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Health Care Providers Try To Recover From Impasse

Flickr Creative Commons BY-NC 2.0

During the more than two years that Illinois went without a state spending plan, hospitals, dentists and other health care providers waited months or even years to get paid for services to state employees and Medicaid patients.

Washington University School of Medicine doctors who had stopped seeing new patients insured through the state of Illinois changed course November 1 and began accepting them again.  That could be seen as progress.

After all, Illinois’ two-year state budget impasse — a political fight between the state’s Republican governor and Democrats who control the General Assembly — left health care providers in and outside the state struggling to serve patients while dealing with payments that were up to two years overdue.

Some of the Washington University doctors, those who practice at outpatient clinics, St. Louis Children’s Hospital and Barnes-Jewish Hospital in St. Louis, had decided to stop accepting new patients insured through Illinois’ State Employees Group Insurance Program a year ago because of the payment delays.

Barnes-Jewish Hospital in St. Louis
Credit Washington University School of Medicine
Washington University School of Medicine
Barnes-Jewish Hospital in St. Louis

Even though the state still owes Washington University $14.5 million, the medical school’s decision to rescind any previous restrictions was a recognition that the Illinois General Assembly passed a budget this past summer — over Gov. Bruce Rauner’s veto — and recently took action to hasten repayment of debts to the school and other vendors waiting on state payments, a university spokeswoman says.

“The state’s new health care budget provides a way to pay down that debt, and over the next six months we will review the state’s progress in making payments for medical services provided by Washington University Physicians,” spokeswoman Caroline Arbanas says.

The decision by the medical school was a relief to Renee Vespa, 52, a Springfield-area resident who said she was turned down several times for an appointment with a Washington University orthopedic surgeon this year because she has insurance through her job as a program adviser for the Illinois Department of Human Services.

Vespa was seeking a specialist willing to correct complications from surgery on her left foot in March 2016 in Springfield. She says she hopes she can get an appointment in St. Louis after the November 1 change in policy and hopes the delay in corrective care won’t lead to permanent nerve damage in her foot.

The previous appointment denials “made me angry at the state of Illinois,” she says. “I am paying my premiums for services that I cannot use.”

Having access to Washington University physicians again is “fantastic news,” she says.  

But with Illinois still owing $5.3 billion to state worker and state retiree health care and almost $4.2 billion for the care of Medicaid patients, the financial pain for providers and hardships for patients related to the impasse aren’t going away soon. Those bills, which the state started paying this week, represent more than half of the state’s overall $15 billion to $16 billion in backlogged payments to vendors.

“Everyone’s affected,” says Danny Chun, spokesman for the Naperville-based Illinois Health and Hospital Association, calling a state with a $36 billion annual budget and $15 billion in overdue bills an “insane” situation.

Health care providers say the legislature, which approved a permanent 32 percent income tax increase, helped the backlog from getting worse. And they say the state’s recently approved $6 billion in borrowing through bond issues to pay down the backlog will help even more and will leverage $2.5 billion in federal matching Medicaid dollars.

Credit Alex Proimos / Flickr/Creative Commons BY-NC 2.0
Flickr/Creative Commons BY-NC 2.0

All of the cash flow set in motion by lawmakers will help the state avoid paying vendors even more in late charges, with interest rates ranging from 9 percent to 12 percent interest annually. The overdue fees currently total about $900 million.

“The good news is that they passed a budget,” Chun says. “The bad news is there’s a lot of work to do.”

Money from the bonds could be exhausted in six months, according to Abdon Pallasch, spokesman for Illinois Comptroller Susana Mendoza, a Democrat.

That still leaves about $6 billion more in unpaid bills. And Rauner says Illinois’ budget remains $1 billion out of balance.

Regardless of the political debate over the accuracy of whether the General Assembly passed a balanced budget and the need for more cuts, Pallasch is blunt in describing the financial hurdles to resume timely payments for health care providers.

“It will take years,” he says. 

For patients and providers alike, the impasse created financial and emotional stress.

Some providers, not wanting to pile up more unpaid bills, asked patients insured through the state insurance program to pay upfront for services beyond the copays or deductibles they already owed, according to Martha Merrill, director of research and employee benefits for Council 31 of the American Federation of State, County and Municipal Employees (AFSCME).

