Kentucky Legislature Restores Partial Funding for QCCT Indigent Care Fund – Sort of.

Amounts in House budget reduced.
Strings attached.
Meddling in Metro-Louisvile’s business.

The Kentucky House and Senate completed an increasingly contentious budget process last night after a weekend of behind-the-scenes horse trading. (The multitude of coal severance earmarks were also restored– a not-unrelated observation.) I suspect that few people actually believe the accompanying bilateral declarations of how well the two political parties worked so wonderfully together in the public interest. The lyrics of Kumbaya are known by heart in Frankfort: “Someone’s laughing, someone’s crying, someone’s singing, and lots of people are praying that things turn out all right!”

The 253 page document (House Bill 235) is only an outline of the various administrative units and projects receiving public funds, or of expenditures for which legislative approval is required. A summary of changes made in-conference is available here. No one can read it without recognizing the large number of earmarks that are the price for securing votes. The budget document also provides an indicator of the priorities of Kentucky’s State Universities and Community College system. Their itemized requests for public funds (or for permission to spend other money) make up 20% of the total budget document! I will write more about this latter use of the document later. In this article I summarize the partial restoration of funding by the legislature of the increasingly complicated and controversial QCCT indigent care program used to support inpatient services at University of Louisville Hospital.

Even the Governor Wanted Changes.
I reported earlier that the Governor’s proposed budget to the House called for a substantial decrease in the annual appropriation from about $21 million yearly to $9.5 and $6.15 million in fiscal years 2015 and 2016 respectively. This would amount to a 70% reduction by Fiscal Year 2015-16 and was justified because of an anticipated decrease in the number of uninsured patients following implementation of the Affordable Care Act in Kentucky. The House version of the budget incorporated the Governor’s recommendation and also included language requiring the University of Louisville and the Cabinet for Family and Health Services prepare specific reports. [See links at end to original documents.]

The Legislative Two-Step.
In the partisan tango that characterizes legislative interaction these days, and in the never-ending effort to demonize the Affordable Care Act, the Kentucky Senate eliminated altogether any state funding for the QCCT. It also eliminated any statutory requirement to document the need for such indigent care funding, or what happens to medically indigent patients in the absence of the Commonwealth’s support of the program.

In the report of the Free Conference Committee that will likely become the final budget (in the absence of a veto), funding from the state was authorized for up to a total of up to $10 million over the next biennium– $6 Million in FY 2014-15, and $4 million in FY 2015-16. This is $5.6 million less than the amount recommended by the House and a 76% decrease from the previous biennium’s total. The $4 million appropriated for FY 2015-16 is only 19% of the current year’s.  The actual text of the authorization in UofL’s part of the budget follows.

Fiscal Years 2014-15   and    2015-16
General Fund  $139,076,900 and $140,416,300
Restricted Funds  $990,331,600 and $1,012,352,500
Federal Funds  $97,877,000 and $96,632,000
TOTAL $1,227,285,500 and  $1,249,400,800

(1) Debt Service: Included in the above General Fund appropriation is $1,339,400 in fiscal year 2015-2016 for previously issued bonds.

(2) Quality and Charity Care Trust Fund: The University of Louisville shall submit written documentation to the Secretary of the Finance and Administration Cabinet demonstrating financial need for reimbursement related to providing hospital care services to indigent and medically needy patients through the Quality and Charity Care Trust. Upon certification of such need by the Secretary of the Finance and Administration Cabinet, reimbursement not to exceed $6,000,000 in fiscal year 2014-2015 and $4,000,000 in fiscal year 2015-2016 shall be deemed a necessary government expense and shall be paid from the General Fund Surplus Account (KRS 48.700) or the Budget Reserve Trust Fund Account (KRS 48.705), subject to the conditions and procedures in this Act. The Louisville Metro Government shall contribute $5,000,000 in fiscal year 2014-2015 and $3,000,000 in fiscal year 2015-2016 to the Quality and Charity Care Trust.” [Emphasis mine.]

