UNM Hospital awaits voter input on $95M mill levy tax - Albuquerque Journal

UNM Hospital awaits voter input on $95M mill levy tax

Nearly $95 million a year is at stake for hospital care in Bernalillo County in the Nov. 8 general election, when voters will decide whether to continue an eight-year property tax for University of New Mexico Hospital.

Money raised from the tax helps cover the hospital’s operating and maintenance costs.

The tax “helps support job growth and economic development in Bernalillo County by providing jobs and clinical resources to the entire state,” says a website for Friends of UNM Hospital, which has launched a campaign in favor of the tax extension. “And as the state’s only teaching hospital, UNM provides education and training to future healthcare providers, including physicians, surgeons, pharmacists, nurses and many others.”a01_jd_17oct_hospital-rippy-paper

However, at least one state lawmaker questions the extension, saying the hospital should reduce its tax bite because it is getting more money to cover uncompensated care following the adoption of Obamacare and the expansion of Medicaid several years ago.

A vote in favor of the 6.4-mill tax would not increase current property tax levies. The owner of a home valued at $195,000, for example, would continue to pay $416 a year for the hospital. Defeat of the extension would mean the owner of that home would see property taxes drop by the same amount.

In a separate ballot measure, Sandoval County voters will be asked to approve a 4.2-mill levy for UNM’s Sandoval Regional Medical Center and for Presbyterian Rust Medical Center.

Steve McKernan, CEO of UNM Hospital (Source: UNM Health Sciences Center)
Steve McKernan, CEO of UNM Hospital (Source: UNM Health Sciences Center)

“We’ve been very fortunate to have pretty solid voter support in previous years,” hospital CEO Steve McKernan said of the Bernalillo County vote. He said past measures have been approved with over 60 percent of ballots cast.

Medicaid boost

Increased Medicaid reimbursements have resulted in UNMH’s uncompensated care bill declining from $84.5 million in fiscal year 2015 to $73.4 million for the fiscal year just ended. Gov. Susana Martinez expanded Medicaid in 2013 so the program would cover more New Mexicans. That has meant more than 800,000 New Mexican adults now have health care coverage, compared with 550,000 people before the Medicaid expansion.

That fact has prompted state Rep. Bill Rehm, R-Albuquerque, a longtime advocate of lower property taxes, to question whether the hospital shouldn’t dial back the property tax rate to reflect the reduction in uncompensated care.

Rehm, who unsuccessfully tried to introduce legislation to reduce UNMH’s tax subsidy, doesn’t want to see the institution operate in the red, but believes the recent infusion of Medicaid revenue could be used to offset the tax to property owners.

However, McKernan said the boost from Medicaid doesn’t pay the full freight for what the hospital charges for services for the indigent and the working poor.

He said uncompensated care numbers might be going down, but a related trend bears watching.

“We’re seeing a rapid increase in bad debt from more and more people who have these high-deductible plans on the exchange,” he said. “When someone is paying $5,000 per year out-of-pocket, plus their insurance premium at the same time, they are effectively underinsured.” He said the hospital works out payment plans to help those individuals.

a01_jd_17oct_hospital-spendingAll revenues from the levy, Medicaid, Medicare and commercial health insurers are treated as operating revenues of the hospital and as such will contribute to any payment shortfall from any patient, including the insured, according to McKernan. If any service through a normal payment mechanism doesn’t cover the cost of care, it will be “cross subsidized” by the total general revenue of the hospital, he added.

Some of those uninsured are likely in the country illegally and don’t qualify for Medicaid, insurance exchange subsidies or Medicare, acknowledged McKernan. He said UNMH doesn’t track immigrant status so he couldn’t provide numbers of those receiving care and what that bill would be.

‘A real busy place’

McKernan has been giving talks outlining the hospital’s importance to the city’s health and economy.

In 2015, the levy accounted for about 9 percent of UNMH revenues, providing more than $93 million in resources for the hospital’s programs. Behavioral, pediatric and surgical specialty programs were among the top recipients. The funding, plus other revenue streams – such as Medicare, Medicaid, commercial insurance, out-of-pocket payments from patients and philanthropy – helps pay the bills.

“We’re a real busy place,” McKernan said, of the not-for-profit institution, which is the safety net hospital for the region and has been receiving a share of county property taxes since 1954. He said it’s not unusual for the 308-bed adult medical surgical unit to run out of room.

The hospital, which operates the state’s only Level One trauma center, treats 90,000 emergency patients and more than 450,000 outpatients annually. It also runs the Comprehensive Cancer Center, the Children’s Hospital, stroke and burn centers and other programs, such as Indian Health Services. As the primary teaching hospital for the UNM School of Medicine, it participates in hundreds of advanced clinical trials annually.

McKernan said the tax bill may seem high to some residents, but the demand for services is tremendous.

While trauma cases represent about 7 percent of total patient volume, it is an extremely expensive level of care. “There are enormous standby costs to put these programs together,” McKernan said, of the hospital’s trauma and emergency medicine departments.a01_jd_17oct_hospital-revenue

Without the property tax revenue collected by the county, many programs and services would be in jeopardy, he said. Operating expenses for the hospital include items such as employee salaries and benefits, medical services and supplies and equipment. For the 2015 fiscal year, operating expenses totaled $853 million, half of which went to payroll.

The cash balance for UNMH at the end of June was $143 million or about 55 days of cash on hand, McKernan said.

New hospital

UNMH’s expansion plans include a 408-bed, $600 million hospital. Construction is expected to begin in late 2017 or early 2018, with completion by early 2021. Property tax money could be used for the general operations and maintenance of the hospital, McKernan said.

Tax money also helps shore up the medical infrastructure the hospital provides for care, McKernan said. Levy funding has gone to hire new clinical staff, open new health centers and clinics, buy new equipment and improve existing facilities to keep up with the volume of patient visits.

To keep pace with the growing demand for services, McKernan said that in the past two years the hospital has hired an additional nine physicians and 70 nurses.

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