VHHA Statement Regarding Governor McAuliffe’s Proposed Biennial Budget

December 17, 2015

RICHMOND, VA – The Virginia Hospital & Healthcare Association (VHHA) today released the following statement in response to Governor Terence R. McAuliffe’s proposed budget for Fiscal Years 2017 and 2018. In his budget speech, the Governor broached the idea of a proposed assessment on Virginia’s acute care hospitals to fund the state’s costs associated with providing health coverage to the uninsured through the joint federal-state Medicaid program.

“VHHA is currently evaluating the Governor’s proposal, which we have just seen today. In a recent letter to the Governor and Virginia General Assembly members, VHHA laid out a conceptual policy framework premised on hospital contributions covering the state’s share of funds needed to draw down federal matching funds for health care. Now that the Governor’s budget proposal is public, VHHA will evaluate it in light of the principles spelled out in the letter from earlier this month. While VHHA evaluates the budget proposal, it should be noted that Governor McAuliffe’s ongoing efforts to find compromise policy solutions to protect health care stability and access are appreciated. VHHA is similarly focused on working to find common sense, bi-partisan policy solutions to address the serious financial challenges facing hospitals and their potential to harm the Commonwealth’s economy and access to health care. The current challenges confronting hospitals are the result of unfunded care mandates, such as the Medicare and Medicaid programs whose reimbursements fall far short of hospitals’ actual cost of providing care, as well as a federal law requiring hospitals to provide emergency care to patients regardless of their ability to pay. Those mandates force hospitals to provide hundreds of millions of dollars in free and discounted care each year. Hospitals view providing high quality, dignified care to people in their communities, regardless of patients’ financial status, as a privilege and a duty. Hospitals care for the insured and uninsured alike, around-the-clock and day-after-day. They provide essential services such as trauma programs, and maintain the capacity to safely treat highly infectious conditions in communities around the Commonwealth. These are the roles that hospitals and health systems embrace. Providing that care comes at a cost, however, which increasingly imperils hospital solvency.”

“Meanwhile, federal funding cuts from sequestration, the Affordable Care Act, and other actions put more financial stress on hospitals. Those combined cuts will approach $1 billion annually by 2021. The impact from these financial challenges is particularly pronounced in rural communities where hospitals have a significant role as health care providers and employers. Virginia’s local hospitals and health systems simply cannot continue to absorb reductions while also bearing a heavy portion of the state’s indigent care costs. The problems created by this unsustainable cycle will be magnified as the already programmed federal funding cuts grow with each passing year. What makes the situation worse is Virginia’s inability to access available federal resources funded by Virginia taxpayers to offset the funding cuts, and deliver fiscal relief to the state budget while enhancing our economy and health care access.”

“Hospitals are major employers and economic engines for the Commonwealth, generating $36 billion in positive economic activity for Virginia, while directly employing 115,000 people, supporting $8 billion in payroll, and spending some $17 billion on goods and services with local businesses. Health care supports 1 in 9 Virginia jobs and was one of the few positive growth sectors in the state economy during 2014. Nationally, health care jobs are projected to be a source of significant job growth over the next decade. Unfortunately, all those benefits are threatened by government mandates and funding cuts that fall on hospitals.”

“Considering the state of affairs, VHHA this month outlined a series of firm conditions under which Virginia’s local hospitals and health systems would be open to contributions that would enable Virginia to draw down additional federal funding to address current challenges. Under defined conditions, these contributions would represent hospitals doing even more to support health care in the Commonwealth. The contributions could be used to help Virginia take full advantage of available federal funding. The concept is flexible enough that it could be used within the existing Medicaid program to increase reimbursements, or to cover the state costs associated with helping more uninsured Virginians obtain health care coverage. Hospitals’ willingness to consider contributing these funds is contingent on strict adherence to six principles that must be the backbone of any provider contribution program that hospitals might support.”

Those principles specify that:

  • The administration and implementation of a contribution be placed in the hands of the private sector;
  • The contribution amount must be set at the minimum level necessary to fund the state match to address payments shortfalls, strengthen rural hospitals, and provide additional funds for Graduate Medical Education (GME);
  • Any contributions from hospitals and health systems must be segregated from the state’s General Fund and not be diverted for any other purpose by the Administration or the General Assembly;
  • The Appropriations Act or implementing legislation authorizing the contributions must contain a provision voiding the program if hospitals’ contributions are ever used for a purpose other than those aforementioned;
  • The Appropriations Act or implementing legislation must contain language requiring a maintenance of effort for existing General Funds dedicated to the current Medicaid program, specifying rates will not be lower than those as of Dec. 31, 2015, and that the contributions are conditioned on the federal and state governments meeting currently stipulated Medicaid match levels; and
  • Any budget savings generated due to contributions offsetting costs within the existing Medicaid program or the General Fund should be set aside for struggling rural hospitals.

“VHHA and its members are resolute that any potential contribution program must embody those concepts to function as intended. The Association, along with hospitals, health systems, and other stakeholders throughout the Commonwealth stand ready to work with policymakers on all sides to develop compromise plans to protect the valuable economic and public health contributions hospitals make in Virginia, and to ensure continued access to care for those who need medical services. The upcoming legislative session presents an opportunity to address important health care policy issues. There are mechanisms available to address these issues while relieving financial pressure on the state budget – as well as Virginia’s local hospitals and health systems – to improve access to care, lower health care costs, and enhance the health status of all Virginians. We look forward to working with the Governor and the Virginia General Assembly to address these common goals.”

About VHHA: The Virginia Hospital & Healthcare Association is an alliance of 107 hospitals and 30 health delivery systems that develops and advocates for sound health care policy in the Commonwealth. Its vision is to achieve excellence in both health care and health.

Julian Walker
Vice President of Communications
(804) 297-3193 office
(804) 304-7402 mobile