Sincerely,

Dan Stultz, M.D., FACP, FACHE
President/CEO

DS:AW:wf

cc: The Honorable David Dewhurst, Lt. Governor of Texas 
      The Honorable Tom Craddick, Speaker, Texas House of Representatives

Hospital Funding Issues
H.B. 1 Conference Committee

• Hospital rate rebasing is needed to recognize the increasing cost and changing case mix in Medicaid admissions for hospitals.
• • The Senate has placed $150 M in Article XI in the second year of the biennium for rebasing hospital rates. This rebasing of rates would account for cost and case mix changes benefiting the 2011-2012 biennium. The House version has no rebasing.
  • Reimbursement rate reductions were made to all hospital services in 2003, and THHSC has indicated that reduction of the Medicaid shortfall through rebasing is critical for Medicaid reform to succeed.

• Restoration of the Medically Needy program is needed to minimize the outright cost shift for this sick and resource-intensive population that comes to the hospital for care without regard to coverage.
• • The Senate has $29.6 M in Article XI to reestablish coverage for the Medically Needy program in Medicaid. The House has no funding for this program.

• Eliminate the one-time intergovernmental transfer from public hospitals to finance the Medicaid STAR+Plus program.
• • The proposed budget assumes a one-time transfer of $58.5 million from the public transferring hospitals for fiscal year 2007. With Medicaid hospital spending under budget, the transfer of local tax dollars to support the program is not justified and should be replaced with general revenue.
  • The 2008-09 budget assumes continuation of the annual transfer of $58.5 M from the public hospitals. The local urban counties never agreed to contribute this money to finance Medicaid for the coming biennium. These assumptions should be rectified in the budget reconciliation process.

• Graduate Medical Education funding for Texas residency training sites for our graduate medical students in needed.  If Texas wants to keep its medical students in Texas and practicing here, partially funding their residency training costs from Medicaid is crucial.  The program was eliminated in 2003 due to budget constraints.
• • Neither the House nor the Senate has Medicaid GME funding included in their budgets. The cost to the state would equal $40 M.

• Restoration of CHIP is critical to the health care needs of Texas children. The state should fully restore CHIP.
• • The House has included $89.5 M for full restorations. The Senate does not assume full CHIP restorations and is $55 million short of full restoration.

• Full disbursement of the Texas trauma fund for its intended purpose is important to the health of the Texas Trauma System.  The state should appropriate funds left over from the 2006-2007 biennium that currently remain in the Designated Trauma Facility/EMS account.  In addition, the state should fully appropriate all funds projected to accrue in the account for the 2008-2009 biennium (which is expected to reach $98 M each of the next two years).
• • The House appropriates $51.7 M in both years of the biennium in Article II, and an additional $46.7 M and $47.0 M for each year, respectively, in Article IX.
  • The Senate appropriates only $51.7 M in each year of the biennium in Article II.
  • Neither the House nor the Senate has appropriated the remaining funds in the account that accrued for FY 2006 or FY 2007.  (This would need to be achieved through the H.B. 15 – the supplemental appropriations bill)

• Funding of nursing school faculty is needed to admit the 11,000 qualified applicants turned away annually from Texas nursing schools and address the state’s critical nursing shortage and hospital RN vacancy rate.
• • The House includes $14.7 M total funding in Article III to the Higher Education Coordinating Board for the professional nursing shortage reduction program. The Senate appropriates only $6.7 M for the biennium.

For more information, contact John Hawkins at the Texas Hospital Association at 499-0979.