During the more than two years that Illinois went without a state spending plan, hospitals, dentists and other health care providers waited months or even years to get paid for services to state employees and Medicaid patients. Some providers delayed expansion, took out lines of credit or even turned to patients to fill in the gap. In this week’s Illinois Issues in-depth report, reporter Dean Olsen examines the long-term damage done to the health care system in Illinois.

The insurance program covers about 347,900 people, including active workers, university employees, retirees and dependents. During the impasse, premiums continued to be collected from members of the program, and that money eventually was used to pay claims, but at least 80 percent of the program’s cost is covered by the state.

According to providers, payment delays were the worst for state plans considered self-insured. For members of the Aetna/Quality Care and “open-access” plans, state funds were funneled directly through third-party administrators to pay claims, so when there was no state appropriation, those payments to providers stopped.

For “fully-insured” plans, such as those provided by Blue Cross and Blue Shield of Illinois and Health Alliance, the state owed those companies premiums. Even when the companies weren’t being paid by the state or were paid late, the companies said they continued to pay health care providers.

AFSCME most frequently heard complaints about upfront payment demands coming from dentists, who were allowed to ask for full payment at the time of service unless they were considered preferred providers. But Merrill says AFSCME also heard about upfront payments being required for imaging scans and nondental surgeries.

Sometimes patients paid the costs, while others delayed getting care, Merrill says. The Illinois Department of Central Management Services sometimes was able to expedite payments to providers so demands on patients could be relaxed and so patients wouldn’t be sent to collection agencies, she says.

Vespa, the DHS employee from Spaulding, near Springfield, says the budge impasse’s lingering impact is causing “a huge amount of stress” for state workers. The late payments to health care providers have effectively nullified some of the benefits of having good health insurance, she says.

Vespa says she understands the reasons behind the political fight that led to the budget impasse. “We need a workable budget, but not at the expense of at-risk populations and on the backs of state employees,” she says.

Merrill wasn’t aware of any patient’s health being compromised as a result of the impasse and payment delays.

“I’m still hearing about problems,” she says, though she is sympathetic to providers’ plight.

“It’s going to take time for it to get better and improve,” she says. “A lot of these providers have been waiting a long time to be paid.”

Dentists, like other health care providers, have had to borrow to make ends meet, and they continue to endure financial hardships. The situation has been most acute in downstate areas such as Springfield, Champaign-Urbana and other regions with universities, prisons and other sites of concentrated state government employment, says Greg Johnson, executive director of the Illinois State Dental Society. 

Credit Wonderlane / Flickr

Dentists are owed about $150 million for the care of state workers, retirees and dependents, he says.

“The delays have not gotten much worse since July,” he says. “We’re still waiting to see how much of the borrowing … will be used to alleviate the dental claims.”

Pallasch says claims for Medicaid providers and those treating state workers likely will be among the first paid because of the federal match available through Medicaid and the high late-payment fees associated with the far-overdue health care bills for state workers.

Delays in paying health care claims, including Medicaid bills, didn’t only affect downstate Illinois.

Presence Health operates hospitals in Urbana, Danville and the Chicago area as well as doctors’ offices and other facilities. The system is one of the largest providers of Medicaid services in the state, according to a statement from Will Snyder, Presence vice president for external affairs.

“Presence Health has seen its aged Medicaid accounts receivable increase drastically during the impasse,” Snyder says, noting that Presence’s average wait for Medicaid payments from the state is 248 days, while the average wait is 348 days for state employee group health payments.

Snyder says the lack of a state budget, combined with uncertainty surrounding attempts to repeal the federal Affordable Care Act, “created an extraordinarily challenging business environment for health care providers. Presence Health remains committed to providing high-quality, compassionate care to our communities, including Medicaid populations and other vulnerable populations. We hope our leaders remain committed to a path of fiscal responsibility and do not leave health care providers waiting nearly a year for payments.”

