UMMC faces unexpected $35M cut, possible layoffs

Employees at the University of Mississippi Medical Center face possible layoffs after the teaching hospital received an unexpected $35 million reduction in Medicaid funding.

That reduction came after state lawmakers had already sliced $8.2 million from the budget of the medical center — a $1.6 billion operation that employs more than 10,000 people.

The $35 million cut to UMMC, the state’s largest Medicaid provider, came as a result of a change in a state Medicaid formula to compensate hospitals that serve large numbers of Medicaid and uninsured patients.

Dr. LouAnn Woodward, UMMC vice chancellor for health affairs and dean of the School of Medicine, said the setback could mean layoffs, the elimination of programs and other cuts. “Everything is on the table,” she said.

But one thing that isn’t on the table is patient care, she said, promising to “protect the patient experience so the brunt of these cuts are not felt at the bedside.”

UMMC is the state’s only Level 1 trauma care provider, with more than 144,000 emergency room visits last year and more than 1 million overall visits by patients.

She said she also desires to protect plans to invest in key assets, including the Batson Children’s Hospital, now at the heart of a philanthropy campaign to raise $100 million toward an $180 million expansion.

The $35 million reduction to UMMC came as a result of a number of factors. One was a decrease in “allowable” uninsured costs.

Another was the formula used to determine the disproportionate share hospital payments to hospitals that serve large numbers of Medicaid and uninsured patients. The new formula applied an inflation rate to Medicaid payments to determine that DSH limit.

In fiscal 2015, UMMC received $120 million from Medicaid for DSH and Upper Payment Limit funding (a cap on the program’s total spending on a particular provider). Last fiscal year, that reimbursement dropped to $104 million. This year, the reimbursement fell to $68 million.

Woodward said UMMC hadn’t anticipated that kind of reduction compared to previous years and didn't learn of it until December — two months after the state implemented its first of three cuts.

In the past, UMMC has never hit the Medicaid formula’s cap, which limits those reimbursements.

But this year UMMC hit the cap, in part because the most recent DSH formula added 5 percent to the total Medicaid payments for inflation, despite the fact the hospital’s Medicaid reimbursement rates did not increase.

In addition, Woodward said the teaching hospital received no reimbursement for $22 million in uncompensated care for patients who had high insurance deductibles and paid little or nothing toward that care.

She said she does believe the cuts “will have a negative impact on recruiting” physicians, nurses and others.

“Health care is a tough environment,” she said. “People will look at this and wonder about decisions they make.”

In a Wednesday email, she told employees that UMMC will make major cuts over the next several months to save $24 million.

“I want to be clear,” she wrote. “Achieving this $24 million in savings will not ‘solve’ our problem. The fact is that our revenue sources will continue to be under pressure, so this focus on cost will not end on June 30, 2017. In some ways, this is the ‘new normal’ for us and for other academic medical centers.”

She conceded the cut “will be hard on everyone,” but “we’ve faced bigger challenges before, and with everybody pulling together, we’ll face this one, too.”

In August, UMMC is opening a new medical school. State bonds funded most of the $73 million school, expected to feature state-of-the-art classrooms and laboratories.

The school’s opening will enable UMMC to expand the class size from 135 medical students per year to more than 165.

UMMC also provides schools for nursing, dentistry, pharmacy and other health care professions, teaching more than 3,000 students.

The hospital has long been an important player in the health care corridor Gov. Phil Bryant desires to use as an economic driver for Jackson, calling the hospital “vitally important … to strengthening Mississippi's health care economy on whole.”

In 2012, the Mississippi Legislature passed the Mississippi Health Care Industry Zone Act, providing tax incentives for companies locating in a health care development zone.

Asked Thursday if Bryant were concerned about these cuts to UMMC, his communications director, Clay Chandler, replied that the governor “does not relish adjusting the state budget, but he is bound by statute to balance it. He will uphold that duty.”

Woodward said UMMC still considers itself “the anchor of the corridor. This is a challenge we have to face. We will have a tough few months, a tough few years, but our mission, our vision and our role does not change. Our big picture role for the state of Mississippi does not change.”