ATLANTA Fitch Ratings on Monday warned that local hospitals in Tennessee stand to see their credit ratings deteriorate if the state drastically revamps its TennCare health care program.
Fitch analyst James Gilliland noted that a proposed plan to return TennCare to that of a traditional Medicaid program would mean scores of people would be removed from the programs rolls. That would mean the burden of funding their health care will fall on hospitals as those people seek service from emergency departments. This will inevitably affect these hospitals bottom lines, and pose a threat to their bond ratings.
In response, David Goetz, Tennessees commissioner of finance and administration, stressed that its too early to say what the exact impact will be on local hospitals because the revisions have yet to be fully outlined.
Gilliland is not alone in his views, as analysts at Moodys Investors Service raised similar concerns last month. The agencies are responding to one of the most aggressive plans to revamp the program that has been proposed since TennCare began in 1994.
Gov. Phil Bredensen announced last month that he wants to dismantle the nearly $8 billion-a-year program because of court decrees that prohibit him from making changes that would rein in costs. The group that pushed for those consent decrees, the Tennessee Justice Center, is trying to negotiate with the governor to keep TennCare in place.
Currently, TennCare accounts for roughly one in four dollars in the state budget. At the pace it is growing, it could consume 91% of new state tax revenues by 2008 if left unchecked.
In short, TennCare has failed as a managed care health plan because of unchecked cost increases, Gilliland said. TennCare is the nations most expensive Medicaid plan on a per capita basis, accounting for roughly 33% of Tennessees $23.8 billion fiscal years 2004 through 2005 state budgets.
Gilliland said some hospitals will fare better than others, but the states five Level I trauma centers are likely to bear more of the uninsured patient burden due to their safety net status.
Fitch rates about $2.2 billion of debt that has been sold for seven health care providers in the state, including a teaching hospital. That includes Covenant Health, which has $539 million of Fitch-rated debt; Mountain States Health Alliance, which has $483 million of rated debt; and Vanderbilt University, which has $613 million of rated debt. They are rated A, BBB, and AA, respectively. Covenant and Vanderbilt have stable outlooks, while the outlook for Mountain States is positive.
Bredensen has been in talks with officials from the justice center since last month, but no compromise has been reached. Goetz said a resolution is expected within the next six months.
We understand the concerns and we are likely to find ways to strengthen the safety nets and lessen the impact to hospitals, he said.
Among the possibilities the state is exploring are programs for uninsured children, as well as providing bridge support in cases where working people who lose coverage seek employer-based coverage.
