MINUTES OF THE JOINT MEETING OF
SENATE COMMITTEE ON FINANCE
AND
ASSEMBLY COMMITTEE ON WAYS AND MEANS
Sixty-seventh Session
June 1, 1993
The joint meeting of the Senate Committee on Finance and the Assembly Committee on Ways and Means was called to order by Chairman William J. Raggio, at 8:00 a.m., on Tuesday, June 1, 1993, in Room 119 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
SENATE COMMITTEE MEMBERS PRESENT:
Senator William J. Raggio, Chairman
Senator Raymond D. Rawson, Vice Chairman
Senator Lawrence E. Jacobsen
Senator Bob Coffin
Senator Diana M. Glomb
Senator William R. O'Donnell
Senator Matthew Q. Callister
ASSEMBLY COMMITTEE MEMBERS PRESENT:
Mr. Morse Arberry, Jr., Chairman
Mr. Larry L. Spitler, Vice Chairman
Mrs. Vonne Chowning
Mr. Joseph E. Dini, Jr.
Mrs. Jan Evans
Ms. Christina R. Giunchigliani
Mr. Dean A. Heller
Mr. David E. Humke
Mr. John W. Marvel
Mr. Richard Perkins
Mr. Robert E. Price
Ms. Sandra Tiffany
Mrs. Myrna T. Williams
STAFF MEMBERS PRESENT:
Daniel G. Miles, Fiscal Analyst
Mark W. Stevens, Fiscal Analyst
Robert A. Guernsey, Principal Deputy Fiscal Analyst
Gary Ghiggeri, Principal Deputy Fiscal Analyst
Judy Jacobs, Committee Secretary
Dale Gray, Committee Secretary
OTHERS PRESENT:
Scott M. Craigie, Chief of Staff, Governor's Office
Jerome F. Carlin, Director, Department of Human Resources
Christopher Thompson, Chief, Health Care Financial Analysis Unit, Department of Human Resources
Jon L. Sasser, Lobbyist, Nevada Legal Services
Paula Treat, Lobbyist, Desert Springs Hospital
Steven J. Peterson, Administrator, Desert Springs Hospital
Senator Raggio announced the two committees were assembled to hear a proposal on medical care for indigent patients.
SENATE BILL (S.B.) 494:Makes various changes relating to provision of medical care to indigent persons.
Scott M. Craigie, Chief of Staff, Governor's Office, explained S.B. 494 was a provider tax, formerly referred to as "the Medicaid miracle." He said the aim was to collect $50.3 million for the state's use to match another $50 million in federal funds. The tax would be imposed upon hospitals, and the funds would purchase expanded Medicaid services of all kinds.
Mr. Craigie estimated there will be a 32 percent increase in General Fund revenues used for the Medicaid budget even with the funds provided by S.B. 494. He attributed the increase to a recession that has driven people into the Medicaid program through augmented eligibilities. He averred the entire budget has been impacted by the recession.
Mr. Craigie pointed out the program would indemnify the counties against sudden and surprising increases in indigent service costs. He acknowledged that had become a major problem in Washoe County and in many of the rural counties. He said those counties would not pay any more for indigent services than they paid over the last biennium. Both in- and out-patient services in Clark County will be included, which puts more money into intergovernmental transfers.
Mr. Craigie asserted the hospitals have been very cooperative as have the counties. He said the overall net benefit to hospitals will be approximately $21 million, most of which will go to the University Medical Center in Clark County with $11.5 million. Another $4.5 million will go to Washoe Medical Center and eight rural hospitals will benefit by $2.7 million. He admitted some hospitals will not benefit from the tax and may actually lose money.
Mr. Craigie acknowledged changes in the program from two years ago. There was a hold-harmless provision which will no longer be included. He said there are other provisions needing description which have changed.
Jerome F. Carlin, Director, Department of Human Resources, referred to a presentation prepared for the committees (Exhibit C). He said the first page identified the changes in federal regulations since the legislation was first passed 2 years ago.
Mr. Carlin said the previous hold-harmless provision in A.B. 577 of the Sixty-sixth Session guaranteed hospitals at least $100,000.
ASSEMBLY BILL (A.B.) 577
OF THE SIXTY-SIXTH SESSION: Makes various changes relating to provision and costs of health care.
