Joseph Krist

Publisher

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RURAL HEALTH

A Government Accountability Office report requested by U.S. Sen. Claire McCaskill reinforces our concerns for the rural hospital sector. The GAO found that although only about half of all rural hospitals are in states that didn’t expand Medicaid, 83% of the ones that closed from 2013 to 2017 were in those states. The data shows part of the story supporting voter initiatives which would seek Medicaid expansion under the Affordable Care Act.

Now the non-expansion state Kansas, is the site of another rural hospital closing. Mercy Hospital in Fort Scott is a 46 bed facility in eastern Kansas. Without expanded Medicaid these hospitals face a variety of pressures dealing with reimbursements and high rates of uninsured. Mercy Hospital says it spent $2.56 million in fiscal year 2017 on uncompensated care, as well as the traditional charity care write-offs it’s obligated to make to maintain nonprofit status. One estimate puts the benefit to Mercy of an expansion at an additional $2.7 million in revenue each year on average, according to the Kansas Hospital Association.

The current facility scheduled for closure opened in 2002. It has 230 employees who in 2017 admitted about 1,000 patients, performed about 1,500 surgeries and saw another 70,000 people on an outpatient basis. The hospital will close Dec. 31, including all inpatient services, the emergency department and ambulatory surgery.

Researchers from Northwestern Kellogg School of Management have found that hospitals in Medicaid expansion states saved $6.2 billion in uncompensated care, with the largest reductions in states with the highest proportion of low-income and uninsured patients. Consistent with these findings, the vast majority of recent hospital closings have been in states that have not expanded Medicaid.

There is not an initiative on the Kansas ballot regarding Medicaid expansion. It is seen as a major factor in the race for Governor. So while not a direct referendum on the issue, the Kansas governor vote can be grouped with the results of direct initiatives in Utah, Idaho, and Nebraska calling for Medicaid expansion.

CALIFORNIA PROPERTY TAX BALLOT INITIATIVES

The proposed California ballot initiative Proposition 5  amends the State Constitution to expand the special rules that give property tax savings to eligible homeowners when they buy a different home. Beginning January 1, 2019, the measure: allows moves anywhere in the State. Eligible homeowners could transfer the taxable value of their existing home to another home anywhere in the state.

It would allow the purchase of a More Expensive Home. Eligible homeowners could transfer the taxable value of their existing home (with some adjustment) to a more expensive home. The taxable value transferred from the existing home to the new home is adjusted upward. The new home’s taxable value is greater than the prior home’s taxable value but less than the new home’s market value.

It Reduces Taxes for Newly-Purchased Homes That Are Less Expensive. When an eligible homeowner moves to a less expensive home, the taxable value transferred from the existing home to the new home is adjusted downward. It also removes Limits on How Many Times a Homeowner Can Use the Special Rules. There is no limit on the number of times an eligible homeowner can transfer their taxable value.

According to the LAO, schools and other local governments each probably would lose over $100 million per year. Over time, these losses would grow, resulting in schools and other local governments each losing about $1 billion per year (in today’s dollars). Current law requires the state to provide more funding to most schools to cover their property tax losses. As a result, state costs for schools would increase by over $100 million per year in the first few years. Over time, these increased state costs for schools would grow to about $1 billion per year in today’s dollars.

The case for includes the view that as the measure would increase home sales, it also would increase property transfer taxes collected by cities and counties. This revenue increase likely would be in the tens of millions of dollars per year. Because the measure would increase the number of homes sold each year, it likely would increase the number of taxpayers required to pay income taxes on the profits from the sale of their homes. This probably would increase state income tax revenues by tens of millions of dollars per year.

RESILIENCE AS A CREDIT ISSUE

Austin, the Texas state capital, had to put into effect a boil water notice for all of its customers due to elevated levels of silt from last week’s flooding. This is the first time in the utility’s history that a notice of this kind has been issued for the entire system.  Nonetheless, the city was more concerned not with a surplus of water but with a real supply deficit. That is because the silty, debris filled river supplying Austin’s three water treatment plants is delivering more water than the plants may treat.

Normally, Austin Water can process more than 300 million gallons per day, but because of the extreme weather the utility was not able to process much more than 100 million gallons daily at the height of the flooding. Customers were asked to reduce water usage as much as possible.

This is a state capitol, home of the state’s flagship university, and a major economic center. So it is clear that resilience is an important issue as the city attempts to expand and modernize its economy.  Clearly, the greater frequency of major storms must be considered when any estimate of resilience is made. The likely solution is expansion of the regional flood management infrastructure. This will introduce extra costs onto the regional tax and economic base.

Meanwhile, The New York Academy of Sciences released the results of a study which reviewed the potential cost of climate change resilience for Los Angeles County. The report already has a high level of exposure to flooding (e.g. people, ports, and harbors), climate change and sea level rise will increase flood risk. The study covers a number of technical issues which we do not need to review here. What is important to us is the potential cost of resilience projects to manage this change. The research suggests three adaptation pathways, anticipating a +1 ft (0.3 m) to +7 ft (+2 m) sea level rise by year 2100. Total adaptation costs vary between $4.3 and $6.4 billion, depending on measures included in the adaptation pathway.

FLORIDA TOLL DISPUTE MOVES TO COURT

The Florida legislature passed the Florida Expressway Authority Act this and the previous summer which was designed to lower tolls on the state’s various toll roads. The legislation provides for a number of changes allowing for things like P3 partnerships but it also seeks to alter the process by which tolls may be raised. Included amendments, among other things, mandated a reduction in toll rates, limited the amount of toll revenue that can be used for administrative expenses, and changed auditing procedures.

