Patients in Deaconess Illinois’ coverage area who previously carried some Medicaid coverage are losing it – even before the HR-1 Medicaid work requirements go into effect early next year – and a negative financial impact is already surfacing.
William Davis, president of the Illinois region at Evansville, Ind.-based Deaconess Health System, is tracking Medicaid enrollment in real time. The current environment is not a risk on the horizon but as a problem already visible in the data.
“We’re looking at the Medicaid enrollment numbers here, and we’re looking at those folks shifting from some pay to no pay, and that is impacting our bottom line,” Mr. Davis said during an episode of the “Becker’s Healthcare Podcast.” “Next quarter we are projecting some of our state directed payments to drop around $500,000 at one of those locations and we’re saying ok, that’s the expectation and what are we going to do to offset that. These pressures are very real.”
State directed payments, supplemental Medicaid funding mechanisms that rural and safety-net hospitals have come to rely on heavily, are facing federal caps and rollback as part of broader healthcare legislation.
With multiple pressures arriving simultaneously — payer mix shifts, 340B changes and declining state directed payments among them — Mr. Davis said the response has centered on scenario modeling: running through the financial implications of each expected policy change, gaming out if-then scenarios before outcomes arrive.
“One key relationship has been with our CFO and our finance teams that truly are trying to project out and go through all the scenarios to understand what the impact of these changes are so that we actually have a game plan and are not just reacting,” he said. “How do we actually get ahead of things and start positioning ourselves well? What we already know is that there is a financial mountain in front of us.”
Mr. Davis said close alignment with the finance team has become the organizational response to that uncertainty. His conversations with his CFO have moved well past the formal meeting cycle.
“We’re having breakfast and dinner together now,” he said. “I’m sure every healthcare organization is really looking at and diving into their data. Having good data is definitely an important part of that.”
The goal is to move from reactive to proactive planning. the health system needs an operational game plan for revenue exposure leadership can already see coming rather than responding to it after the fact. It is an exercise hospitals across the country are running in parallel as Medicaid supplemental payment reductions begin to materialize.
The broader rural healthcare environment adds urgency. Simultaneous policy pressures — Medicaid work requirements under HR-1, the expiration of enhanced ACA subsidies and questions about state directed payment grandfathering — are bearing down on rural providers that were already operating at the margin. For systems like Deaconess Illinois, the financial planning extends beyond closing this quarter’s gap to questions of long-term sustainability. But that doesn’t mean care will suffer.
“What I can assure our communities is that we aren’t going to let our quality or safety and that experience drop off,” he said. “We’re going to figure it out.”
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