He stated the broad-based taxes collected from hospitals now must be redistributed in large part to hospitals that serve the poor.
Mr. Carlin said a cap has been placed on the amount that can be paid to hospitals based upon the number of Medicaid patients served during the past year. He said the cap for Nevada is $73.6 million which represents approximately 20 percent of the total Medicaid budget. He said federal legislation instituted a freeze which prevented a state from exceeding 12 percent, but the hold-harmless provision allowed the state to remain at the $73.6 million level until the percentage goes above 12 percent. He calculated that would not occur for several years.
Mr. Carlin continued to say the tax may not be imposed on Medicaid revenues only. An additional tax was placed on providers other than hospitals during the last biennium, and only the portion of their income related to Medicaid was taxed. He said:
That meant that there were a number of physicians who did a small amount of Medicaid business that we taxed and returned the money through higher fees. This would require us to tax all revenues of physicians; therefore we are dropping the tax on physicians...and other outpatient providers....
Mr. Carlin said the bill would continue to allow intergovernmental transfers which will be a key component in making the program work. He said it is not a new concept, it is a reaffirmation that intergovernmental transfers from tax revenue can be used as match money for the Medicaid program.
Mr. Carlin stated the proposed changes in federal law listed on the document (Exhibit C) passed the United States House of Representatives last week. He indicated the disproportionate share of payments to publicly owned hospitals will be limited to the amount of their uncompensated care. Some states were transferring more through the intergovernmental process and getting back more money than the total of their compensated care. He said it would affect Nevada but there will be a grace period until the legislature returns.
Mr. Carlin exclaimed there was nothing he could foresee to negatively impact the program in Nevada for the biennium. He warned there probably will be changes in the next biennium.
Mr. Carlin turned to a flow chart on the second page which identifies the three sources of revenue. He described the chart and explained the hospital districts are small, rural taxing districts that provide subsidies to rural hospitals. They would transfer in $1.4 million which would be matched, and they would receive back all of their $1.4 million plus the matching funds.
Mr. Carlin stated the tax on hospitals would go into the intergovernmental transfer account as would money spent on indigent medical care for inpatients in Clark and Washoe counties and for outpatients in Clark County. Those would include patients transferred into either Washoe or Clark County from the rural counties. By transferring those funds into the intergovernmental account, the funds may be matched with Medicaid dollars. As a result, $21 million more is paid back to the hospitals than they pay in through taxes or intergovernmental transfers.
Mr. Carlin declared the counties also get a slight net benefit because their social service departments are used to determine eligibility for the disproportionate share payments. That will return to them approximately $3 million for the biennium in reimbursements for services they are already performing.
Mr. Carlin said the money leftover in the hospital intergovernmental transfer account is then used for a match with the federal government to provide the $100 million in Medicaid services.
Turning to page 3, Mr. Carlin said the figures were a restatement of those on the second page. He explained the small amount for penalties is included in case there are any penalties collected, and the interest figure anticipates about $500,000 to be earned. He recommended any penalties or interest collected be held in a reserve account. He explained there are a couple of unclear determinations that must be made regarding the federal law. Federal law now states that other assessments and fees made by the states against hospitals would reduce the level of federal participation.
Mr. Carlin acknowledged there are a few small assessments against hospitals. If the federal government determined those should be deducted, the reserve could be used as an offset.
Mr. Carlin conceded the payments go out to the hospitals in a disproportionate share. He added:
We also maintain the current rate. When we went into this program our reimbursement rate from Medicaid was based on the 50th percentile of where an efficient hospital was. We took the rate that half the hospitals were below and half were above and that's the rate we paid. We increased that to 55 percent and we continue that under this program.
Mr. Carlin said the increased costs of Medicaid set forth on page 3 of the exhibit equal the $50.3 million available for additional matching money.
Mr. Carlin pointed out the net benefit or loss to each hospital based on 1992 Medicaid usage as set forth on page 5. He explained the figures would change as indigent or Medicaid usage goes up or down in the facilities. He called attention to University Medical Center and Washoe Medical Center figures which serve the bulk of Medicaid patients in the state.
