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  • Guest Blogger: Are Feds Giving a Safety Net to Massachusetts's Hospitals?

    Two of the most prominent “safety net” hospitals in Massachusetts are facing sizable budget gaps again this year, and are turning to the feds to bail them out. Boston Medical Center (BMC) and Cambridge Health Alliance (CHA) have long received, in part because of their emphasis on the under- and uninsured, greater political assistance in propping up their balance sheets. The desired Medicaid waiver amendment would be worth $86 million this year for CHA and $90 million for BMC. These institutions play an important role in Massachusetts, but the new slug of federal dollars undermines the viability of Massachusetts health reform by introducing new annual bailouts.

    A key accomplishment of the Massachusetts experiment was a deal to leverage public money away from hospitals for the care of the uninsured to assist low-income individuals in purchasing insurance on their own instead. MIT economist Jonathan Gruber described the status quo as “The federal government was essentially supplementing the expansion of these inner city hospitals.” For more on this funding arrangement see Greg D’Angelo and Ed Haislmaier Health Care Reform in Massachusetts: Medicaid Waiver Renewal will Set a Precedent.

    Post-reform, these safety net hospitals were provided multiple measures to aid in the transition to the new health care landscape. For example, they were granted three years of supplemental payments starting at $200 million dollars and ratcheting back $20 million annually. This arrangement kept in place some form of direct payment to these institutions, and earmarked that money away from subsidized coverage for low-income individuals. Pioneer Institute’s Executive Director called for the end of these payments in a op-ed in The Boston Globe, see Jim Stergios Doing the Math on Healthcare.

    As Medicaid moved from direct payments for care toward more payments to managed care organizations, BMC and CHA established and were granted a three-year exclusive contract to these patients. The state was also given permission from the feds to use additional money remaining in the Safety Net Care Pool (SNCP) to compensate these hospitals for remaining care they provided to the uninsured.

    Two things raise additional concerns. One, in order to make budget numbers work in a period of economic freefall, Governor Deval Patrick refused to make payment to BMC for Medicaid services already rendered. So the federal money possibly on its way to BMC could be another special deal to paper over Massachusetts’ budget woes.

    Second, the budget gaps these hospitals face are reason for even more concern because of the President’s recently passed national health plan. Because the federal law both expands Medicaid eligibility and offers generous subsidies to families up to 400% of the federal poverty level (up from 300% in Massachusetts), the number of individuals seeking care at safety net hospitals is going to spike. Because the federal law is premised on $500 billion in projected “saving”/cuts from entitlement health spending, safety net hospitals will be in even higher demand as other doctors stop taking patients due to lower reimbursement rates. The Obama Administration has essentially asked the hospitals to accept a business model not seen since the late ‘90s internet boom — you’ll lose money on each patient but you’ll make it up on volume.

    If safety net hospitals are not able to balance their budget sheets even with the special funding streams provided under the Massachusetts health reform, low-income individuals with private insurance or Medicaid will lose their place of care because the status quo is unsustainable.

    All of these issues turn on ever-rising health care costs. And they make clear that we need reform that puts consumers in the drivers seat and leverages health care decisions to help contain health care costs. Instead of paying hospitals when individuals don’t have insurance or not reimbursing doctors at a rate that covers the cost of care, Massachusetts must focus on reforms that promote market choice and competition. That’s the only way to control the cost of providing coverage for employers and affordable, quality coverage for employees.

    For more on how Massachusetts has struggled to aid its small business community during health reform, and suggestions to fix it see Joshua Archambault Massachusetts Health Care Reform Has Left Small Business Behind: A Warning to the States.

    Cross-posted at the Pioneer Institute Blog.

    Posted in Obamacare [slideshow_deploy]

    3 Responses to Guest Blogger: Are Feds Giving a Safety Net to Massachusetts's Hospitals?

    1. Pingback: Guest Blogger: Are Feds Giving a Safety Net to Massachusetts’s Hospitals? | BIG Propaganda

    2. Dennis Keefe, Cambri says:

      In the words of Ronald Reagan: "There you go again."

      Several years ago, when the economy was actually in far greater shape, I had to push back against the conservative think tanks that opined the public support we receive was somehow unwarranted, unfair and unnecessary. I thought we had actually put the matter to bed but here it is again, like Lazarus rising, and in yet another election-year cycle.

      Let me first reiterate a couple of points and then bring you up to date about developments at Cambridge Health Alliance.

      You begin your piece by saying we are "turning to the feds" for a bailout to close our budget gaps. That simply isn't true. We simply want and expect to be paid for providing important services for people who desperately need health care and have no place to turn.

      Cambridge Health Alliance, in fact, provides 30 times the health care to the uninsured compared to the community hospital average and at least 10 times the health care to Medicaid/Commonwealth Care patients compared to the community hospital average. As you noted, these government programs – whether it be Medicaid or the uninsured – typically pay providers far below the costs of health care. That is why both the state and federal governments have designations for disproportionate share hospitals – those hospitals with a high public payer mix – to provide needed financial support in recognition that government programs often do not cover the full health care costs for their beneficiaries.

      It's simple math; the greater the amount of care an organization provides to populations served by these programs, the greater the financial shortfall, and the greater concomitant need for additional revenue support. For our health care system, low-income public programs represent greater than 50 percent of what we do, while for some area hospitals it's as low as five percent. Health reform was aimed at changing the formulas around this government payer formula and it has succeeded somewhat. But our population of uninsured and underinsured remains quite high while the amount we receive from government payers is declining more precipitously.