Those changes in the ability of the individual issuers to raise revenues are now the subject of a lawsuit by the Miami Dade County Expressway Authority (MDX).  MDX alleges these tolling requirements should be rendered null, as they usurp authority granted to MDX via a transfer agreement signed in 1996. That agreement “granted to MDX full financial control” of the five expressways located in Miami-Dade County.

MDX is asking for a declaratory judgment that the amendments are unconstitutional. MDX claims that the toll provisions clash with non impairment provisions included in the bond resolution.

ATLANTIC CITY ON THE LONG CLIMB UP

Moody’s Investors Service has upgraded the City of Atlantic City, NJ’s Long-Term Issuer Rating to B2 from Caa3. The outlook remains positive. The upgrade is a positive notch in the belt of the state overseers managing the city’s finances. The mid-B rating still takes into account the city’s continued, albeit reduced, financial and economic distress. The agreement with the city’s casinos securing payments in lieu of taxes is a positive as is material budgetary improvements undertaken under State oversight.

The city still needs to further its economic diversity to reduce reliance on the casino industry. The gaming industry is still seeing new entities coming into the regional marketplace and those facilities while not achieving their projected operating results still serve as a source of serious competition for the marginal gaming dollar.

DOMINION OFFERS TO MANAGE SANTEE COOPER

Dominion Energy, a major Virginia investor owned utility, has offered to buy SCANA, the parent company of South Carolina E&G. That would place them in  the position of managing the Sumner nuclear expansion which was put on hold earlier this year. Now, Dominion is making an offer to the other major utility partner in the project – South Carolina Public service Authority (Santee Cooper) to manage Santee Cooper to help it save costs after the state-owned power company racked up $4 billion in debt on the failed nuclear project.

The letter including the proposal makes some bold promises. The offer would save Santee Cooper’s electric customers “hundreds of millions of dollars in overhead, fuel and capital related costs.” It purports to provide a vehicle to stabilize rates especially for large industrial and electric cooperative customers. Santee Cooper retail customers already pay an additional $5 monthly due to Sumner costs and face an additional $13 monthly until project related debt is retired.

Dominion claims that this proposal is superior to a sale of Santee Cooper to an investor owned utility. Dominion would not say whether the offer would stand if the Virginia-based power utility does not complete its proposed purchase of Cayce-based SCANA. According to the state, a handful of utilities privately have expressed interest in buying it.

The offer is a bit of an end run around the framework established by a South Carolina state committee charged with evaluating alternatives to the status quo. Dominion asked the S.C. Public Service Commission to reject Santee Cooper’s request for a $351 million payout if the Virginia-based utility is allowed to buy SCAN. Dominion claims that the arrangement would allow Santee Cooper to remain state owned, tax exempt and keep an “A+” credit rating.

BROWARD HEALTH MANAGEMENT UPHEAVAL

Broward Health which runs the former North Broward Health System has dismissed its chief counsel. The move comes as doctors complained that her office’s failure to get contracts through was costing the system essential physicians and Broward Health’s own chief executive complained about a “pervasive culture of fear” that the counsel helped create.

The board was a creation of outgoing Governor Rick Scott whose antipathy to the public provision of health services is well established. At the same time, five current and former Broward Health leaders indicted last year on charges of violating Florida’s open-meetings law. One of them is the departing chief counsel.

The counsel had angered board members with a series of investigations undertaken by outside attorneys whose fees were paid by the district. These investigations were seen as a part of an effort to discredit board members who oppose some of the Governor’s health policies. The period of oversight by the board – appointed by Scott – has included a massive federal fine, the suicide of its CEO, the decline of its bond rating and unending controversies and investigations.

The move to fire the counsel comes amidst charges that patient care has suffered, as physicians fled its hospitals and a failure to sign contracts on time cost the system necessary medical equipment. The negotiation and execution of contracts was under the purview of the counsel.

In the meantime, the district’s tax supported Baa2/BBB+.

MEDICAID UNCERTAINTY IN CALIFORNIA

The California State Auditor has released results of its payments that the Department of Health Care Services (Health Care Services) made from 2014 through 2017 because it failed to ensure that counties resolved discrepancies between the state and county Medi-Cal eligibility systems. Counties are generally responsible for determining Medi-Cal eligibility and for recording this information in their eligibility systems, which then transmit the beneficiaries’ information and Medi-Cal eligibility to the State’s eligibility system. Health Care Services uses the information from the State’s eligibility system to determine the amount that it pays for Medi-Cal beneficiaries.

Statewide comparison of Medi-Cal beneficiary eligibility data identified pervasive discrepancies between the state and county systems. Specifically, the analysis of 10.7 million Medi-Cal beneficiary records from December 2017 revealed more than 453,000 beneficiaries marked as eligible in the State’s eligibility system although they were not listed as eligible in the counties’ eligibility systems for at least three months. Upon examining the data for these beneficiaries from 2014 through 2017, we found that 57 percent of these discrepancies had persisted for more than two years. Many of these discrepancies resulted from Health Care Services failing to ensure that counties had evaluated the Medi-Cal eligibility of beneficiaries transitioning from other programs. One reason counties failed to complete those evaluations promptly was because of the implementation of the federal Patient Protection and Affordable Care Act which created a backlog of Medi-Cal applications and eligibility redeterminations.

It is not clear as to whether a County has any financial obligation as the result of these “overpayments”. If they do, then Los Angeles County is one to look at as some 50% of the questionable eligibility cases are concentrated there. Ironically, LA County is one of three who blame their eligibility problems on implementation of the Affordable Care Act. Effectively, the counties claim that the expansion created an unmanageable burden for them. State law gives the county of residence the responsibility for determining eligibility and providing ongoing case management; however, health care providers use the state’s Health Care Services’ records to authorize care.