Mr. Carlin drew attention to highlights of S.B. 494 outlined on pages 9, 10 and 11 of Exhibit C. Referring to the second section he said the Department of Human Resources needs to apply for a federal waiver to exclude rural hospitals from the tax.
Referring to the proposed change encompassed in section 25 of S.B. 494, Mr. Carlin said:
[It] is a provision that provides for the transitioning of when counties pay the hospitals and when the state pays the hospitals. ...After this program ends the counties would pick up on the payments again. We wanted to make sure there was equity in that transition, so we have set up a procedure whereby the cutoff date will be the same when the program ends as when the program resumes for the county so that there will be no benefit or harm to counties or hospitals as a result of the changing sources of payment.
Mr. Carlin explained:
When the counties quit paying their bills it would be possible...for hospitals to...expedite the billing to counties and collect more money from counties with the...bill that would have come in after July first, they could bill those before July first, and then the counties would be paying money that they normally would have spent in this upcoming biennium. They're giving all that money to us, so we are adding a cutoff date that if the service was provided...before June 30 then the hospitals would then submit the bill to the counties. But if the service was provided after June 30 then the bill would automatically come to the state.
Mr. Carlin offered an amendment based upon a commitment made to the National Governor's Association indicating there will be a provision in the federal regulations for states to waive taxes for a hospital in financial distress. He recommended the addition of the proviso because Saint Rose Dominican Hospital may be in that situation.
Senator Coffin inquired if the funds coming in to University Medical Center must be used in a particular area or if the funds could be used to subsidize contracts with commercial entities. Mr. Carlin replied:
They currently, this biennium, received about $17.5 million and that money was expended in their total budget to deal with the uncompensated care.... I would anticipate that they are budgeting to spend that money in the same fashion this next biennium to deal with people who just cannot pay anything at all.
Mr. Carlin indicated those funds are not targeted by the state and may be used in any way.
In reply to another question by Senator Coffin regarding removal of all other medical providers, Mr. Carlin explained:
Under the current program we may have pharmacies, for example, that do a very small Medicaid business, and we were allowed to tax just the Medicaid portion of their business. Because of the changes in the federal law, the tax must be broad-based. You cannot just take Medicaid, you would have to tax them on all their revenues. Therefore a pharmacy that did $100 in Medicaid business but did $1 million would have to pay a tax on the million dollars and it just would be a severe hardship on those facilities.
Mr. Carlin said the same would apply to physicians, physical therapists, optometrists or whatever. He pointed out some physicians do not serve any Medicaid patients.
Mr. Craigie interjected providers that had not served any Medicaid
patients had not been taxed at all under the current biennium. In order to meet the new rules, all doctors or pharmacies or physical therapists would have to be assessed, and he asserted that would not be feasible, hence the repeal of Nevada Revised Statutes 422.289.
Mr. Humke inquired why specialty and psychiatric hospitals were exempted. Mr. Carlin replied it was primarily due to the fact the state was seeking benefits for acute medical care. He said the entire county program being transferred to the intergovernmental agency at the Department of Human Resources would pay for emergency medical care. He said:
We would not want to allow those kinds of facilities that don't provide those [emergency] services to be a part of the disproportionate share payout, because that would simply dilute...the money that would be going to the hospitals that did provide that care.
Mr. Humke asked if some of the hospitals to which he had referred provide acute medical care. Mr. Carlin responded, "Not really. Not very much of it in any instance."
Senator Rawson expressed concern over existing contracts hospitals have and how much the cost of hospitalization may rise. Mr. Carlin responded that the hospitals will benefit by $21 million in the aggregate and costs should not go up. He averred costs to consumers should go down.
Senator Rawson asked how the distribution of patients will work under a managed-care program. Mr. Carlin responded:
We are planning to continue as a department to set the rates for hospitals and to make those payments that would go to hospitals, thereby removing the incentive and the opportunity for a bidder on the managed-care program to negotiate with a single hospital, a "sweetheart deal" that would be below price and send all their patients there. We are designing the managed-care program so there would be no incentives to use any particular hospital.
We would anticipate that location of physicians, because our Medicaid population is spread throughout the valley, would have some influence on where people would go. Also we should keep in mind that 40 percent of all hospital expenditures on the Medicaid program are for people who are determined after they were provided the service to be eligible for Medicaid. A managed-care program would not do any diversion of that large group of patients at all.
