Medicaid Expansion is Big Business for Ohio Hospitals

By Scott Pullins

 

Cleveland Clinic CEO Toby Cosgrove admittedly does not like politics.  And who can blame him?  But that hasn’t stopped him from going all out in an attempt to derail the latest attempt by Republicans to repeal and replace Obamacare.  

 

For hospital CEO’s like Mr. Cosgrove, the risks of possible passage of the Graham Cassidy proposal are simply too high.  Simply put, Graham Cassidy, which looks like it is all but dead, would block grant federal funds to the states.  And those states that already received increased dollars to fund Medicaid expansion, like Ohio, would see those funds redirected to states that haven’t, like Texas.  One study projects that Ohio would see a loss of $9 billion in Medicaid funds by 2026.

 

For Ohio hospitals like the Cleveland Clinic, the Obamacare Medicaid expansion has been a veritable financial bonanza.  Many Ohio hospitals were doing pretty well financially even prior to the Medicaid expansion, but its enactment has literally opened the financial floodgates.

 

From 2013 through next year, Medicaid payments to Ohio hospitals will have increased from less than $5 billion per year to over $7 billion per year.  At the same time, in 2013, before this increase took place, Ohio hospitals had already earned a profit of nearly $3 billion.  

 

Let’s take Cleveland Clinic for example.  The hospital group is now ranked as the 2nd largest employer in Ohio, only behind Walmart, and currently employs a little over 49,000 people in Ohio.  

 

As a nonprofit organization, The Cleveland Clinic is required to file and publish detailed tax returns, called form 990’s.  And their latest return from 2015 shows they are doing pretty well.  They report a “profit” of approximately $735 million with approximately $7.2 billion in cash on hand.

 

At the same time, Cleveland Clinic reported that it paid 5,305 individuals over $100,000 per year in salary.  Additionally, they reported paying another 603 individuals and/or companies over $100,000 as independent contractors.  Two out of their five highest paid contractors were construction companies that were paid approximately $30 million.

 

Mercy Health, headquartered in Cincinnati, is the 5th largest employer in the State of Ohio.  They report that they have over 32,000 employees in Ohio.  Their 2015 tax return shows a profit of a little over $67 million with nearly $2.3 billion cash on hand.  Likewise, Mercy Health reported that they paid 2,017 individuals over $100,000 in annual salary and another 1,665 individuals or companies over $100,000 as individual contractors.  Their second highest contractor expense was for over $85 million in construction services.

 

University Hospitals, headquartered in Cleveland, is the 7th largest employer in Ohio.  They report that they have 26,000 employees in Ohio.  Their 2015 tax return shows a profit of over $358 million with over $2 billion cash on hand.  Likewise, University Hospitals reported that they paid 1,930 individuals over $100,000 in annual salary and another 1,439 individuals or companies over $100,000 as individual contractors.  

 

Rounding out the top ten employers in Ohio is OhioHealth, the 8th largest employer in Ohio with a little over 22,000 employees.  OhioHealth’s return shows that they earned a “profit” of over $400 million and had nearly $3 billion in cash on hand.  

 

At the same time OhioHealth reported paying 935 individuals over $100,000 in annual salary.  They reported paying another 604 individuals and/or companies over $100,000 per year as individual contractors.  Two out of their top five individual contractors were construction companies that were paid over $85 million.

 

Ohio’s hospitals make up 4 out of 10 of Ohio’s top ten employers.  In addition, 18 hospitals rank in the top 100 of Ohio employers.  

 

Medicaid expansion in Ohio has meant big growth, big expenditures, and lots of new construction for Ohio hospitals.  Part of this reason is that while Doctors are reimbursed at a much lower rate under Medicaid, hospitals are reimbursed at or over Medicare rates under Medicaid.  So for primary care physicians, taking Medicaid patients is a money losing proposition, while hospitals taking patients is a money-making proposition.  Hospitals can also raise prices for private insurance patients to help make up any difference.

 

But has Medicaid expansion improved the lives of the working poor?  It certainly doesn’t seem so.  The Buckeye Institute for Public Policy Solutions, a Columbus based free market think tank, has reported that “69 of Ohio’s 88 counties include a region defined by the U.S. Department of Health and Human Services as medically underserved.”   

 

Medically Underserved Areas/Populations are areas or populations designated as having too few primary care providers, high infant mortality, high poverty or a high elderly population.  Meanwhile, study after study has shown that Medicaid has no significant impact on health outcomes versus being uninsured.  

 

3rd Rail Politics contacted Ohio Voices for Children, one of Ohio’s leading child advocacy organizations to obtain their views on this issue.  Unfortunately, they declined to comment.

 

We also contacted the Ohio Hospital Association.  The trade association that represents most Ohio hospitals has supported Medicaid expansion from the beginning.  They too declined to comment.