Curiously, in my experience, this budget requires Louisville Metro government to contribute a total of $8 million over the biennium This is even less than the annual $7 million the city has been contributing to the QCCT over the past few years. It is not clear to me that the legislature has the authority to require Louisville Metro government to spend any amount, let alone to spend less! If any of our readers can clarify things for us, I will amend this article accordingly. Some possibilities come to mind:

Turf Wars?
Readers will we recall that at the last state budget time, the Senate reacted to Metro Government’s modest decrease in the city’s contribution with threats to decrease the state’s contribution. Louisville Metro government justified their “non-decrease” in the spirit of transparency by moving away from the historic and unnecessarily complicated payment and rebate system in use since the 1980s. (UofL actually ended up with exactly the same amount as before.) It seems possible that some residua of this previous state and city dynamic over University Hospital remains.

What Does the Current QCCT Agreement Include?
Is it possible that in the newest version of the city/state/university QCCT contract, that Louisville Metro Government has already indicated it will contribute $8 million? For that matter, might the Conference Committee’s curious language be interpreted to mean that the state’s contribution is contingent on a reduction of the city contribution to $8 million over the biennium? I will try to assemble some relevant documents or information for clarification.

What is Being Promised in Return for Public Money?
In the QCCT contract agreements of the past, state and city contributions were contingent on an agreement by the University of Louisville Hospital to provide all indigent care in excess of that funded by the QCCT or other sources. That agreement has changed over time and I have no idea what it says today. For that matter, who are the checks from the Commonwealth and the City of Louisville made out to– KentuckyOne Health, or University Medical Center, Inc which still operates a significant part of University Hospital and its pharmacy? Only a part of University Hospital is managed today by KentuckyOne Health, a Catholic hospital chain. Providing comprehensive indigent care, including reproductive health and end-of-life care, may be a problem for KentuckyOne. How is the money divvied up, and under what rules to avoid Scandal or inappropriate financial diversion.

A Nod to Transparency and Accountability.
The Conference Committee also restored some accountability language to the use of QCCT funds. In fact, it does so in at least three places. As noted above from language in the budget of the Council on Postsecondary Education, and as a precondition for releasing any money whatsoever,

“The University of Louisville shall submit written documentation to the Secretary of the Finance and Administration Cabinet demonstrating financial need for reimbursement related to providing hospital care services to indigent and medically needy patients through the Quality and Charity Care Trust.”

and additionally in the same section,

“(3) Evaluation of Indigent Care: The Cabinet for Health and Family Services and the University of Louisville shall collaborate to conduct an annual study of the effect of the reduction in contributions to the Quality and Charity Care Trust on the delivery of indigent care in Jefferson County. The Cabinet for Health and Family Services and the University of Louisville shall submit a report containing the results of this study to the Interim Joint Committee on Appropriations and Revenue by June 1 of each fiscal year.”

Just so no one forgets, the evaluation requirement designated (3) above is repeated word-for-word in the Medicaid Budget section.

In brief, to get the State’s QCCT contribution, the University of Louisville must first prove it would still need the money if it no longer transferred $ millions to the general and research operations of the University of Louisville, and then to evaluate the effect of any reduction in total contributions. I would hope that there exists an additional requirement to report on how any money is actually used. Perhaps there is such a requirement in the QCCT contract document itself. What is clear, is that state and local governments are taking an increasingly justifiable “trust but verify” position on this transfer of public funds to a hospital still claims private hospital status!

Enough for now.
I hope to be able to provide additional information including Metro-Louisville’s take on the Budget and its timetable for dealing with Louisville’s own role in this multi-party line-dance. The Budget contains a number other reporting requirements and restrictions on billing for indigent medical services that apply to all hospitals. These will be pretty mysterious to the uninitiated, as they are to me. As we citizens of the Commonwealth decide on how we wish to finance effective, efficient, and just medical services for the most vulnerable among us, all the pieces must be on the table. Arguing for one program over another without regard for the whole will only perpetuate the status quo that has led us to pay for overly-expensive services in an inefficient, inequitable, and even segregated setting. We must do better. Our community can be no more healthy than the sickest among us.

Peter Hasselbacher, MD
President, KHPI
Emeritus Professor of Medicine, UofL
April 1, 2014

Earlier KHPI articles about QCCT fund.
House version of Budget. (1.2 MB PDF)
Senate Version of Budget. (1.0 MB PDF)
Free Conference Committee Report. (1.3 MB PDF)
Highlights of Conference Committee Report. (1.5 MB PDF)
University of Louisville’s portion of Budget. (0.2 MB PDF)