Mr. Craigie said:
We have, in dialogue with the hospitals, agreed that the managed-care program that will be put forward by the department will be very aggressive in terms of utilization. But we believe it would be inconsistent with the program that's on the table here for us to develop a managed-care program that specifically directs the patient or the client groups to specific hospitals.
Obviously there is going to be some competitive tension among the hospitals as they try now aggressively to get some of these patients to come to their hospitals. And frankly for that client group we think that's a very positive thing.
Basically, the commitment the state has made...is that in the administration of the managed-care program we are not going to artificially direct patients. We had originally in our discussions with the hospitals wanted to artificially direct to make sure that nobody had lost money. But, as you know, the hospital association itself came and put on the record before both committees that that was inappropriate; and as we looked at the federal regs [regulations] and the federal performance, it's true.
Senator Rawson asked if hospitals coming into the program now have accepted the use the figures from actual experience in the prior year.
Christopher Thompson, Chief, Health Care Financial Analysis Unit, Department of Human Resources, said the hospitals had reviewed the numbers and they accept the fact prior information is the best that can be used for projection purposes. He said the only hospitals in which there may be some changes would be Lake Mead Hospital and Saint Rose Dominican because they have both undergone significant expansion in the last few years.
Senator O'Donnell asked how many beds Boulder Hospital currently has. Mr. Thompson replied he believed there were 20 acute-care beds and 18 beds for long-term care. Because only the acute-care beds are included among those taxed, Boulder Hospital has room to double its size while it will benefit from Medicaid payments.
Senator O'Donnell asked for an explanation of "the agreed upon amount" on line 41. Mr. Carlin replied that pertained to the hospital taxing districts. He explained:
They're working from an amount. The maximum amount, a disproportionate share payment that we can make to any of these small rural hospitals, is what's driving the figures, so that's why the language is a little...loose. We're trying to give them the maximum benefit possible....
Mr. Spitler asked if a managed-care network was the only option considered to neutralize the tax. He wondered if other options had been considered. Mr. Carlin replied:
We believe managed care will work for the Medicaid program, but we're not going to structure it in a way that is going to...provide incentives to divert patients to specific hospitals.
Mr. Spitler responded:
Then your earlier comment about the idea that this would...drive hospital costs down would not be the case at Desert Springs Hospital. It would, in fact, raise the cost of services there.
Mr. Carlin answered:
In actuality I was speaking in aggregate...but in Desert Springs [Hospital] there are two other factors. One, they're one of the most extremely profitable hospitals in the state; and two, they do have some limitations because of other legislation in terms of not being able to increase their bill charges over a certain amount. I would think those two factors would mitigate and there would not be a move to increase their costs over and above what they're already authorized by law to do.
Mr. Craigie interjected his expressed hope that Desert Springs Hospital would find ways to increase their utilization. He admitted it will be difficult because of the type of services they provide. He said, "We would much prefer to find a way to maintain a hold-harmless position on this tax, but we can't. We're forbidden to do so." He committed to helping Desert Springs Hospital in any reasonable way possible so that the hospital could break even.
Mr. Spitler asked if the urban hospitals offer the same range of services. Mr. Carlin acknowledged Desert Springs Hospital is unique because it does not offer obstetric, maternity or pediatric care. He said he had found nothing in the law which would allow for a distinction on taxes that would reflect levels of services.
Mrs. Williams asked if all the rural hospitals offered the full range of services, including gynecology, obstetrics, pediatrics and trauma units. Mr. Carlin answered they do not. She stated:
I'm having a little difficulty understanding how they can have all these acute-care patients come out benefitting or breaking even and this other hospital [Desert Springs Hospital] can't.
Mr. Carlin replied he felt it was a reflection of the nature of some of the services. He said it was permissible to make exceptions for rural hospitals but not for large urban hospitals. He explained they transfer major-need patients into the urban areas, primarily to Washoe Medical Center. The rural hospitals only benefit if they offer obstetrical services, he said. He indicated he had found no basis on which to make an exclusion for a single urban hospital when the other hospitals are being taxed.
