Originally published at the Naples Daily News.
Alexandra Glorioso , alexandra.glorioso@naplesnews.com; 239-435-3442 Published 8:04 a.m. ET Feb. 20, 2017 | Updated 5:59 p.m. ET Feb. 20, 2017
TALLAHASSEE — Gov. Rick Scott, who once ran one of the largest for-profit hospital chains in the country, is putting nonprofit hospitals on notice, targeting taxpayer payments they receive for health care to the poor.
Nine Florida nonprofit hospitals and one public hospital account for nearly two-thirds, or more than $220 million, of Scott’s proposed $298 million cuts in supplemental payments to hospitals for serving poor patients.
Scott's budget recommends cutting the extra cash payments because he argues they receive the money under the incorrect assumption that they provide more care to the poor.
Overall, Scott is proposing to cut nearly $1 billion from health care, mostly through payments to hospitals for care they say they give the poor.
As Florida’s legislative session gets underway March 7, cracking down on questionable spending in the state budget is a priority for Scott and House Speaker Richard Corcoran, R-Land O’Lakes.
With so much of the $80 billion-plus budget already committed, there are only a few places that meaningful spending cuts can come from, including health care.
Health care is nearly 42 percent of the state’s budget, and it continues to grow as Medicaid, which accounts for about 33 percent of the state's spending, expands every year.
Click here to see hospitals Gov. Scott proposes to cut extra payments to »
The hospitals that face some of the greatest cuts include Lee Memorial Hospital in Lee County ($20.3 million) and Tallahassee Memorial in Leon County ($7.6 million). Lawnwood Regional Medical Center in St. Lucie County ($5.9 million) and NCH Baker Hospital Downtown in Collier County ($5 million) are also facing cuts.
The hospitals that would face the largest cuts by far are Orange County's Florida Hospital ($49.9 million) and Orlando Health ($37.9 million), both of which treated Pulse Nightclub victims last year.
The cuts stem from a budget exercise conducted by the state's health agency, which determined for-profit hospitals in 2015 provided the most charity care to patients, about 67 percent, compared with 60 percent by nonprofits.
Florida Gov. Rick Scott speaks about his budget proposals during a pre-legislative news conference, Tuesday, Jan. 31, 2017, in Tallahassee. (AP Photo/Steve Cannon) (Photo: Steve Cannon, AP)
“The governor expects all hospitals, especially not-for-profit hospitals, to meet the average for-profit hospital charitable purpose threshold of 67.1 percent in order to continue receiving add-on dollars from the state,” Scott spokesmanMcKinley Lewis said, adding that cuts won't be made to hospitals that don't produce profits or excess revenues. "As the two most profitable hospitals in Florida, both Florida Hospital and Orlando Regional Medical Center are no exception to this expectation."
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Florida Hospital and Orlando Health were the most profitable hospitals in the state in 2015, reporting $311.8 million and $261.8 million, respectively, in left over revenue, according to a worksheet provided by the governor's office.
To calculate the percentage of care hospitals provide to the poor and indigent, the state's health agency adjusted some of the data these hospitals report.
Because hospitals can charge different prices for the same service, to compare charity, the agency converted charges hospitals submitted for services provided to indigent patients into prices that the federal Medicare health care program for those 65 and older pays for those services.
In an effort to find excess spending in the hospitals' portion of the budget, the state's health agency identified hospitals that could be erroneously receiving supplemental money from the state under the incorrect assumption that these hospitals provide a great deal of care to the poor.
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To do this, the agency sought to determine how much “charitable purpose” hospitals in Florida serve. This category includes straight charity care, in which a hospital expects no payment from the patients, as well as uncompensated expenses incurred to care for poor patients insured through the Medicaid program.
The agency then compared how much money hospitals spent on this charitable purpose to their overall profits to determine each hospital's charitable purpose percentage.
If that percentage was more than 10 percent below the for-profits' average, then certain extra payments these hospitals receive from the state are on Scott's chopping block.
While House Republicans are generally in line with Scott when it comes to his health care cuts, some are questioning whether the profit calculations made by the administration are distorted.
"Before for-profit hospitals report their profit, they may transfer some revenue out to their parent corporation for operating expenses, possibly diminishing their appearance of profitability," said Rep. Cary Pigman, a Republican emergency care physician from Avon Park who generally applauds Scott's proposed health care cuts and is chairman of the House's health quality subcommittee and member of two other health committees, including appropriations.
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While nonprofits don’t make “profits” per se, they can generate excess revenues. It’s unclear whether they commonly transfer this money to other entities, but Lee Memorial says it does not.
“100 percent of our operational gains are reinvested in our community in new and upgraded technology and facilities so we can continue to provide the highest level of care and services to Southwest Florida,” said Mary Briggs, a spokeswoman for Lee Memorial.
Lee Memorial provides 23 percent of its care to the neediest patients, according to the governor's worksheet.
In addition to the $20 million proposed cut in Lee Memorial's supplemental payment, Scott is proposing a reduction in Medicaid reimbursement rates, as well as other payments associated with indigent care, for a projected total of $35 million in cuts.
Scott's proposed cuts are recommendations, but some of his thinking is reflected by House leadership.
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The House’s health appropriations chairman, Rep. Jason Brodeur, said the House isn’t interested in harming hospitals that care for the poor, but he is, like the governor, skeptical that all of these state handouts are fair.
“What I think is confusing to the governor and the House is what principle is that money given out on? I don’t mind add-ons or enhancements as long as they are principle-based. By what principle are they getting extra money?” Brodeur, R-Sanford, said.