At Advocate Health Care, which operates in the Chicago area and downstate, Meghan Woltman, vice president for government and community relations, says in a statement, “We continue to manage significant delays in payment and remain committed to working with state officials to ensure continued support for critical programs and services for the state’s most vulnerable patients.”

The Chicago Tribune reported in May that Advocate was making $200 million in cuts, amounting to a 4 percent decrease in costs, in part because of low and slow Medicaid payments.

The impasse prompted as many as 30 percent of Illinois’ 97 county-level health departments — mostly the small and mid-size agencies — to trim operating hours, staff and programs, says Tom Hughes, executive director of the Illinois Public Health Association. Even after passage of a fiscal 2018 budget, Hughes says, “Not all health departments have restored hours and/or staff. We have a long way to go to recover from the budget impasse.”

In Springfield, the seat of a county where almost one out of every four residents are insured through the state insurance program, the impasse prompted the Springfield Clinic physician group to change a past practice and ask patients to pay their deductibles and copays before the state paid its share instead of after. A clinic spokeswoman won’t say whether that request for state-insured patients continues.

A Springfield surgical group, Orthopedic Center of Illinois, began requiring patients insured by certain state of Illinois plans to pay half of the cost of elective surgeries, including the state’s share, before the surgery would be performed. Any overpayment would be refunded to the state-insured patient later. The upfront payment requirement has since been rescinded, an OCI spokeswoman says.

Springfield-based Memorial Health System, which is owed $144 million by the state for the care of state workers and Medicaid recipients, put off constructing an $80 million medical office building during the impasse. The project remains on hold, system CEO Edgar Curtis says. Some of Memorial’s bills to the state have gone unpaid for almost two years, he says.  

Memorial Medical Center in Springfield
Credit Memorial Medical Center
Memorial Medical Center
Memorial Medical Center in Springfield

The health system, which operates Memorial Medical Center in Springfield and three other central Illinois hospitals, hasn’t had to lay off employees as a result but has reduced internal expenses, Curtis says.

“We’re not looking at spending on bricks and mortar right now,” he says. “We love serving the community, and we’re never going to deviate from providing that care. It’s going to take time for the revenues to flow in, and we understand that. The backlog of payments from the state is catastrophic.”

Hospital Sisters Health System, which operates Springfield’s other large hospital, HSHS St. John’s, didn’t let the backlog halt the start of construction on a $48 million outpatient medical office building for the care of women and children. The system is owed $57.6 million in Medicaid bills and $71.4 million for state employee health care, spokesman Brian Reardon says.

The impasse caused Springfield-based Southern Illinois University School of Medicine to cut the pay of doctors in its physician group practice, contributing to the decisions of some doctors to leave, medical school Dean and Provost Dr. Jerry Kruse says. Late state payments for patient care, as well as internal budget cuts made to cope with the financial crisis, have left the school in a “very difficult budget situation,” he says.

Some of the state’s small, rural hospitals had a hard time meeting payroll during the impasse, and many are still struggling, according to Patricia Schou, executive director of the Illinois Critical Access Hospital Network.

The state health insurance program owes Fayette County Hospital and Long Term Care $2 million. With 320 workers, the Vandalia institution serves employees of Vandalia Correctional Center and is one of the largest employers in the southern Illinois county.

With net revenues of $25 million per year, the hospital has had to appeal to the state for expedited Medicaid payments and use more than $2 million of a $2.7 million line of credit, all to continue paying staff and other financial obligations, CEO Greg Starnes says.

“We operate on some pretty small numbers compared to the larger systems,” he says. “We are really having to manage that cash flow carefully.”

The state owes 16-bed Franklin Hospital almost $1 million in Medicaid claims and more than $1 million for state employee health care, CEO James Johnson says. The situation has caused the hospital in Benton, 130 miles south of Springfield, to use most of a $1.3 million line of credit and delay payments to its own vendors for medical supplies and maintenance contracts, he says.

Some vendors, not happy with the state’s debts being transferred to them, have threatened to cut off services to the 200-employee hospital.

“It’s not a very pleasant place to be, in terms of accounts payable,” Johnson says. “We are living paycheck to paycheck.”

Dean Olsen is a staff writer for The State Journal-Register in Springfield, where he covers the health care beat.

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