Mr. Thompson related actions taken to benefit Desert Springs Hospital had encompassed excluding Medicare revenues from the tax as allowed under federal law. He acknowledged Desert Springs Hospital provides the most Medicare services in the state, and they have expressed an intention to increase their Medicaid utilization. He said the disproportionate-share calculation in the program will provide a great financial incentive for Desert Springs Hospital to increase their Medicaid services to the point where they may receive $1,700 per day for Medicaid patients.
Mr. Price inquired if "acute care" was defined in S.B. 494. Mr. Carlin replied it was defined in other parts of the statutes. He said the taxing is based upon a common level of service. He stated, "The distinction here is between acute medical beds versus nursing home beds versus psychiatric beds versus rehab [rehabilitation] beds."
Mr. Price asked where a state property tax designated to fund indigent care for people in automobile accidents would fit into the plan. Mr. Carlin replied there would be no transfer of money and that program would continue as is.
Mr. Price inquired if federal or veteran's hospitals came under the same plan. Mr. Carlin answered that federal and state hospitals are exempt, including the Veteran's Administration Hospital.
Ms. Giunchigliani asked if managed care came under the program. Mr. Carlin confirmed it did not.
Ms. Giunchigliani pointed out the figures in sections 22 and 27 were different and seemed to have no relation to the exhibit provided by Mr. Carlin. She asked for an explanation. Mr. Thompson responded section 22 set forth the maximum amount of the tax. He said:
Section 27 is with regard to the disproportionate-share payments that we would make; and it is our intention to make payments of $68,350,000 in the first year, $73,560,000 in the second year, which is what our maximum allowable disproportionate-share amounts are.
Mr. Thompson explained the figures in section 27 were slightly below the maximum to account for any future minor change in federal law that might reduce the amount of payment to be made under the disproportionate-share program. That would allow alteration of the program to maintain the benefits for the state and the hospital. He asserted if the amounts were to drop below the levels indicated, $65 and $70 million, there would be a problem in maintaining the viability of the program.
Referring to the diagram on the second page of Exhibit C, Mr. Thompson indicated the amount delineated under "Hospitals" at $147.7 million would include the amounts he cited as well as approximately $2.9 million per year for the increase in the rates.
Mr. Carlin admitted the intergovernment transfer program will expire by July 1, 1995, and will have to be addressed by the next session of the legislature. There may be federal changes that will have to be taken into consideration at that time.
Mrs. Evans asked if the payments to and from the hospitals had been reconciled for 1991 and 1992. Mr. Thompson responded there had been an adjustment in midyear, but the final settling process should be completed within the next 2 to 3 months.
Mrs. Evans asked how a special allocation of 20 percent for Clark County and 5 percent for Washoe County had been determined. Mr. Carlin responded it had been based upon the numbers of eligible Medicaid patients and indigent patients in the counties and to the amount of contributions being made by county governments to the program. He noted there was a dramatic variance, that nearly $20 million tax dollars were received from Clark County and about $3 million from Washoe County. He explained:
The requirement that we are basically committing to the counties is that, when they transfer their money to us...is to ensure that those counties' indigents are going to be fully paid for there. When we took those factors into consideration that's basically what we felt we had to have to be able to commit; that...those county funds would not be in jeopardy of going to some other hospital.
Mrs. Evans asked how a determination was made to weight the Medicaid days to 10 percent for newborns and 40 percent for psychiatric days. Mr. Carlin replied it had to do with the significantly lower cost of services provided to those patients
than to other patients. He added the Department of Human Resources was trying to design a formula that would provide the maximum benefit to the maximum number of hospitals and do a minimum amount of damage to other hospitals.
Mrs. Evans inquired to which hospitals the proposed amendment regarding hospitals in distress would apply. Mr. Carlin responded it would apply to a hospital that would meet federal guidelines. He noted the federal government had not stated what "financially distressed" would mean. He conjectured it would be limited to hospitals breaking even or having difficulty paying bills.
Mrs. Evans inquired what plans for the future would be. She stated the hospitals had been informed the program would be continued. She asked if something similar would continue. Mr. Craigie responded:
When the budget was being developed in November and early December...the provider tax was not a part of the original drafts. It was reinserted because of this tremendous increase in the number of eligible clients as a result of this economic downturn. Not only were the state revenues affected, but...the demand for social service [went] up.
