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State may borrow $1.2 billion in hospitals program

Posted August 17, 2007 11:00 pm

Aaron Chambers

A plan to send extra dollars to the hospitals with the poorest patients lingered on life support just a week ago.

Now state officials are trying to resurrect the program in a big way - and fast. They're poised to borrow $1.2 billion to restart payments, and that means the hospitals may soon get the $470 million they've anticipated since early spring. The state would get $130 million on top of that for other health-care expenses.

Come Aug. 31, the legal authority to spend the money expires. Officials hope to raise and spend it by then.

"Borrowing is really the only option," said Carol Knowles, spokeswoman for state Comptroller Dan Hynes.

The three-year plan is geared to help hospitals handling the most patients on Medicaid, the joint state/federal health care plan for the poor. It works by shuffling money between the state and hospitals, thereby triggering federal reimbursement for the state's Medicaid spending,

Hospitals gain $1.4 billion over three years, or $470 million each year. The state wins a three-year total of $390 million and the feds pick up the $1.8 billion tab.

In Rockford, SwedishAmerican Hospital is counting on $16.5 million to expand its obstetrics unit, which handles the lion's share of local Medicaid pregnancies, and to make general hospital infrastructure improvements. It slated $8 million to $10 million to buy the old Highland Hospital in Belvidere.

"The (ordinary) payment stream for Medicaid basically doesn't even cover our cost of providing care," said CEO Bill Gorski. "So when an infusion or a potential infusion like this is coming in, we're able to look at doing things that maybe we weren't able to do in the past."

The state completed the first year of the program. But it couldn't execute the second year by spring, as required under Illinois law, because lawmakers had not authorized the spending.

The state borrowed $900 million to kick-start the second-year cycle anyway. But without the power to spend that money, the state couldn't make a single payment to hospitals by the time it had to pay off the loan in early June. The state paid $12 million in interest on the loan.

Had the process worked like it was supposed to, the state would have used federal reimbursement dollars - not the dollars it borrowed - to pay off the loan.

On June 14, lawmakers finally sent Gov. Rod Blagojevich a measure authorizing the state to spend $1.2 billion to begin the process. But the governor waited until late in the night on Monday - the last day he could act - to sign it.

The authority to spend the $1.2 billion expires Aug. 31 but the account dedicated for hospital aid has just $9.7 million, since the state swept the account to pay off the loan. The state may have the power to spend the money, but it has only a fraction of the necessary cash on hand. That's where the second loan comes in.

Howard Peters, executive vice president of the Illinois Hospital Association, said officials agreed another short-term loan is the best way to restart the program.

"These payments were due to hospitals back in March, so it's been a long wait," Peters said. "Some hospitals had to borrow in order to make payroll."

But Blagojevich spokeswoman Becky Carroll said the administration had not committed to the borrowing plan.

"We're looking at all options, but nothing is a done deal yet," she said. "We're looking at this possibility and others, but not sure yet if it can get done."

If the state can't complete the second-year $1.2 billion cycle by Aug. 31, proponents hope to roll it into the upcoming year. Under that scenario, the third-year cycle would cover two years of payments totaling $2.4 billion.

Staff writer Aaron Chambers may be reached at 217-782-2959 or achambers@rrstar.com.

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