Debt deal could hurt Northwestern Wisconsin hospitals

• Essentia Health St. Mary's Hospital-Superior

Essentia Health St. Mary’s Hospital-Superior is one of many hospitals serving rural areas that face possible reduced funding under a debt-reduction plan under consideration by a congressional committee. (Clint Austin / caustin@duluthnews.com)

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Medicare cuts under consideration by the deficit-reduction supercommittee in Washington could be “devastating” to critical-access hospitals such as Essentia Health St. Mary’s Hospital-Superior, an advocate for Wisconsin hospitals says.

Hospitals in Spooner and Shell Lake also could be hard hit.

The 12-member committee is tasked with agreeing to $1.2 trillion in savings over 10 years by Thanksgiving. If they agree on a package, Congress must pass their legislation and the president must sign it by Christmas. If not, $1.2 trillion in automatic across-the-board cuts will take effect beginning with the 2013 fiscal year.

Among the automatic cuts would be 2 percent to Medicare, said Steve Brenton, president of the Wisconsin Hospital Association. But what’s more worrying from the perspective of rural hospitals is the possibility the supercommittee might make more significant cuts to their Medicare reimbursements to avoid the automatic cuts.

Michael Mahoney, vice president for public policy at Essentia Health, said two proposals from the Obama administration are sources of concern to critical-access hospitals. One would reduce the Medicare reimbursements to those hospitals from 101 percent of eligible costs to 100 percent. The more significant proposal would remove the “critical access” designation from any hospital that’s within 10 miles of another hospital.

The only hospital in the Essentia system that would be affected by the latter measure is St. Mary’s-Superior, Mahoney said.

In Northwestern Wisconsin, it also would affect Spooner Health System and Indianhead Medical Center in Shell Lake, Brenton said.

“That would be devastating,” Brenton said on Friday. “I’m not going to talk about hospitals closing, but I guarantee you it would be devastating.”

The hospitals would be faced with a 20 to 25 percent reduction in Medicare reimbursements, he said.

St. Mary’s-Superior “would lose revenue to the tune of several million dollars,” Mahoney said. “Several million dollars for a hospital that size is significant.”

Mike Schafer, CEO of Spooner Health System, couldn’t predict the amount of revenue that would be lost. But, he said, “It would cause us to dramatically alter how we do our business here. It’s safe to say that it would be significant. Devastating.”

Administrators of Indianhead Medical Center weren’t available for a comment.

Critical-access hospitals were created as part of the Balanced Budget Act of 1997. The designation provides special reimbursements to hospitals in rural communities.

Originally, if a hospital was within a 35-mile drive of another hospital, it couldn’t be designated a critical-access hospital. But Congress later dropped that provision and left it up to the states to designate critical-access hospitals.

Minnesota has 79 critical-access hospitals. Wisconsin has 58.

Brenton said the 12 members of the budget-cutting committee are largely from urban areas and might not be sensitive to rural health-care needs.

“The good news is that we’ve gotten really strong support from members of the Wisconsin congressional delegation,” he said.

That includes Rep. Sean Duffy, R-Weston, who co-signed a letter to supercommittee members asking them not to target rural hospitals.

“While these proposals will result in savings, we urge you to carefully consider the potentially devastating consequences of such cuts on access to care for patients and economic development in rural communities,” said the letter, whose 68 signers also included Rep. Chip Cravaack, R-North Branch in Minnesota.

Spooner would feel the economic consequences, Schafer said.

“We have about a $10 million payroll, but the jobs that supports and creates in the community as well —if you lose your hospital, you lose your community,” he said.

But while the potential changes in Medicare reimbursements for rural hospitals is alarming, the 2 percent automatic cut would be even worse for Essentia Health, Mahoney said.

“That has significant revenue reductions for us,” he said. “As a system, many millions.”

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