state is looking for,” Berkshire’s Rodowicz said.

She said now is the time because she fears once the proposal goes to the federal government, the die will be cast. The time to make adjustments is while it is in state hands.

Baystate officials have lobbied state lawmakers and met this week with Springfield Mayor Domenic J. Sarno.

They’ve asked U.S. Rep. Richard E. Neal, chairman of the House Ways and Means Committee and dean of the New England congressional delegation, for his help.

Neal has had ongoing conversations with both the hospitals and the Baker administration on this issue. He said he’s encouraging the Executive Office of Health and Human Services to prioritize patient needs and carefully consider how the Medicaid waiver would impact providers around the state and in Western Massachusetts.

In particular, Neal is advocating for the state to increase support to all safety net hospitals on the front lines and improve care, especially in the behavioral health area.

“Massachusetts has long led the nation in innovative approaches to improving health care delivery. I encourage the Baker administration to develop a waiver formula that treats the commonwealth’s hospitals fairly and ensures patients receive the best care possible, no matter their financial status,” Neal said.

Keroack and his team will meet soon with U.S. Sen. Edward J. Markey’s staff. Markey, speaking Friday on a swing through Springfield to promote infrastructure spending, said health care funding has to be consistent, reliable and that hospitals need to be compensated for the care they are providing.

“Health is the first wealth,” the Malden Democrat said. “If children are in a situation where they have no protection of their health, they can’t take advantage of any other opportunity.”

State Sen. Adam Gomez, D-Springfield, whose district includes the physical footprint of most of Baystate, said he’s been briefed and discussed supplemental safety net funding with Baystate officials.

He said he’s also hearing from the state Sheriff’s Association, eager to secure funding for inmate health care at the county jails.

“I know that Baystate really needs this funding,” Gomez said.

Gomez discussed the matter with the chairman of the state Senate Ways and Means Committee, Sen. Michael J. Rodrigues, whose district in Bristol and Plymouth counties includes South Coast Health’s service territory.

“We think that the reimbursements are kind of shallow,” he said.

State Rep. Carlos Gonzalez, D-Springfield, said the administration’s proposal is tailored to Boston’s health care institutions and its economies.

“We really have to start thinking of this state beyond Boston,” Gonzalez said.

State Rep. Lindsay N. Sabadosa, D-Northampton, is on the House Health Care Finance Committee. She said it takes years just to develop the waiver proposal and the Baker administration has taken the lead.

But she’s concerned about how the safety net funding impacts another state goal: improving access to behavioral health care at Baystate and elsewhere.

“There is a big focus on our community hospitals,” Sabadosa said. “We need to make sure we do this equitably.”