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Reimbursement changes to cost GRMC $750,000

Published: Thursday, Jan. 31, 2013 10:36 a.m. CDT • Updated: Thursday, Jan. 31, 2013 10:40 a.m. CDT

A reduction in Blue Cross Blue Shield reimbursement will likely affect how much employees at Greater Regional Medical Center (GRMC) will pay for their own benefits next fiscal year.

Matt McCutchan, chief financial officer at GRMC, said Monday, Blue Cross Blue Shield reimbursement rates have plummeted from 70 cents to 60 cents per dollar over the past two years.

McCutchan said those Blue Cross Blue Shield reimbursement changes will likely cause a loss in revenue at GRMC of more than $750,000 by 2014.

“These changes in reimbursement have really put pressure on our operating margin,” McCutchan said. “We are going to have to look at places to make cuts and the lowest hanging fruit right now is employee benefits. That’s where we are most out of line with our competitors.”

McCutchan said the loss in revenue will likely force GRMC administration to make employees pay more for their current health insurance.

GRMC employees currently have good benefits — only paying for 6 to 9 percent of their health insurance while the market shows employees at other hospitals paying for 20 to 30 percent of their health insurance.

As well, McCutchan said GRMC will likely need to cut wage expenses in departments where reimbursement is not covering GRMC’s costs.

Affordable Care Act

McCutchan said he does believe the Affordable Care Act (ACA) has played a role in the recent reduction in reimbursement rates because ACA compels insurance companies to insure patients with pre-existing conditions and eliminates lifetime maximum benefits. 

“This is good for patients,” McCutchan said, “but it does add risk and cost to insurance companies. In order to manage the extra costs, they will cut reimbursement to providers and raise premiums. We are seeing both of these things happen in the market.”

Blue Cross Blue Shield can dictate reimbursement rates because they are one of the largest health-insurance companies in the country and is “the dominant player in Iowa,” McCutchan said.


Unlike some other hospitals, doctors at GRMC are still taking Medicare patients. McCutchan said they have no other choice as 50 percent of their patients are Medicare patients. However, GRMC is taking a 2 percent cut in Medicare reimbursement this fiscal year.

McCutchan said that reimbursement cut is costing GRMC a loss of $400,000 per year.

Medicaid expansion

McCutchan said GRMC is a proponent of the Medicaid expansion currently being proposed at the state level. It would expand Medicaid coverage to as many as 150,000 Iowans.

Kirk Norris of the Iowa Hospital Association said broadening the eligibility requirements would be a “win-win, if not a win-win-win” for state government, low-income Iowans and Iowa business community. The hospital industry, he noted, is a major employer and has a $6 billion impact on the state’s economy.

GRMC staff recently issued a press release supporting Iowa Hospital Association and Medicaid expansion.

“We support it because, first, it allows uninsured patients to maintain their health,” McCutchan said. “Right now, uninsured patients don’t go to the doctor at all, or if they do, they go to the emergency room. I hope this expansion would would encourage the uninsured to develop a relationship with their primary doctor.”

“And, on the fiscal side, this expansion would help GRMC with our bad debt and uncompensated care.”

Currently, GRMC loses approximately $3 million annually in bad debt and uncompensated care.

The proposed expansion plan would raise the Medicaid eligibility limit to 138 percent of the federal poverty level, or about $15,400 annually for an individual.

However, Republican Gov. Terry Branstad is against the expansion, calling it “unaffordable and unsustainable.” He also points out the state is picking up $57 million in additional Medicaid costs this year because of decisions at the federal level.

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