Focus: Maine's Hospitals
Last updated on 5/1/03

Q: How much will Maine hospitals receive in revenues in the first year under Dirigo Health?

A: An estimated $100 million. According to figures released by financial analysts for the Governor's Office of Health Policy and Finance, it is estimated that Maine hospitals will receive $100 million in revenues in the first year. It is estimated that the program will generate total reimbursements for all Maine providers of $270 million in Year One.1

Q: How much will Maine hospitals receive to reduce their uncompensated care costs in the first year of operation of Dirigo Health?

A: An estimated $30 million. According to figures released by financial analysts for the Governor's Office of Health Policy and Finance, it is estimated that Maine hospitals will receive $30 million in payments for hospital services that would have been unpaid if Dirigo Health were not enacted.2

Q: Why is the Maine Hospital Association concerned about Dirigo Health?

A: The Maine Hospital Association supports almost all of Dirigo Health's provisions including the access expansions and the provisions to reform Maine's Certificate of Need (CON).3 However, they are very concerned about the immediate implications for their revenue growth if an expenditure target were mandatory. As originally described in materials released by the GOHPF, the expenditure target would be used as a guide to track the consumer price index (CPI) beginning with a base year of 1999. If the expenditure target were mandatory, which it is not, hospital spending growth would have been reduced from its current 9 - 10 percent annual rate (an average annual increase of $166 million for each year from 2000 - 2002) to 2 - 3 percent (an annual average increase of $40 million for each year from 2000 - 2002).

The legislation, published one week after the original materials, uses the Hospital Cost Index (HCI) not the CPI to track spending growth. The HCI is a measure of the average spending growth for hospitals and is typically 1 - 2 percent higher than the CPI in any given year. For example in the year 2002, the CPI was 1.6% and the HCI was 3.3%. By comparison, Maine hospital spending growth in 2002 was 10.2% while the HCI was 3.3%. Using that measure, Maine hospital spending growth was roughly 3 times higher the national average. As with the CPI, the MHA does not believe that HCI is a fair measure because it does not take into account utilization.

Whether the expenditure target is the CPI or the HCI, consumers and businesses believe that they cannot afford the current 9 - 10 percent spending growth for hospital services. In 2002, hospital revenues exceeded $2.2 billion. If the growth rate in 2003 is the same as last year's (10.2%), Mainers will have to spend an additional $224 million for hospital services this year alone. That is an unacceptable burden on our consumers and businesses. Consumers and businesses believe using a voluntary target as a guide to measure and bring hospital growth to more affordable levels is needed. They also believe that the target should be reasonable. Consumer and businesses want a target and a process in order to understand why Maine spending is so much higher than national norms and how to reduce it over time without harming Maine's hospitals. LD 1611 provides a starting point.

Q: How will LD 1611 affect Maine's rural hospitals?

A: First, LD 1611 will provide an estimated 57,000 uninsured and underinsured Mainers with comprehensive health insurance coverage in the first year alone.4 As indicated above, rural hospitals will share in the $100 million in new revenues for hospital services in the first year of operation. Second, LD 1611 creates a planning process to "ensur[e] that rural residents of this State have appropriate access to critical care services as well as primary and preventive care, within a reasonable geographic distance."5 Finally, the Director of the GOHPF, Trish Riley, testified that the Governor will offer an amendment to LD 1611 to protect Maine's rural hospitals.6

Analysts from Mathematica Policy Research, Inc. estimate that the total number of eligible citizens is 189,500.7

Q: Does the Maine Hospital Association support the State Health Planning Process?

A: Yes! The MHA supports the State Health Planning Process saying "CON reform and health planning are real cost containment tools and will constrain health care costs."8 Health planning is a method for determining how to more effectively and efficiently deploy limited health care resources.

Q: Are the expenditure targets and voluntary price caps truly voluntary?

A: Yes. The expenditure target is just that - a target . A plan to meet that target must be collaboratively developed by the hospital, medical and osteopathic associations in conjunction with the GOHPF.9 If no plan is developed, there is no provision in the bill to enforce the target. In other words, the working group has to agree on a plan before the process can move forward. With regard to the voluntary price cap, the legislation provides that if the voluntary cap of 3% is exceeded on an average statewide basis, then plans for rate setting will be developed.10 The GOHPF indicated that such plans would need legislative approval.

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