Mr. Craigie declared the Governor would like to do away with the provider tax. He indicated it was probable that the federal government will "do it for us" during the interim. He stated a preference for a strong managed-care program, which he opined would be better for the hospitals and the state. He averred many of the components of the plan may not be the best possible way to reimburse for indigent patients. He reiterated the program was considered a stop-gap measure to deal with the increase in the client load.
Mr. Craigie vowed the first step in a managed-care program would be implemented within the next year which would focus on utilization rather than on volume for discount rates.
Mrs. Evans proposed:
...a further amendment that would stipulate that in the second year of this biennium, if it does appear that this process or something very similar will continue that is involving the hospital and the counties, that the counties and the hospitals meet with state government to jointly devise a plan for the future....
Mrs. Evans said one of the complaints she hears most frequently is that the counties are impacted, the hospitals are affected, and they feel they have not had an opportunity to participate in discussions of possible solutions to the problem.
Mr. Arberry asked when the hospitals cited on page 6 of the handout would receive written notice from the Health Care Financing Administration (HCFA) that they will be excluded from the tax.
Mr. Carlin replied HCFA had been making promises for the past 2 weeks to get the notices out. He said HCFA has indicated agreement to the plan which will not require a waiver from the state. He did not foresee any drawbacks.
Jon L. Sasser, Lobbyist, Nevada Legal Services, called the passage of S.B. 494 essential. He distributed a handout (Exhibit D) showing the gap that would occur if the state is faced with the projected revenue shortfall. He pointed out the state had asked agencies to prepare contingency plans if the gap arises. He noted the Governor had asked that education and public safety be exempt from cuts.
Mr. Sasser called attention to the chart on Exhibit D. He said:
What is left over basically is human services, which makes up 77 percent of the remaining budget outside those that are exempt. The Welfare Division would make up approximately 50 percent of any gap, and Medicaid...would be about two-thirds of the Welfare Division's budget.
Mr. Sasser asserted there is no room for additional cuts. He calculated there would be $35.5 million in cuts necessary. He said, "Each lost General Fund dollar would also mean a lost federal matching dollar, so we'll be looking at nearly $70 million in cuts in services for the Welfare Division."
Mr. Sasser requested the committees look at the last page depicting where cuts could be made. He delineated the cuts that could be made to Aid to Dependent Children (ADC), Supplemental Security Income (SSI), and prescription drugs and long-term care under Medicaid without the provider tax. He warned a cut in prescription payments could result in the patient winding up in the hospital on Medicaid for acute care. If Medicaid long-term care was eliminated, it would result in return of those patients to the counties.
Mr. Sasser related his understanding that there is a lawsuit pending in Clark County challenging the length of time people must wait to have their Medicaid applications approved. He said that was an indication there could be no room for staff cuts.
Mr. Sasser said provider rates to nursing homes and hospitals are locked in through contracts or regulations as well as through federal regulations for prescription drugs. He averred the services left do not make up a large block for Medicaid dollars. He appealed to the legislature to pass S.B. 494 to provide the necessary revenue that would result. Without it, he said, "we would have to look at deep and devastating cuts in the Medicaid program."
Paula Treat, Lobbyist, Desert Springs Hospital, introduced Steven J. Peterson, Administrator, Desert Springs Hospital. Mr. Peterson voiced his distress. He charged his hospital may have difficulty competing. He asserted hospitals will be placed at risk for the funds contributed to the tax and from the requirement to recover the funds through providing services to Medicaid beneficiaries.
Mr. Peterson pointed out the number of Medicaid patients admitted to Desert Springs Hospital portrayed on an exhibit (Exhibit E) he provided. He suggested the hospital may not have an opportunity to serve many of the estimated 7,000 Medicaid-eligible patients in the area because it does not provide obstetric or pediatric services.
Mr. Peterson reported there were 4,784 Medicaid patients treated in state hospitals in the third quarter of fiscal year (FY) 1992. He said:
The Nevada peer-review organization...which assembles a data base for Medicaid publishes a report indicating primary diagnoses by general group. In analyzing this...that tells me how many of those 4,000-plus patients would have been eligible for admission to my facility just based on the scope of service required to treat those individuals....
