Health care providers in Borderland are bracing for cuts in funding as Gov. Tim Pawlenty balances the state budget.

Pawlenty may not take action on the budget until after July 1, but he has indicated he will make cuts, rather than raise revenue, to balance the budget.

During the legislative session, Pawlenty’s biggest line-item veto eliminated the General Assistance Medical Care program for about 30,000 childless adults with very low incomes starting in July 2010.

That cut could mean that hospitals will be asked to provide services to more patients who don’t have insurance.

Minnesota Hospital Association President Lawrence Massa explained in a news release that the cuts to GAMC could raise hospitals’ uncompensated care amounts.

Bonnie Erickson, interim CEO at Falls Memorial Hospital, said the association estimates that the Falls hospital will see funding cuts of $2.5 million over the next two years, if the governor makes cuts to funding as he has proposed.

Erickson estimated the cuts may be less, and more like $600,000 in each of 2010 and 2011.

Erickson explained that all hospitals must abide by the Emergency Medical Treatment and Active Labor Act, which prohibits hospitals from refusing treatment to anyone in an emergency room.

People without insurance are provided service, and if they have no way to pay for it, the hospital absorbs the costs from budgeted funds for bad debt or charity care.

“In 2009, we increased our budget by 60 percent to cover charity care and bad debt expenses,” Erickson said.

She said the hospital may have to increase the amount it budgets for charity and bad debt should use of emergency and other services increase by people who cannot pay for it.

To offset the potential increase in those costs, as well as the cuts planned by Pawlenty, Erickson said the hospital would look at improving efficiencies and cutting services in all areas.

“We’re very fortunate in this community because we’re a critical access provider and that gives us advantage for Medicare cost-based reimbursement and medical assistance cost-based reimbursement,” she said.

The community is also fortunate in that it has not experienced the down scaling of the economy, as has been the case in other places in the state, she said.

“We still have people with insurance, although people’s co-pays are going up, which figures into the bad debt equation,” she said.

Erickson said she attended a session of the Legislature in mid-April when many MHA members met with legislators. “I heard testimony from various hospitals that have been heavily impacted by the proposed cuts and the downturn in the economy,” she said.

Erickson said she sympathizes with governments. “There is no money and when there is no money and no jobs, it’s a domino effect,” she said.

The community will continue to have medical care, she noted.

“We are aware (of the anticipated cuts) and are not closing our eyes to it,” she assured. “We are working with our legislators and certainly with our staff.”

Calvin Olson, administrator at Littlefork Medical Center, said Pawlenty’s proposal will impact the facility. The center operates the Jackpine Chateau, an assisted living residence; a long-term care facility; and Pineview Recovery Center, a chemical dependency treatment center.

Pawlenty proposes to cut money for assisted living, elderly waivered programs and chemical dependency treatment.

“The problem now is the uncertainly of the whole deal,” said Olson. “He hasn’t shown his hand. Everything is in limbo.”

As the center considers how it may handle the cuts, Olson noted that 70 percent of the center’s expenses are salaries and benefits.

“You can’t cut electricity or cleaning supplies; you can’t cut food, though you can shop around and do a better job of purchasing,” he said. “This is not a good deal for health care. If expenses are more than revenues, what can you do?”

Olson also noted that the facilities rate year runs from Oct. 1 to Sept. 30, so if Pawlenty announces cuts July 1, “that’s kind of undoing what has been promised to us. We file our cost reports and get a rate notice and count on that. If it’s reduced July 1 — that’s a whole new problem.”

Olson said he wished he had more information about the funding.

“I don’t have any magic,” he said. “I am hoping that whatever happens, (the impact is) as small as it can be.”

Adam Coe, administrator, Good Samaritan Communities - International Falls, said several aspects of the services provided by Good Samaritan will be impacted by Pawlenty’s budget.

The budget cuts the rates of the Good Samaritan home health care agency by 2.5 percent.

The Good Samaritan Society’s nursing home rates will also be impacted.

Coe noted that in 2008, nursing homes on average in Minnesota had a $24 gap per person per day between what it costs to care for someone and what the agency is reimbursed.

To bridge the gap, the state put together a rebasing plan in 2007, which was to be phased in over the next eight years. “Now, they are putting this rebasing plan on hold for four years — which will continue to increase this gap and put increased financial hardship on nursing homes,” stated Coe.

In addition, he noted that a 1 percent temporary nursing facility rate increase put in place Oct. 1 was not funded and will expire on Sept. 20. “As a result, nursing facility operating rates will decrease by 1 percent,” according to Coe.

He also noted that the state budget decreases the amount it will pay for someone who needs a private room based on medical necessity by 3.5 percent.

“These new cuts to nursing homes will be hard to sustain in an already under funded industry, who’s mission is to care for our most vulnerable adults,” Coe stated. “The additional cuts to home health care agencies and assisted living facilities put an unsustainable financial burden on the entire long-term care industry in Minnesota.”

Coe did offer a positive note: The state extended the exception to a moratorium on nursing home expansions an additional 18 months.

Good Samaritan has sought to replace or rebuild the nursing home.

“This means that projects such as ours that were approved by the state of Minnesota as an exception to the moratorium now have an additional 18 months (on top of the original 18 months) to become construction ready,” he stated. “This allows much needed time to allow organizations such as ours to seek the needed funding/financing to construct a new nursing home.”

Meanwhile, MHA President Massa said that the governor’s actions might buy enough time for the federal government to step in and provide coverage to GAMC enrollees.

To qualify for GAMC, Minnesotans must make no more than $7,800 a year. Under recent federal health care reform discussions, proposals have been made to provide federally funded health insurance for Americans making less than $8,800 a year. If that proposal is adopted nationally, all Minnesotans currently enrolled in GAMC could qualify for the federal coverage.