By Joe Lawlor
Portland Press Herald
AUGUSTA, Maine — Maine’s hospitals and medical community are sounding the alarm over proposed cuts in Gov. Janet Mills’ budget to Medicaid reimbursement rates for hospital-affiliated doctors, nurse practitioners, and other healthcare providers.
State officials defended the cutbacks as a difficult but necessary step and said the proposal will equalize Medicaid payments to doctors across the state, whether or not they are tied to a hospital network. Reimbursement rates for hospital-affiliated providers are now significantly higher than for those who operate independently.
The clash over payments comes as many hospitals and their health networks operate in a precarious financial position.
Northern Light Health, the state’s second-largest hospital network, last year outsourced thousands of administrative, cafeteria and housekeeping jobs, among other cuts, and finished the year with a financial deficit.
Earlier this month, Central Maine Healthcare and its three hospitals were purchased by a California -based nonprofit after experiencing financial strains for years.
St. Mary’s Regional Medical Center in Lewiston, also under financial pressure, closed its intensive care unit last year. And seven Maine hospitals have shuttered their birthing centers in recent years, limiting access in some rural parts of the state.
Maine’s hospitals, as major employers and providers of critical services, are an influential player in state politics. Reimbursement rates and other financial issues have historically been a focus of conflict at the State House.
The Mills administration’s proposed reductions are tied to complicated reimbursement formulas, but overall would amount to about a 36% cut to payments to doctors for Medicaid services over the next five years, hospital officials said. It would cost hospitals $24 million per year once the cuts are in full effect, they said.
It’s not just doctors working inside hospital walls who would be affected by the reduced reimbursements. The rates would apply to inpatient and outpatient services including primary care, pediatrics, surgery, emergency room care, screenings, and basically any services that are provided by hospital-affiliated doctors and other healthcare providers, hospital officials said.
If approved by lawmakers, the rate decreases would start going into effect in July 2026, the second year of the two-year budget.
Medicaid — called MaineCare in the state — is a federal program, operated by states, and funded with a blend of federal and state dollars. It serves primarily low-income and disabled patients.
The cutbacks would affect most of the larger hospitals in Maine, but not many rural hospitals, which are reimbursed at different rates under Medicaid. Maine has 17 “critical access hospitals” that would not be affected by these rate reductions, including Calais Regional Hospital, Blue Hill Memorial Hospital and Millinocket Regional Hospital.
But Maine’s larger hospitals would have to absorb the reductions.
Katie Fullam Harris, chief government affairs officer for MaineHealth, the parent organization of Maine Medical Center in Portland and seven other hospitals, said hospital systems already are “struggling” financially. MaineHealth is the largest healthcare system in the state.
“I can’t emphasize enough the importance of sustaining access to care across our state, and the need to pay physicians adequately to do so,” Harris said. “This proposed reduction flies in the face of our goals of developing strong economies across out state, which relies on a healthy population to do so.”
Jeffrey Austin, vice president of government affairs for the Maine Hospital Association, said it’s a “substantial” cut that would, statewide, slash about $24 million in Medicaid revenue per year from hospitals. That’s because Medicaid is a blend of federal and state dollars, and for every $1 a state cuts, the federal government cuts $3, he said.
“The rough estimate is if it goes through, doctors will get paid roughly 50 cents on the dollar for treating Medicaid patients,” Austin said. “I don’t know how that’s sustainable.”
Lindsay Hammes, a spokeswoman for the Maine Department of Health and Human Services, said in a written statement that the administration looked to achieve “greater consistency across reimbursement for the same services delivered in different settings.”
“The administration understands the frustration surrounding the proposal, but we had to make difficult decisions in order to close the budget gap, including the gap in Medicaid funding, in order to maintain core programs that also benefit hospitals in other ways,” Hammes said.
Mills’ supplemental budget for the current fiscal year closes a $118 million Medicaid gap between revenues and expenses.
As an example of existing reimbursement disparities, Hammes said, " Maine’s Medicaid reimbursement for the professional staff at (hospital-affiliated) physician practices equates to 170% of what Medicare would pay, which is a generous amount for a state Medicaid agency to pay. By comparison, the state pays independent physician practices at 100% of Medicare for primary care and 72.4% for other services.”
The Medicaid reimbursement cut to hospital-affiliated doctors would be slashed to 109% of Medicare rates within five years, according to the budget proposal.
Hammes said the more generous reimbursement rates for hospital-affiliated providers is one reason why most independent practices have closed, and now most doctor’s offices are affiliated with a hospital.
Lisa Harvey-McPherson, vice president of government relations for Northern Light Health, the parent company of Mercy Hospital in Portland and Eastern Maine Medical Center in Bangor, said the hospital system finished the 2024 fiscal year $156 million in the red.
“The significant driver of that number is government underpayment,” Harvey-McPherson said. “If we exacerbate that underpayment, we add to the fiscal crisis that hospitals are facing.”
Joy McKenna, spokesperson for MaineGeneral Medical Center in Augusta, said that “adding to the financial burden of Maine hospitals right now would only compound already challenging budgets.”
Harvey-McPherson and Harris both pointed out that a separate cost-of-living adjustment freeze for direct care workers in Mills’ budget also would hurt hospitals because many of those employees either work directly for the hospital systems or help keep people out of hospitals by providing needed home-based services. If those services are slashed — and they are currently underfunded, according to advocates — patients are more likely to be sicker and need more expensive hospital-level care.
“We are really at a crossroads to decide what services as a state we are going to have,” Harvey-McPherson said. “The payment system we have today can’t sustain what we have.”
Dr. James Jarvis, president-elect of the Maine Medical Association, a trade group representing physicians before the Legislature, criticized the proposal.
” Maine has a growing problem with access to healthcare, and cutting reimbursements should never be the solution,” he said in a written statement. “We must work together to create a system that provides access to health care for all (as a public good), contains costs, eliminates health disparities, and ensures a robust public health system.”
Republican lawmakers have already signaled they will fight the cuts in hospital funding.
State Rep. Joshua Morris, R- Turner, blasted the Mills administration for its health proposals, including the Medicaid rate reduction plan.
“This is another consequence of Gov. Janet Mills and Augusta Democrats’ ongoing out-of-control spending,” Morris said in a written statement. “Now they want to tax prescriptions and ambulances and stiff health care providers when access to care is at a crisis point. Maine people will feel this in higher taxes, higher insurance premiums, and fewer doctors. It is the opposite of fiscal responsibility.”
But Hammes pointed out that the state “invested significantly in hospital reimbursement through the hospital reimbursement agreement approved last year by the Legislature.
“With that agreement in July 2024, hospital reimbursement increased from 83.7% to 109% of Medicare” for some outpatient facility costs and a 42% median increase for some inpatient reimbursement rates, Hammes said.
The 2024 rate reforms resulted in $60 million annually in new state and federal dollars for the hospital system, but it also increased taxes on net revenues for hospitals from 2.25% to 3.25%.
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