“Political piñata”: NC hospitals feeling the heat for holding up Medicaid expansion

Steve Lawler, president and CEO of the North Carolina Healthcare Association, is taking a beating from the left, right and middle.

Lawler, whose association represents hospitals across the state, is the face of resistance to Medicaid expansion that would give 600,000 North Carolinians access to coverage under the government-funded health insurance program. He is getting weary of the pummeling from all sides.. He told me last week, “No one wants to be a political piñata.”

The hospitals support expansion, but they object to a state Senate bill that ties expansion to major changes in the Certificate of Need (CON) law. The law provides hospitals a strong advantage in providing imaging and outpatient services that are their major sources of revenue. The hospital association prefers a state House bill that expands Medicaid without changes in the CON law.

From the right, state Republican Senate leader Phil Berger says Medicaid can’t cover more people until the CON law is reformed to allow more services from more providers.

From the left, Democratic Gov. Roy Cooper wants the hospitals to accept the Senate’s demands so North Carolina can expand Medicaid just as 38 states already have. He said the hospitals’ holdout is depriving people of health insurance and costing the state $521 million a month is lost federal funding. “North Carolina needs our hospital leaders to step up now and do what’s right for their patients and the health of our state,” Cooper said in a recent op-ed.

From the middle, Republican state Treasurer Dale Folwell, who heads the State Health Plan serving teachers and state employees, is a critic of hospitals’ variable pricing for the same procedures and what he considers excessive hospital profits in North Carolina. The treasurer is ambivalent about Medicaid expansion, but not about hospitals’ financial practices. He said big hospital systems are using the state’s outdated CON law to protect their profits at the expense of patients and taxpayers.

The federal government will pay 90 percent of the costs of expanding Medicaid. Hospitals, which will benefit from having more insured patients, have agreed to pay the remaining 10 percent, $500 million annually.

Given that offering, Lawler said, hospitals shouldn’t have to also agree to allowing more competition from private firms and medical groups. He said that change would erode the hospitals’ share of the services that support all hospitals’ finances and keep struggling rural hospitals afloat.

In the past three years, Lawler said, hospital costs have risen by 20 percent while revenue has grown by 3 percent. He said, more than half of hospitals are operating in the red and “the 2023-2024 forecast does look any more favorable.”

Fowler scoffs at Lawler’s talk of hard times for hospitals. He said hospitals will recoup their contribution to Medicaid expansion by raising their prices.

Smaller community hospitals have financial stress, Fowell acknowledges, but he said large hospital systems are seeing a surge in revenue. He said, “(Lawler) is using the storyline of a few rural hospitals when he’s carrying water for the urban systems.”

Changing the CON law would be overdue even without the Medicaid expansion debate. The law was intended to hold down the cost of health care providers investing in new facilities, expensive machines and duplicative services. Now it tends to support high health care costs instead of reducing them. That has prompted other states to drop or revise their CON laws.

Lawler said the hospitals are not willing to give away all their competitive advantages under the CON law, but they are willing to negotiate changes. He’s confident an agreement can be reached this year.

Lawler doesn’t like having himself and the hospitals being criticized from all sides for blocking expansion, but the critics are unlikely to stop swinging until the hospital association cracks.

They know that when you break a piñata, a lot of goodies fall out.

This story was originally published August 23, 2022 at 4:30 AM.