UNC Hospitals prepares for big budget cuts

As UNC Hospitals prepares for upcoming state budget cuts, increased Medicaid reimbursements might more than make up for them.

Gov. Bev Perdue presented her budget last month with a proposed 25 percent cut to the UNC Hospitals state appropriation, which will reduce the financial support for charity care.

Also part of her proposal is renegotiating for higher reimbursements for Medicaid-covered patients, which would become final when the budget is passed.

The hospital has been facing financial difficulties, reporting $283 million in charity care expenses and shortfalls in Medicare and Medicaid reimbursements for 2010. Officials are projecting $306 million more in uncompensated care expenses for 2011.

A higher Medicaid reimbursement is expected to make up for budget cuts in state appropriations, serving as another way to help UNC manage its uncompensated care expenses, said Chris Mackey, press secretary for Perdue.

“It’s a tough budget year and the governor had to make certain choices,” Mackey said.

UNC Hospitals spokeswoman Jennifer James said the hospital is not surprised by the 25 percent cut in state appropriations.

“We anticipated that UNC Health Care’s appropriations will likely be cut to similar levels as other state agencies,” James said.

State appropriations have generally been on the decline since 2006, she said.

Appropriations were cut by almost $7 million — about 17 percent —from 2010 to 2011, and the proposed 25 percent cut comes on top of this decrease, she said.

While the Medicaid reimbursements would help cover a decrease in state appropriations, the funding makes up only about 2 percent of the hospital’s $1.8 billion total operating budget, James said.

However, the increase does not address all of the hospital’s financial problems.

“Our costs are not going to change; they’re only going to go up,” James said. “And we’re likely to see more uninsured and people who can’t pay.”

Less money from the state means having to charge insured patients more, she said.

And that is where the higher reimbursements for Medicaid services will help, Mackey said.

The final budget approved by the General Assembly is expected to have even deeper cuts beyond Perdue’s proposal, said Adam Searing, project director for the N.C. Justice Center Health Access Coalition.

Searing said, “That is where the real cuts are going to be and that is where the hospital is most worried.”

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