Day Kimball Healthcare Set to Lose Millions as a Result of Governor's Budget Cuts

Significant Reductions in Services, Staffing Unavoidable if Funding is Not Restored

Take action. Tell Gov. Malloy to restore hospital funding now >

Just three months after community members and local legislators successfully fought to avoid $12 million in cuts to Day Kimball Healthcare (DKH) included in Governor Malloy’s proposed 2016-17 biennial state budget, Northeast Connecticut’s major health care provider and largest employer is now facing similar cuts once again.

DKH is set to lose $4.2 million over the next nine months as a result of the state budget cuts recently announced by Gov. Dannel P. Malloy, and as much as $11 million over the next two years if the cuts carry through to 2017.

Day Kimball Healthcare President and CEO Robert Smanik says such losses would force DKH to make significant cuts to services and staffing. Hospitals across the state are facing similar circumstances and are calling on legislators to convene a special session of the General Assembly to restore the funds.

“If these funds are not restored the effect will be disastrous for the physical and economic health of Northeast Connecticut,” Smanik said. “I’m shocked that the Governor has rescinded funds that are so critical to the health and economy of our region and dismayed that he would do so after our legislators worked so hard to secure the funds in a budget that was approved and enacted just three months ago.”

Smanik said that the support DKH received from Senator Mae Flexer and local representatives during the initial budget negotiations in the spring remains. “I’ve been in touch with Senator Flexer and our representatives, and they are supportive of calling a special session to get these cuts reversed,” Smanik said.

The Governor’s office announced last Friday $103 million in total cuts to the state’s biennial 2016-17 budget, with Medicaid payments to hospitals making up the largest single cut at $63.4 million. The Medicaid cuts eliminate all of the supplemental and small hospital payments due to hospitals from October 1 of this year through June of 2016, when the state’s current fiscal year ends.Statewide, that $63.4 million cut actually translates to nearly $192 million in lost funding for Connecticut’s hospitals over the next nine months. That’s because eliminating the supplemental hospital appropriation means the state also loses out on matching federal dollars for Medicaid.

For Day Kimball, the cuts mean the organization must now plan for a $5.6 million loss in funding for its 2016 fiscal year, which begins October 1 and runs through September, 2016. That budget was already projected to have an operating loss as a result of cuts enacted in the state’s 2014-15 budget.

“Because our fiscal year extends three months past the end of the state’s fiscal year next June, we have to assume in our planning that those cuts will be carried through to 2017, which would total $5.6 million,” Smanik said.

“And if the cuts are carried forward, we’ll be looking at the same loss for our fiscal year 2017,” Smanik continued, “which would amount to an $11 million dollar cut in our funding from the state’s biennium budget. That’s more than three times greater than the cuts DKH received in the state’s 2014-2015 budget, which has already caused us to have an operating loss despite cutting $6 million in expenses.”

The sudden and sharp decline in state funding and resultant budget woes are not unique to Day Kimball and are closely tied to rapid changes in how the state has taxed and provided Medicaid funding to hospitals over just the last four years.

About the Supplemental Hospital Appropriation

The supplemental hospital appropriation is a mechanism whereby the state returns a portion of a provider tax paid by hospitals. This tax was put into place in 2011 and allowed Connecticut to qualify for higher matching Medicaid funds from the federal government.

The provider tax generates additional revenue for the state, which then allowed the state to provide additional Medicaid funding to hospitals and therefore to qualify for higher matching Medicaid funding from the federal government. Those funds are then redistributed back to hospitals in the form of the supplemental appropriation, essentially paying hospitals back for the provider tax in the form of additional Medicaid funding.

At the end of this cycle, the goal is to provide hospitals with additional funding to care for the state’s most vulnerable residents – those enrolled in Medicaid. That funding is essential to helping hospitals defray the cost of providing care to patients covered by Medicaid, because Medicaid reimbursement rates don’t come close to covering the actual cost of providing care. Statewide, 20% of patients are covered by Medicaid. The patient mix is similar for Day Kimball, but with a higher Medicaid patient mix in pediatrics (50%) and OB/GYN (40%).

What has happened is that the state has continually decreased the amount of the supplemental appropriation and now eliminated it completely, which eliminates the matching federal funding as well. Meanwhile the provider tax remains. This has created a triple-whammy for hospitals who must nevertheless continue to provide care, and are left trying to balance budgets with a hefty amount of funding that was promised to them now taken away.

About the Small Hospital Appropriation

The state’s 2016-17 budget also set aside the small hospital appropriation, a pool of money to provide additional funding to small community hospitals that serve a higher proportion of Medicare and Medicaid patients (and so are disproportionately affected by cuts to the supplemental appropriation and sub-cost Medicaid reimbursement rates). To qualify for the small hospital pool, hospitals must also have demonstrated high-quality patient care and low cost. Day Kimball Hospital was one of six small community hospitals in the state to receive additional funding through this pool. This funding has now also been eliminated.

“In a fight for our lives,” Day Kimball joins hospitals around the state in calling for funding to be restored.

“Once again, as we were when the Governor announced his originally proposed budget last spring, Day Kimball is in a fight for our lives and for the livelihood of Northeast Connecticut,” Smanik said.

If the cuts are not reversed, Smanik summed up the dire consequences it will have for the region by saying, “In the 13 towns we serve, 72,000 out of the 93,000 residents use our services. We are the largest employer in the region with more than 1,300 employees, 82% of whom live in Northeast Connecticut. We employ 50 of the area’s physicians, with more than another 250 on our medical staff. Whether you’re a patient, a family member of a patient, a resident, a business owner or an employee of Day Kimball, these cuts will affect you.”

He continued, “I am hopeful that the efforts of our local legislators and others from around the state will be successful in convening a special session to review this decision and to restore these essential funds.”

 

Take action. Tell Gov. Malloy to restore hospital funding now >