      Another confusing point in the analysis is your apparent belief that broader health insurance coverage inevitably leads to different choices about where patients receive their healthcare. “Public Hospitals become superfluous if people gain insurance,” is a bromide frequently uttered by those who have no association with public institutions and the people who depend on them. The notion fails to appreciate that many people go to public hospitals because of language competency needs, the social complexity of their cases, behavioral healthcare needs, a feeling of being more "welcome," or the need for financial counseling or other case management services. These services are typically not available in private hospitals or private physician offices, and moreover, these entities are really not trying to reach out to the patients who need them. Nor do any insurers pay for these services. So the core concept of reducing and/or eliminating supplemental funding for public hospitals because fewer patients will go there ("Let the money follow the patient") underscores the misunderstanding of why patients go -and keep coming- to public hospitals in the first place. This reasoning is comparable to studying a restaurant and then deciding you can close a soup kitchen.

      Most insulting is the inference in your piece that we're undeserving or the money is squandered. But you should know that over the last 18 months we have been engaged in a major reconfiguration effort to improve efficiencies, lower costs, eliminate redundancies and otherwise demonstrate that whatever money we receive it is much needed and well spent. We have reduced our full-time workforce by more than 12 percent. We've converted Somerville Hospital to an outpatient facility, closed or consolidated six health clinics and reduced by half the number of adult mental health beds in our network. No other hospital in the state, especially one so dependent on government payers, has taken such drastic steps, which were contingent on retaining state and federal dollars

      Looking to the future, we're well aware that the environment is changing and that it would be foolhardy to expect state and federal reimbursement sources will continue unabated. That's why we intend to be leaders in adopting new payment methodologies and transitioning to a Patient-Centered Accountable Care Organization and Medical Home, which are designed to further bring down costs as well as vastly improve patient outcomes.

      These changes might not meet your criteria for free-market economics, but I believe will achieve the same goals you seem to desire of lowering the cost to taxpayers and becoming less reliance on public reimbursement. That the patients will also greatly benefit is an added bonus.

    3. Josh Archambault says:

      Mr. Keefe,

      First, thank you for taking the time to read my post and comment. There is no question that you have played a significant leadership role in health care reform both as a CEO of a major integrated healthcare delivery system, and now as the chair of the board for the Massachusetts Hospital Association. It is clear that your intent is to advocate for the best interest of your organization. However, I did want to offer a few comments in response:

      Recent Actions: Credit is due for moving forward more aggressively to reduce costs than other organizations in similquestion_markar situations. I understand CHA attempted to strike a balance and find cuts in different ways, which have not always resolved in a manner to CHA’s liking . Yet I would be remiss if I did not make note of the language chosen that should be worrisome to policy makers. As you wrote :

      “effort to improve efficiencies, lower costs, eliminate redundancies” have come “over the last 18 months” and were “contingent on retaining state and federal dollars.”

      Wasn’t part of reform that these efforts start 54 months ago when the law was signed? Do strings have to be attached?

      Payments: My bigger concern is that CHA and BMC continue on an unsustainable path. The fact remains that numerous special funding arrangements were put in place in 2006, and today CHA and BMC still argue that supplemental payments are necessary. Further, other valuable urban systems such as Baystate Health and Mercy Medical Center in Springfield, South Shore Medical (St. Luke’s) in New Bedford, and Lawrence and Lowell General Hospitals have struggled through reform without favorable treatment. While I don’t believe that I suggested public hospitals become superfluous, I do want to ask if you meant to argue that supplemental payments are justified because CHA and BMC have a more welcoming environment and translation services? Do these other hospitals not offer unique services as well?

      If I were a state policy maker, the positions articulated in your comment would make me very nervous for the future. As you probably know, Pioneer exists to raise tough questions for policy makers, and we have been consistent on this issue since early on in the debate. The bottom line remains, the current financial path remains untenable. Do you disagree? If so, then why is CHA looking to merge or seeking a partnership?

      The goal of my post was to highlight the past funding arrangement for BMC and CHA, and cite concerns under the federal expansion that directly impacts safety net hospitals. While CHA may provide “30x the health care to the uninsured” and “10x the health care to Medicaid/Commonwealth Care patients,” to the broader policy community it should raise some challenging questions. How is it that with almost 98% coverage, CHA is providing this much care? Are the Governor and Connector Board’s numbers wrong?

      Alternative Focus: Unsustainable reimbursements are driving more patients into safety net systems as doctors refuse to take new Medicaid/Medicare patients, and it is likely to worsen as the Federal government expanded Medicaid to 16 million new people, and cut half a trillion dollars from Medicare. Doesn’t this seem like an issue of greater significance?

      Payment Reform: It is great to hear that CHA is planning to participate in payment reform pilots, especially given your experience with the special three year MCO pilot I mentioned. Yet, do you believe that payment reform will eliminate the need for extra payments? Will we be having this same discussion in 3-5 years?

      Election year: Beyond the funding issue, I must disagree that this issue is purely tied to the election cycle. It is slightly misleading to suggest this as the fiscal year ends now and budget gaps become public as a result. It should also be noted that Pioneer has argued in support of payments for BMC and CHA when the Governor proposed making cuts retroactively .

      Finally, I must push back on your restaurant and soup kitchen analogy for two reasons. In this scenario, you suggest that patients only have access to the soup kitchen. However under health reform, the customers were given a ticket to access either location. Isn’t it possible that on occasion they might break their habit and end up going to the restaurant? It doesn’t necessitate closing the soup kitchen, but it might mean some change.

      Secondly, I am sure you would agree that it is a disservice to compare CHA to a soup kitchen given CHA’s reputation for good services. I hope that we both can agree that providing better care for patients for less cost, whether private or public monies is a move in the right direction. It is my hope we can continue this discussion as health reform proceeds forward, and some of my questions can be answered.



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