Truman Medical Center pulls out of Missouri Medicaid provider tax pool

Kansas City’s Truman Medical Center will stop contributing to a financial pooling arrangement that helps maintain political support for a tax that pumps hundreds of millions of dollars into Missouri’s Medicaid program every year.

The move, which lawmakers began learning about last week, has raised concerns that other providers could follow Truman’s lead — and could ultimately doom the provider tax and the funding it has provided the state for nearly three decades.

The provider taxes were first enacted in 1992, but a bitter political fight over contraceptive coverage and Planned Parenthood pushed an extension of the taxes into a special legislative session in late June. House Budget Committee Chairman Cody Smith, R-Carthage, who guided the bill through the House, said the pooling arrangement has helped maintain support for the taxes from hospitals that do not serve a large number of Medicaid clients.

Truman’s decision “is a big blow to the concept, I would think, as they are the largest Medicaid provider,” Smith said.

Pulling out of the pool wasn’t an easy decision, Keith King, spokesman for Truman Medical Center, wrote in an email to The Independent. But he said it is necessary for the hospital’s financial stability. 

“As a safety-net hospital and largest single provider of uncompensated care in our region, Truman Medical Centers/University Health operates on a lower operating margin than most Missouri hospitals,” King wrote.

The special session extended the provider taxes through 2024.

Hospitals pay a tax of about 5.75 percent on patient revenues that produces about $1.7 billion annually to support the Medicaid program. Called the federal reimbursement allowance, or FRA, the money finances payments for hospital care and other services provided by Medicaid.

There are similar taxes on nursing homes, pharmacies and ambulance services.

For hospitals like Truman that serve a large Medicaid clientele, the tax is paid by deducting what is owed from Medicaid payments. Hospitals that have a limited number of Medicaid patients remit cash to the state.

The pool is a voluntary arrangement managed by the Missouri Hospital Association. Participating hospitals that receive more in Medicaid payments than they pay in FRA taxes contribute to the pool and hospitals that pay money to the state receive funds to offset the taxes.

The pool handles about $80 million annually, said Dave Dillon, spokesman for the association.

“Hospitals that serve a significant number of uninsured may gain more financially by walking away,” Dillon wrote in an email. “That’s why we work so hard to maintain the pooling arrangement — because it levels the playing field between potential winners and losers in the FRA, and keeps everyone in the tent.”

SSM Health, which operates nine hospitals in Missouri, pulled out of the pooling arrangement during 2019, when it was enduring financial stress that led it to put three hospitals up for sale.

The action by Truman Medical Center comes as the state is imposing cuts on hospital payments. Gov. Mike Parson vetoed a $50 million appropriation intended to offset cuts to payments for outpatient services and the hospital association is suing over plans to cut payments for inpatient services.

“The move to managed care, outpatient fee schedules and other factors have destabilized hospitals’ 30-year relationship with the state in the FRA,” Dillon wrote in an email. “Like the game Jenga, the more parts of the structure that are removed, the less stable the whole platform.”

Neither Truman nor the hospital association would say how much Truman contributes to the pool. 

“But here’s the bottom line: this is a tough year all around, and we’ve been looking at every expense to see what we can cut to potentially meet that small margin we talked about earlier,” King wrote in the email. “These kind of cuts are never easy, but we make them to ensure we can continue to take care of our patients at the level they deserve.”

The full impact of Truman’s withdrawal from the pool may not be known until the FRA is up for renewal again in 2024. Support from providers for the taxes is vital to the regular passage of extensions.

“This is about goodwill, it is about having a wider view of this program,” Dillon said in an interview. “It is what underpins the kind of collaborations necessary to do the FRA.”