The big question is how much that will ultimately cost the Towson hospital. Tens of millions of dollars could be at stake.
The University of Maryland Medical System voluntary gave up the Medicare certification when it bought St. Joseph from Denver-based Catholic Health Initiatives in a $206.3 million deal that closed in December. The medical system, looking for a clean break from troubles St. Joseph faced under the previous owners, chose instead to apply for a new certification.
But in December, St. Joseph failed an inspection by the Centers for Medicare & Medicaid Services, which oversees the health program, needed to get a new certification. It quickly addressed the problems and is awaiting results of a second survey conducted this month. But while it waits, St. Joseph remains unable to collect Medicare reimbursements.
Federal officials said St. Joseph won't be able to bill until it meets its requirements.
"The effective date of the hospital's participation in Medicare will be the date it submits an acceptable plan of correction, and that is the earliest date the hospital will be permitted to bill for services," the agency said in a statement this week.
St. Joseph believes it became eligible for payments as of Dec. 14, when it submitted a plan to the agency showing that it had corrected the issues identified in the December survey and was in compliance with federal guidelines.
St. Joseph officials have declined to discuss the case but revealed their position in a financial statement. The hospital reported that it lost $5.2 million in revenue in the two weeks it believes it was not Medicare-compliant.
The financial statement also for the first time detailed how much the University of Maryland spent to acquire the troubled medical center. The medical system took out a $220 million short-term loan to cover the acquisition's cost and working capital, the filing said. It hopes to refinance this year with a state-backed bond.
The financial burden of the merger, including the additional debt, has caused some concern among bond rating agencies, including Standard & Poor's, which downgraded the rating of the University of Maryland Medical System from A to A-.
S&P Director Stephen Infranco said his team wasn't overly concerned about the lack of Medicare certification and figured it would be a short-term problem. He expects things to eventually turn around.
"UMMS just got in there and probably hasn't gotten a chance to put their stamp on things and make the changes they see fit," Infranco said.
But the agencies were working off the University of Maryland's assumption about when it will be able to bill Medicare. In its report, Moody's noted that the hospital wasn't able to bill for Medicare for two weeks. Moody's maintained its A2 rating, but lowered its outlook from stable to negative. Fitch maintained its A rating.
Moody's analyst Beth Wexler said she believes the certification issue will be resolved and have little impact on the system's finances. "I think it is all built into their model and is short-term," she said.
The labor union that represents hospital workers is concerned. It worries that the University of Maryland isn't being forthcoming with the potential financial impact of not having Medicare certification.
"This apparent delayed disclosure around the loss of Medicare certification could harm patient care and put financial strain on the system, which gets [much] of its funding from public sources," said Vanessa Johnson, vice president of 1199SEIU United Healthcare Workers East. "The University of Maryland Medical System must be more transparent and accountable to the people of Maryland."
Losing Medicare revenue for even a few weeks adds further financial strain on the hospital as it attempts to rebuild. It is expected to take five years for St. Joseph to make a profit once again.
Medicare accounts for 41 percent of hospital revenue, on average, according to the American Hospital Association. It makes up 45 percent of St. Joseph's patient services revenue, according to the financial statement.
The certifications also have further ramifications. Medicare certification is a condition for participating in the Medicaid program. A spokeswoman with the Maryland Department of Health and Mental Hygiene said the agency is "reviewing applicable laws and regulations so we can apply them appropriately in this case." Doctors who work for the hospital, not those in private practice, also can't bill Medicare while the certification is in question.
The University of Maryland said it knew the risk it was taking by reapplying for certification.