Proposed cuts to Tennessee’s Medicaid program would result in a $10.5 million deficit for Nashville General Hospital in the 2011 fiscal year, a burden the hospital says it cannot absorb.

The TennCare program reductions, detailed Gov. Phil Bredesen's formal budget proposal Monday evening, cut about $200 million in state spending for the government run health plan next year by eliminating coverage for certain services and placing restrictions on others.

In a statement e-mailed to NashvillePost.com, Nashville General interim CEO Jason Boyd said the proposed cuts would result in a $10.5 million deficit for the safety-net facility.

“Nashville General cannot absorb a $10.5 million cut, but is hopeful the State working in concert with the hospital advocacy groups can find a solution to fund hospitals that provide a high portion of TennCare, charity and unfunded care to the citizens of Tennessee,” Boyd said.

According to the Tennessee Department of Health’s Joint Annual Report of Hospitals, TennCare accounted for about 35 percent of the hospital’s $41.7 million in net patient revenue for fiscal year ended June 30, 2008. That year, the hospital’s bad debt and charity care totaled $66.9 million.

Statewide problem

Statewide, the TennCare cuts amount to a $526 million reduction for Tennessee hospitals, said Craig Becker, president of the Tennessee Hospital Association.

“That’s going to crater some hospitals, including Metro and some other small rural and large urban [hospitals]. It’s going to have a dramatic impact on us,” Becker said.

The proposed cuts, which largely follow the budget reductions proposed by TennCare in November, would eliminate certain services that are currently covered under TennCare, including occupational, speech and physical therapy. Additional annual per-person limits would be placed on certain services, such as a $10,000 limit on inpatient hospital services.

The $10,000 inpatient limit alone would save Tennessee about $51 million. In total, the TennCare cuts would save the state $174 million.

On a conference call with reporters this morning, Bredesen acknowledged that the TennCare cuts, designed to have as little impact as possible on TennCare beneficiaries, are gong to hurt hospitals.

“And I’m sorry for that,” he said, “but the TennCare costs are such a huge piece of the budget that you can’t possibly balance the budget without dealing with some of these TennCare issues.”

As proposed, TennCare accounts for 24 percent of the state’s $28 billion budget in 2011. In 2004, the program took up 34 percent of Tennessee’s budget.

To help mitigate the impact of the cuts on hospitals, the THA and Tennessee Association of Public and Teaching Hospitals are working with facilities across the state to identify potential solutions.

Becker said THA is investigating whether doing away with TennCare’s managed care organizations might help by eliminating administrative costs for the program. “The state used to pay the TennCare bills, and it’s something maybe they ought to take a look at,” he said.

Another potential option is imposing a hospital fee akin to what’s in place for the nursing home industry. Essentially, providers would tax themselves for providing services to Medicaid recipients and the money raised would be used to draw down matching federal funds.

“We’re looking at everything,” Becker said.

But for safety-net facilities like Nashville General and The Regional Medical Center at Memphis, offsetting TennCare cuts will only alleviate part of a larger financial problem, Bredesen said.

“TennCare reimbursement is not the source of their problem,” Bredesen said. “The source of their problem is the large number of people who have no insurance.”