Cleveland Clinic Health System Obligated Group - FMSbonds.com

Ohio HCAP ProgramOhio currently has in place a program known as the “Hospital Care Assurance Program” (“HCAP”) thatimposes an assessment on hospitals to create a pool of funds for redistribution to hospitals based upon an indigentcare factor. Under the HCAP, ODJFS helps hospitals pay for uncompensated costs of treating indigent people. TheDepartment does so by levying a provider tax against hospitals to generate a basic funding source that is joined withmatching federal Medicaid funds. The pooled funds are then redistributed to hospitals based on the relative level ofeach hospital’s indigent care services. The BBA imposed reductions on the level of matching federal fundsavailable with respect to the HCAP and similar programs in other states. The pool of funds available to hospitalsunder the HCAP is therefore expected to decrease in the future. In the fiscal year ended December 31, 2007, theObligated Group received HCAP fund net distributions of approximately $7.3 million. There is no guarantee that, inthe future, the Obligated Group will continue to receive distributions at this level or that the Obligated Group willreceive any aggregate net amount from HCAP.State Children’s Health Insurance ProgramThe State Children’s Health Insurance Program (“CHIP”) is a federally funded insurance program forchildren whose families earn too much money to be eligible for Medicaid, but yet cannot afford commercial healthinsurance. CMS administers the CHIP, but each state creates its own program based upon minimum federalguidelines. Ohio has implemented a CHIP. A CHIP can either be part of a state’s Medicaid program, or acompletely separate state program.While generally considered to be beneficial for both patients and providers by reducing the number ofuninsured children, it is difficult to assess the fiscal impact of CHIP on the payments to the Obligated Group.Moreover, states must periodically submit their CHIP plan to CMS for review to determine if it meets the federalrequirements. If it does not meet the federal requirements, a state can lose its federal funding for its program.Finally, the CHIP currently is only funded by the federal government through March 31, 2009. A state’s decision toelevate the eligibility requirements, thereby decreasing the number of children eligible for CHIP, the loss of federalapproval for a state’s program and the failure of the federal government to appropriate additional funds for CHIPafter March 2009 could each have a material adverse effect on the financial condition and results of operations of theObligated Group.Florida Medicaid ProgramFlorida Medicaid provides a variety of health care services at varying levels of coverage to eligible personswho meet certain income and asset limits. The Medicaid Program in Florida is administered by AHCA throughvarious systems of payment, including a fee for service system and a managed care program.Reimbursement for care provided to Florida Medicaid patients is subject to appropriation by the Floridalegislature of sufficient funds to pay incurred patient obligations. In Florida, Medicaid reimbursement rates forhospitals, nursing facilities and other institutional providers are determined by the Medicaid Program AnalysisBureau. Currently, hospitals are reimbursed for inpatient hospital services prospectively based on fixed per diemrates, subject to caps, regardless of diagnosis or level of care delivered to such patients. An exception is made fordiagnostic laboratory procedures, which are reimbursed at the lesser of the provider’s customary fee or themaximum Medicaid fee.As a result of Florida Medicaid reimbursement methodologies that limit payments to providers of Medicaidservices and continuing Florida budget cuts reducing the level of benefits paid, there can be no assurance that thepayments for services provided by the Obligated Issuers to Florida Medicaid patients will be sufficient to cover theactual costs of providing such services to such Medicaid beneficiaries.30