With the state of Florida facing a budget deficit of nearly $4 billion, it was a year of great legislative and financial challenges with significant implications for the health of our community. Some proposed legislation would have negatively impacted our already very limited Trauma funding from the Personal Injury Protection program for uninsured motorists, the Low Income Pool trauma funding and red light camera enforcement trauma funds. In these cases, we had some legislative success. However, the greatest pressures centered on Medicaid funding.
In April, it became evident that the Florida Senate was proposing budget adjustments totaling more than $1.8 billion, including the elimination of the Medically Needy and Aged/Disabled hospital programs. These proposed cuts would have meant an annualized loss of approximately $42 million to Lee Memorial Health System. Many of you, and countless individuals, organizations and chambers of commerce in our community, supported Lee Memorial Health System by contacting legislators and voicing opposition. In early May, the Florida legislature finalized and passed a compromise Medicaid budget that kept the Medically Needy and Aged/Disabled funding, but included a 12 percent rate cut for hospitals.
While the 12 percent cut is significant, your quick action, support and advocacy made a difference, and we appreciate your efforts. With your help, and that of our representatives in the Florida Hospital Association and the Safety Net Alliance of Florida, as well as our local legislative elected state delegation, our potential losses were cut by more than half.
We now are facing reimbursement reductions—Medicaid, Low Income Pool funding and other reductions—amounting to approximately $18 million annually. These cuts and changes are effective July 1—the start of the state’s fiscal year. As we work on our 2012 budget, with the goal of finalizing it by the end of September, we will implement necessary adjustments to balance our budget.
Our leadership is engaged and focused on increasing productivity and efficiency, continuing to enhance patient safety and ensuring preventive and maintenance care is available to those in need. Recent and ongoing efforts—including the implementation of Epic, the management of length of stay and readmissions, and the opening of the Lee Physician Group Dunbar United Way House—help streamline, control and adjust our costs. These funding reductions come at a time when only one-fifth of hospitalized patients in our community are commercially insured. The vast majority of patients are in programs that do not cover the costs of care…Medicare, Medicaid and uninsured.
Over the next two to three years, additional legislative changes will affect our financial position. One significant change is the transition to Medicaid managed care plans, in which health care providers will negotiate contracts with private insurance companies. Over the long term, this will require additional efficiencies because current funding for patient care costs will be reallocated by the state of Florida to pay insurance companies for their reserves and administrative costs. Nursing homes will be the first to convert from fee-for-service to managed care in 2013; hospitals will follow in 2014. We will continue to provide updates during the coming months, as more information becomes available.
Although the upcoming reductions directly affect Medicaid reimbursement, we understand that everyone will be affected by these changes. Last year, our Medicaid shortfall was $36.4 million. This year, it will be even greater with more patients and less reimbursement. We have made up for these shortfalls in the past and will have to find ways to do so in the future in order to continue to provide the safety net for our community. This is not a temporary change—but, we know that our patients rely on us to provide quality, compassionate, lifesaving care…that will not change.
We appreciate your efforts in supporting us in our advocacy and grassroots efforts. Together we made a difference.