Governor John E. Baldacci shakes on the hospital agreement at the state house. Photo by Ramona du Houx

Maine’s payments will save jobs and help fund new projects

By Ramona du Houx

April 7, 2009

In October of 2006, Governor Baldacci and Maine’s hospitals signed a settlement agreement to pay a State debt obligation. In March, Baldacci began the repayment process by signing a $45 million financial order to pay the first installment towards the debt.

“In October 2006, I committed to an aggressive four-year schedule to increase hospital reimbursements and repay Maine’s hospitals for settlements owed to them,” said Governor Baldacci. “Despite difficult budget times, working with the Legislature we have been able to meet that commitment. The agreement I signed in 2006 was to bring Maine current through fiscal year 2007. With these payments, we will go beyond what we agreed to.”

The 2006 agreement also called on hospitals to work to control the cost of the health care they provide.

“Both sides agreed to a target of 3 percent growth in hospital costs,” said Baldacci. “As important as these payments are, we also know that our current rate of healthcare spending is not sustainable. It will take a continued collaborative effort between the State, Maine’s hospitals, and other healthcare providers to contain costs while providing access to quality care.”

As the Appropriations Committee worked to close the 2009 supplemental budget, a bipartisan agreement was reached that ensured that the first General Fund dollars freed up by increased federal support for Medicaid would be directed toward hospital settlements.

“This was a bipartisan agreement with broad legislative support,” said Speaker of the House Hannah Pingree. “Health care is an issue that is extremely important to the people of Maine; working with the congressional delegation and healthcare partners, we are meeting our obligations.”

As the recession is taking its toll in manufacturing jobs across the state, the healthcare sector has not been immune. People are putting off non-emergency operations as healthcare costs continue to rise. The timing of the debt payment will save jobs in the recession and help stabilize Maine’s healthcare network.

“This accomplishes a number of important things. First and foremost, it pays our bills, bringing us up to ’08 in repayments. Beginning in February, we are also going to be changing the payment system, so the state doesn’t run into this problem again. And it leverages federal funds: we are able to draw down two and a half dollars for each dollar,” said the governor. “We’re collectively talking about over $373 million coming to our rural and urban hospitals that employ close to 30,000 people. It’s tremendous in terms of an economic stimulus impact and the overall economy. It prevents layoffs and program cuts.”

Federal officials have said transparency and accountability rules will apply to the hospital payments.

“This will be totally transparent,” said the governor. “In fact we are going to begin that process right now by sending the hospitals a letter with the forms that need to be filled in.”

The information will be posted on both the state and national recovery Web sites.

“Initially, many hospitals had to borrow funds to meet operating expenses, because of the debt the State owed. The first round of funds will be used to pay off those debts. Other hospitals that were planning on layoffs won’t need to proceed with them, which is a huge relief to those communities,” said Steve Michaud, president of the Maine Hospital Association. “We know that several hospitals have capital projects that have been deferred because they just didn’t have the resources; soon they will, and we will see new projects and programs.”

Some of those projects maybe in the form of preventative care and increasing energy efficiency measures.

“This is tremendous for the Bangor area,” said Sister Mary Norberta, president of St. Joseph Hospital. “It saves jobs, not to mention the positive impact on the community. Soon this will create jobs, as we now can move forward with new improvement projects.”