Mountain States Health Alliance CEO Dennis Vonderfecht stressed Thursday that the 200 positions slated for elimination from the system’s facilities in Tennessee and Virginia in the coming months will be achieved through natural attrition instead of layoffs, but said the failure of state and federal officials to reach an agreement on Medicaid expansion could deal a significant blow to the health care industry in the future.
“Revenues are going down, which means expenses have to go down — we’re having to shrink our organization,” Vonderfecht said Thursday, a day after a joint news conference with other local health care providers to urge what has so far been a stalemate over expanding coverage. “If this loss of funding isn’t corrected, it could eventually mean loss of services or the closure of hospitals. It’s a very serious situation.”
Under the Affordable Care Act, commonly known as Obamacare, hospitals and clinics across the country lost $155 billion of federal Medicare reimbursements and payments, but the losses were supposed to be offset by hundreds of thousands of new enrollees in each state’s Medicaid program, paid for in full by the federal government for the next three years.
After 2016, federal aid would pay 90 percent of the costs of the new beneficiaries until 2020.
But a recent Supreme Court ruling gave states the option of accepting the federal dollars, and nearly half, including Tennessee and Virginia, chose to reject the funding altogether or to pursue other options for spending it.
Tennessee Gov. Bill Haslam is advocating what’s come to be known as “The Tennessee Plan,” whereby the $1.4 billion in federal funding earmarked for the state would be used to purchase private health insurance for 175,000 residents up to 138 percent of the federal poverty level that would require approval of the state General Assembly to continue funding.
In the commonwealth, Gov. Robert F. McDonnell signed a written pledge broadly backing Medicaid expansion to 400,000 people in Virginia, but put final approval in the hands of a special panel contingent upon a number of specific federal reform measures not likely to be put in place before the October deadline.
“We were supposed to get a lot of those dollars that we gave up back, part of that through Medicaid in each state,” Vonderfecht said. “If that revenue’s not coming back to us, we still have to take care of those people who don’t have insurance.
“Our operating margin is less than 1 percent, so we’re basically breaking even,” he said. “Any reduction in funding has to be met with an equal reduction in expenses.”
To reach their target, Vonderfecht said as employees in certain positions retire or leave, new employees are not being hired to replace them. For key positions that cannot go unfilled, employees are being transferred and their previous positions left open.
The CEO said the lost positions come from across MSHA’s 13 affiliated hospitals, more of which come proportionally from the larger facilities in Johnson City.
The 200 cuts would be in addition to 330 positions lost since March, Vonderfecht said.
Last year, MSHA underwent a round of true layoffs, losing 168 employees and eliminating 90 empty positions.
Despite the recent belt-tightening, Vonderfecht said the health care company is financially stable, citing a BBB+ bond rating handed down by Fitch Ratings in July and general growth in the area.
“The whole industry is facing huge concerns over the loss of federal dollars,” he said. “The billions we’re considering here could be a huge boon if they’re approved, or they could be a huge hit economically if they aren’t.”
The new $69 million surgery tower being built at Johnson City Medical Center was a necessary expense to meet the modern demands of operating rooms, and the acquisition of Unicoi County Memorial Hospital was important to ensure medical care for the nearby residents, Vonderfecht said.
Both were previously approved in the company’s budget and would have had little impact on MSHA’s recouping the loss of federal dollars had they been put on hold, he added.
Vonderfecht also vehemently denied that MSHA was looking for buyers and said rumors of hospital closures, which commonly surface when positions are eliminated, were untrue.
“We’ve had the benefit of well-maintained finances in the past,” he said. “Other health care organizations that may have not had that benefit are having real problems right now and looking at difficult decisions, but we are on stable footing.”