Mat-Su Regional Medical Center puts expansion project on hold

PALMER — A $60 million expansion of facilities at the Mat-Su Regional Medical Center and an additional $6.7 million project at Alaska Regional Hospital in Anchorage are now on hold because of uncertainties raised in Gov. Mike Dunleavy’s proposed FY 2020 state budget.

The governor’s plan to cut $225 million, or one-third, of state funds for Medicaid, a federal-state health care program for lower-income Alaskans, threaten the economics of the projects, officials at both hospitals said.

“These projects are on hold while we analyze the situation. We’re in a holding pattern,” said Alan Craft, spokesperson for Mat-Su Regional. “Mat-Su Regional has plans to expand its capacity to provide much needed access to care, but investment is not possible when a significant portion of its reimbursement and the well-being of the economy are in jeopardy from massive cuts and layoffs by the state,” Craft said.

Monique Martin at Alaska Regional in Anchorage said “a one-third reduction to the Medicaid budget would be devastating to Medicaid recipients, health care providers and the health care delivery system as a whole. The reduction of state funds also triggers a loss of federal funds for Medicaid that is tied to the state money.

Cuts to Medicaid are part of the governor’s proposal to reduce the state budget by $1.6 billion next year, which the governor said is needed to bring spending in line with recurring revenues. However, over half of the budget cut, or $900 million, is to free up money for the governor’s proposed $3,000 Permanent Fund Dividend, which Dunleavy promised voters in elections last fall.

The Mat-Su Regional projects on hold include $40 million for an expansion of facilities planned for 2020 and 2021; a $14.5 million expansion of emergency treatment facilities, and $4.5 million for new inpatient psychiatric beds that were to be installed this year. The projects are part of an overall $70 million expansion plan for the hospital, of which $10 million is complete, according to information provided by the Mat-Su hospital.

Alaska Regional had planned 24 new inpatient psychiatric beds, Martin said. Were the new facilities to be installed the new employees hired to staff the new facilities would have earned $16 million in salary and benefits, Martin said.

More inpatient psychiatric units are badly needed because patients with drug and mental health problems are crowding emergency rooms. Craft said Mat-Su’s emergency room dealt with 349 behaviorial health issues in 2014, which increased to 1,100 in 2017.

The new inpatient psychiatric beds planned are needed to take the pressure of the Mat-Su’s emergency room so there is capacity and staff to handle medical emergencies.

The Dunleavy administration says it is working on a plan to reorganize Medicaid, which it says is inefficient, but needs permission from the federal Centers for Medicare and Medicaid or CMS, through a “waiver” process. This is a complex procedure that could take one to two years, administration officials acknowledged in briefings to budget committees in the Legislature.

As a short-term measure Dunleavy plans to tap $179 million remaining in the state’s Statutory Budget Reserve (SBR) to help sustain the state share of Medicaid until the federal permission comes through. The uncertainty this raises, however, is that the federal CMS might not approve the state reorganization plan, or could approve it with change, but the money withdrawn from the SBR is enough money for only one year, which raises questions about the future.

Also, the Legislature may not approve the withdrawal from the SBR. Lawmakers have already voiced concern about tapping remaining state cash reserved for the FY 2020 budget.

Craft said the uncertainty over Medicaid is a major threat to Mat-Su Regional, which was built in 2006. In 2018 about 21 percent of the hospital’s stays, or patients kept overnight, were Medicaid patients.

Thirty four percent of visits to Mat-Su Regional’s emergency room were Medicaid patients, and 60 percent of the behaviorial health patients visiting the emergency room were on Medicaid. This is important because if Medicaid were reduced the hospital will have to absorb these costs since under federal law patients cannot be turned away from emergency rooms. “Mat-Su Regional provides care to all patients, regardless of financial status,” Craft said.

The hospital experienced $17.2 million in uncompensated care costs in 2018 and that could rise substantially if the one-third cuts to Medicaid are made.

The hospital is important to Mat-Su’s economy. In 2018 the hospital paid $79.9 million to 799 employees; $8.2 million in purchases from local vendors, and $1.3 million in property and sales tax to local governments, according to information made available by Mat-Su Regional.