The Ides of March have come and gone, and so has the midpoint of this 140-day legislative session. The House of Representatives Appropriations Committee has worked at a feverish pace to produce HB1 and the supplemental funding bill. These bills have been voted out of committee, gone to Calendars, and been posted for presentation on the House floor. The bill has been scheduled for reading on the floor of the House and for debate on Friday, and maybe on Saturday, and perhaps even on Sunday!
I thought I would provide for you a “Cliff Notes” version of just where we are from the House viewpoint at this stage of the session. Remember that changes can be made on the House floor next week. Also remember that when the bill leaves the House, it moves into a conference committee with the Senate. Five lucky House members will constitute that House conferees; the same number will come from the Senate.
Recognizing the financial situation Texas faces, UTMB has requested that in HB 1:
- The university's appropriations be cut by percentages no greater than other health-related institutions’ appropriations are cut, and
- The university receives Ike restoration funds appropriated or approved last session.
Tuition Revenue Bond Debt Service Funding
o A $150 million tuition revenue bond (TRB) was passed by the 81st Legislature. Since it was approved late in the session, and since UTMB did not need immediate funding for the facility, debt service for that TRB was not appropriated.
o UTMB has requested approximately $13 million for TRB debt service during the second year of the next biennium ($150 million at 6% over 20 years).
o This TRB will be used to construct a Surgical Tower connected to the existing John Sealy Hospital to restore bed capacity to pre-Ike levels and to provide operating rooms and ICU beds to support UTMB’s patient care obligations, including the Level I Trauma Center, and UTMB’s education and research programs.
o The TRB will be matched by a grant from The Sealy & Smith Foundation of $170 million; bonds and philanthropic sources will cover the remainder of the construction costs.
o Construction of the Surgical Tower is essential to maintaining current clinical, trauma and educational programs.
o Funding for the TRB debt service is NOT in HB 1. It must be added to the FY 2012-2013 appropriations bill before or in conference, or be added to the FY 2011 Supplemental Appropriations bill.
UTMB’s Base Appropriations
o During the 81st Legislative Session, UTMB received a $48-million-per-year adjustment to its base appropriation in lieu of DSH and UPL funds, which go to the state treasury. The base appropriations adjustment helps support UTMB’s services to low-income patients and is crucial to UTMB’s operation of the Level One Trauma Center. These sorts of services are supported at other public tertiary care hospitals by DSH and UPL.
o UTMB has requested that the legislature treat appropriations reductions in the same manner as it does other state-funded teaching hospitals, which were reduced by only 10% in HB 1.
o Reductions of the magnitude proposed in HB 1 (25% to UTMB’s hospital base GR funding) will likely lead to some or all of the following:
− Reduction in services to women and children through UTMB’s Regional Maternal and Child Health Programs, which are located throughout East and Southeast Texas and in border communities, and which last year served more than 100,000 economically disadvantaged women and children
− Elimination of the contract to serve Central Texas mothers at Austin Women’s Hospital at Brackenridge Hospital, which delivers more than 130 infants per month and provides family planning services
− Reduction in indigent health care services in UTMB hospitals and clinics
− Reduction in post-graduate medical education programs and house staff
− Reduction in available beds to support hospital admissions
− Reduction in services and/or closure of the Level I Trauma Center
o Preservation of UTMB’s base hospital appropriation is essential for UTMB to continue its post-hurricane recovery and maintain its clinical and educational programs. UTMB is asking the Legislature to reduce its hospital appropriation by no more than the 10% reduction applied to the other state-owned hospitals in HB 1; the final decision to be made in conference committee.
Continued access to HB 4586 funds appropriated in the 81st Legislature for Ike Recovery
o UTMB received $150 million in General Revenue to be used to match FEMA funds and other Hurricane Ike recovery needs.
− The FEMA damage estimate in May 2009 was $667 million; the current revised FEMA damage estimate is $1.2 billion.
− FEMA requires fund matches at both the 90:10 level and the 75:25 level based upon the type of repair.
− Some damages are not covered at full cost and some are not covered at all by FEMA funds.
o Since the hurricane, UTMB has been working around the clock with contractors and FEMA representatives to finalize the damage and mitigation cost assessment; however, due to the pace of FEMA approval, the appropriation cannot be fully spent before its expiration date. UTMB is working with the LBB and the Comptroller and will encumber much of the funding by the June 2011 expiration of the appropriation through contracts with major construction vendors.
o Any funds unencumbered before the HB4586 June 2011 expiration will be swept.
o UTMB seeks permission for continued access to these funds if it is unable to encumber all of the funds before the appropriation timeline expires. A potential remedy is “re”-appropriation of unencumbered funds in the HB 1 FY2012-2013 appropriations bill or in the Supplemental Appropriations Bill.
Correctional Managed Health Care Contract
o The state has contracted with UTMB and Texas Tech since 1993 to provide medical care to inmates.
o The major portion of correctional care services is funded through a baseline appropriation. However, both universities customarily incur care-related expenses over and above their share of that baseline appropriation. These expenses have traditionally been covered by the institutions until a supplemental appropriations request can be approved by the state.
o As a result, UTMB and Texas Tech have had to carry substantial losses on their books until a supplemental appropriation to cover the deficit is approved; this creates a financial hardship for both university systems.
o This process also runs counter to existing statute, which states that university funds will not be utilized for offender health care services.
o UTMB and Texas Tech have both gone on record by disagreeing with the most recent auditor’s report:
− Both universities believe that their health care costs and indirect costs are stated accurately and that they are consistent with community standards.
− Both universities believe that the accounts for all monies used for salaries and contracted services in their delivery systems have been compliant with generally accepted accounting principles, as well as the provisions of the Correctional Managed Health Care Committee contract.
o The cost of health care in the prison system continues to rise because of:
− Medical inflation(i.e. increased costs for drugs, supplies and equipment)
− Increasing number of older offenders who do not qualify for parole
− Increased acuity and volume of hospitalized patients
− Increased burden of chronic diseases
− Increased use of pharmaceuticals
− Increasing personnel costs
− Expanding mental health services
− Offender litigation
o UTMB wants to serve as a vendor for hospital and specialty health care, pharmaceutical services, telemedicine, electronic medical records, information systems, and physicians and mid-level practitioners, fully reimbursed for these costs.
o UTMB must be allowed to adjust the amount of care it provides to the appropriation provided and not expend university educational funds to close that gap.
o UTMB’s reimbursement for patient care services must cover associated costs, as determined by GAAP accounting standards.
o UTMB must obtain $51.1 million in Supplemental Appropriations in order to cover the deficits from FY2010-2011. The current Supplemental Appropriations Bill, HB-4, includes $40 million to UTMB for CMC.
o UTMB must have a new contract with TDCJ that clearly defines roles and responsibilities, with UTMB as a vendor for offender health services sized to fit the appropriation amount.