PROVIDENCE, R.I. (WPRI) – An influential Rhode Island think tank is urging lawmakers to scrutinize Gov. Dan McKee’s proposal to build a new facility at Eleanor Slater Hospital, estimating the cost per patient at the facility has ballooned to more than $760,000 per year.

The recommendation was part of a 30-page report released this week by the Rhode Island Public Expenditures Council, which examined various issues related to state revenue and spending. The nonpartisan group examined how the state-run hospital’s financial woes have plagued the state budget since employees raised concerns around federal compliance in 2019.

“ESH continues to represent the most troubling spending issue in the state budget, with sharp increases in state general revenues, relatively high patient costs, and continuing questions as to future spending,” RIPEC officials wrote in the report.

In a breakdown of the hospital’s financial picture, RIPEC estimated McKee is seeking to spend $143.7 million in state and federal revenue next fiscal year on the state-run medical and psychiatric facility, comprising Zambarano in Burrillville and three more units in Cranston.

With about 188 patients currently living at the hospital, the per patient cost would total $764,362 per year – an eye-popping figure considering House Fiscal Office staff pegged the number at about $557,000 per year during the 2019-20 fiscal year. That’s a roughly 37% increase in per patient cost over four years.

For comparison, RIPEC cited a 2020 report done by the consulting group Alverez & Marsal that estimated the average cost of nursing home care is about $125,000 per year – about six times less than what the state is spending on Eleanor Slater patients.

Eleanor Slater spokesperson Randy Edgar said costs have increased largely because of staffing issues during the COVID-19 pandemic, adding those challenges have led up to increased overtime costs. He also said the hospital’s overall census has increased from 188 when RIPEC did its analysis to over 200 — which would lower the per patient cost.

Eleanor Slater is often described as a “hospital of last resort,” meaning it’s where patients go when no other care facility will accept them. But critics of that characterization argue there are numerous patients living at the facility – especially at the Zambarano campus – who could be receiving the same level of care in less restrictive settings, a requirement of federal law.

“The billing difficulties at ESH revealed that many patients receive services less than hospital level care, and that some needed only skilled nursing level care, which costs only a fraction of the per patient costs incurred at ESH,” RIPEC officials wrote.

The hospital’s money problems started in 2019 under then-Gov. Gina Raimondo when employees raised concerns over billing practices and whether the state was complying with federal law that prohibits institutionalization of psychiatric patients in state-run facilities.

At the time, the state received more than half of its funding for Eleanor Slater’s operations from the U.S. Centers for Medicare and Medicaid Services. But that changed immediately after the state stopped billing for Medicaid because of the compliance concerns. As a result, state taxpayers started shouldering tens of millions of dollars in costs once covered by the federal government.  

Since then, the Raimondo and McKee administrations have failed to remain in federal compliance, as medical patients must make up more than half of the patients at the hospital in order for it to receive Medicaid funding.

The hospital has struggled with the requirement because of high demand for psychiatric services – especially because the facility is legal required to take in mental health patients ordered there through criminal and civil courts.

As a result of the out-of-whack patient mix, RIPEC found, the state last year could only use federal funds to pay for any Eleanor Slater medical patients younger than 22 years old and older than 65 years old, who make up only a small portion of overall patients.  

“Consequently, the enacted FY 2022 budget for ESH contained just $2 million in Medicaid funds,” RIPEC officials wrote.

Indeed, the state this fiscal year put $115.5 million in general revenue – funded by state taxpayers – toward the hospital, representing about 81% of total costs, according to the RIPEC analysis. For comparison, the state paid about 45% of total costs in fiscal year 2019-20. During that same time, overall hospital costs increased about 16%.

To try and solve for the ongoing financial problems, McKee has proposed transferring $210 million to the state’s capital improvement fund. About $108.2 million of that money would go toward the construction of a new, 100-bed medical facility at the Zambarano campus, where fewer psychiatric are living currently. 

As part of the governor’s proposal, the state would designate the hospital’s existing 52-bed Benton facility in Cranston as a standalone psychiatric hospital. The move would theoretically separate the psychiatric patients from the Eleanor Slater license, and help the state remain in federal compliance for Medicaid funding more consistently.

“The proposal assumes that this reorganization would help the state come into federal compliance on its patient mix for billing purposes,” RIPEC officials wrote.  

Edgar also noted that there is additional funding in the governor’s proposed budget to add new leadership at the separately licensed Benton facility.

“This facility will better position ESH to seek available federal reimbursements, reducing costs to taxpayers,” he said in a statement.

The think tank stopped short of taking a position on whether the proposal is a good idea, but it did encourage policymakers to take a closer look at whether a new building would ultimately improve the hospital’s financial standing.

“Before approving this investment, policymakers should assess whether the plan places ESH on a more financially responsible and sustainable path,” RIPEC officials wrote.