Mr. Peterson asserted the hospital would have moved into establishing an obstetrics unit in order to compete if he had known earlier that the hospital would not be eligible for the funds.
Mr. Peterson said:
I do have one suggestion and potentially a remedy for the dilemma...with having to fund $1.8 million over the biennium in this state tax, which I think is very regressive. That's about 12 percent of my hospital's bottom line, and...in order to deal with that I would ask you to consider a charge increase for Desert Springs [Hospital]. ...We're restricted by state law as to the amount of pass-through that we can do on an annual basis.
Mr. Peterson said he had analyzed the situation and determined it would take a 3.2 percent raise on gross charges to recover the cost of the tax. He estimated gross charges at $225 million on an annual basis. He said 6.3 percent of Nevadans would be affected because of the amount of Preferred Provider Organization (PPO), Health Maintenance Organization (HMO) and contract discount business in place. He said those rates would be unaffected. He added there would be no impact on Medicare and Medicaid patients and the most of the cost to recover the tax would come from patients from out-of-state.
Mr. Peterson reiterated his opposition to S.B. 494.
Mrs. Evans asked if Mr. Peterson projected a loss of $1.7 million for the biennium. He responded that was his belief based upon historic utilization of the Medicaid business at his hospital. He asserted the number of projected patients would have to double in order to neutralize the impact of the tax. He stated the proposed rate increase would cover the $1.7 million.
Senator O'Donnell asked if a neonatal center could be opened in Desert Springs Hospital. Mr. Peterson replied he did not believe it would be feasible to open such a center without an obstetrical service. He said at 80 percent of capacity the hospital has one of the highest occupancy rates in the state and does not have the physical capacity to add those services.
Senator O'Donnell asked if there was any alternative left open to the hospital other than a raise in rates. Mr. Peterson said an attempt to renegotiate the contracts with HMOs and PPOs would be nearly impossible due to the competitive market. He declared Desert Springs Hospital has the lowest rates of the "big six" hospitals in the state. He said the rates are about 6 1/2 percent below the average, so even with his proposed 3.2 percent raise the charges would be lower than those at the other big hospitals.
Senator Rawson asked what percentage of the rates at Desert Springs Hospital were contract rates. Mr. Peterson replied over 90 percent of the rates were under contract if Medicare and Medicaid were included.
Senator Raggio asked Mr. Carlin to comment on the suggestion to make an exception to allow a rate increase of 3.2 percent. Mr. Carlin responded:
If it wasn't tied to this bill where there would be a direct correlation so the `feds' would come back and point out that this was in fact a hold-harmless provision, it was addressed through other legislation which addresses the tax that had been placed on the hospitals, it would probably pass muster.
Senator Raggio repeated that if the raise were allowed under the process described by Mr. Carlin it would probably not be construed as a hold-harmless provision. Mr. Carlin concurred. He suggested it could be done through other bills that would amend the sections that set caps on the amounts that hospitals can raise rates.
Senator Rawson inquired if it would be desirable to raise rates because of the competitive market. Mr. Peterson said the raise would produce the desired revenue and the patients that would pay would largely be those from out-of-state.
In the absence of further testimony on S.B. 494 Senator Raggio closed the hearing. He announced a scheduled report from actuaries would be available the next morning in the Senate Committee on Finance.
Senator Raggio adjourned the joint meeting of the Senate Committee on Finance and the Assembly Committee on Ways and Means. He announced the Senate Committee on Finance would convene at 4:00 p.m. in the afternoon.
Senator Coffin stated for the record he had received a FAX (facsimile machine) report from the City Council of Boulder City that protested their exclusion from the subsidy. Senator Raggio acknowledged the protest and asked that it be made available to the committee at the afternoon hearing.
Mr. Arberry announced a subcommittee hearing for the following morning.
Senator Raggio adjourned the meeting at 9:40 a.m.
RESPECTFULLY SUBMITTED:
Judy Jacobs, Committee Secretary
APPROVED BY:
Senator William J. Raggio, Chairman
DATE:
Mr. Morse Arberry, Jr., Chairman
DATE:
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Senate Committee on Finance
Assembly Committee on Ways and Means
June 1, 1993
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