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Hospitals: Budget cuts will affect service

Sue Klabo said Minnesota hospitals like the one she leads face "grave" circumstances if state policymakers make deep health-care budget cuts.

Klabo said her Mahnomen Health Center in northwestern Minnesota is treating a growing number of patients who are uninsured or rely on government-subsidized programs, but faces potential budget reductions that threaten the center's viability.

"We are financially marginal now," Klabo, Mahnomen's administrator, told lawmakers Wednesday. "How are we going to be able to sustain services through this long economic crisis?"

With less than a month remaining in the legislative session, Klabo and other hospital officials from around the state asked lawmakers to avoid cutting hospital reimbursement funds and eliminating Minnesotans from government health insurance programs.

Criticism is targeted at Gov. Tim Pawlenty, who proposes to reduce state payments to hospitals for treatment of poor patients on subsidized health care programs. Hospital executives also complain that the Republican governor's budget plan drops 84,000 people from the state-subsidized MinnesotaCare health insurance program over the next 1.5 years.

As a result, many of those Minnesotans may delay treatment until their conditions worsen, and then they show up in emergency rooms to be treated at a higher cost, hospital officials said.

House Democrats, who worked with the Minnesota Hospital Association to convene the Wednesday hearing, propose no eligibility changes to MinnesotaCare. Like Pawlenty, though, House Democratic-Farmer-Laborites propose a 3 percent cut to hospital reimbursements for care of poor patients in the next two years. Senators plan to release their health-care spending plan later this week or early next week.

MinnesotaCare funding and hospital payments are part of health and human services spending, an area of the budget that is projected to grow at a much higher rate than other areas.

"We recognize that these cuts can be difficult, but under the circumstances we're in, everyone is going to have to do some belt-tightening," Pawlenty spokesman Brian McClung said. "Hospitals are not immune from that."

Hospital officials said that they expect to see cuts in state aid as lawmakers look for ways to solve a projected $4.6 billion budget deficit, but the reductions come on top of cuts made in previous years.

"Real people will suffer," said Mark Eustis, president of Fairview Health Services. Fairview's system includes a hospital in Red Wing and clinics in the eastern Twin Cities suburbs.

Preventative care will diminish and there will be less emphasis on managing chronic diseases, Eustis warned.

Health care facilities already have let workers go, imposed salary freezes, delayed construction projects and reduced some services.

Cutting programs means eliminating jobs. That is especially difficult for rural health-care facilities, which struggle to recruit nurses, therapists and technicians, Klabo said.

"Once lost, they will be impossible to get back," Klabo said.

Hospitals in Minnesota's large regional centers also are bracing for a big budget hit.

St. Luke's Hospital in Duluth expects to lose $12 million in state reimbursement rates for treating poor patients, St. Luke's CEO John Strange said. A $6 million-per-year hit amounts to 1 percent of the hospital's gross revenue, he said.

To save money, the hospital already closed an outpatient cancer clinic in Virginia and further program closures are possible, Strange said. Future budget cuts will focus on specialty programs because general medical services must remain, he said.

"You've got to have the basic care," he said.


A hospital patient asked lawmakers to not make spending cuts that hurt the state's health-care system in the long term.

Don Obernolte told legislators that he received great care from a St. Paul hospital after a logging accident two years ago. Obernolte said a large tree fell on him, causing severe injuries, while he worked on a family farm in Tamarack, west of Duluth.

"My fluke accident happened in the blink of an eye by something as unpredictable as a change in the wind," Obernolte said. "Please do not let a change in the political winds determine whether or not someplace as special as (St. Paul's) Bethesda Hospital survives for those of us whose lives might change in an instant."

The rough economy has changed the type of patients hospitals see, said Mary Ellen Wells of Hutchinson Area Health Care.

Wells said overall hospital activity has go down in recent months, but a rising unemployment rate has resulted in a growing number of patients who have inadequate health insurance or none at all.

Hospitals are required to treat those patients, but cannot recoup the costs, she said.

"It's not about threat, it's the about reality of trying to take care of patients when we don't have the kind of reimbursement that we need," she said.