Presentation on theme: "THE PERSPECTIVE FROM THE FRONT LINES"— Presentation transcript:
1THE PERSPECTIVE FROM THE FRONT LINES The Health of Safety-Net Hospitals: How are They Faring? What’s the Outlook?Briefing by the Alliance for Health Reform & the Commonwealth FundJune 4, 2012 – Washington, DCArthur A. Gianelli, MA, MBA, MPHPresident and CEO of the NuHealth System
2The Train Has Left the Station Regardless of the Supreme Court’s determination regarding the Affordable Care Act, certain dramatic changes are irreversible….
3Reform is Here…. Governments at all levels are resource-starved. Pressure is on the entire health care delivery system to reduce cost and improve quality.Payers at all levels are:Pushing hospitals to “bend the cost curve” through improvement and by driving care to ambulatory settings.Incentivizing improvement efforts through Accountable Care Organizations, bundled payments, health homes, and other risk-based strategies.
4….Regardless of What the Supreme Court Says In response, hospitals are:Reducing admissions (“demand destruction”)Expanding primary care and care managementDeveloping alignment strategies with physiciansIntegrating with other hospitals and insurance plansSeeking capital from for-profit or private equity firmsEntering into quality-driven risk / shared savings contracts with payers“The odds of a hospital surviving on its own – without being part of [a] healthcare ecosystem – are low, leaving many partnering, forming clinical affiliations, merging, or selling.”--Molly Gamble“The Future of the American Hospital: Role and Relevancy in the Next Decade”Becker’s Hospital ReviewMay 7, 2012
5What is a Safety Net Provider? Safety net providers have two distinguishing characteristics:By legal mandate or explicitly adopted mission, they maintain an “open door”, offering patients access to services regardless of their ability to pay.A substantial share of their patient mix is uninsured, Medicaid, and other vulnerable patients.Examples include hospitals and FQHCsSource: Marion Lewin and Stuart Altman, eds. Institute of Medicine, America’s Health Care Safety Net: Intact but Endangered (Washington, DC: National Academy Press, March 2000).
6Public Hospitals: A Snapshot Members of the National Association of Public Hospitals:Uncompensated Care: NAPH members provided 31% of ambulatory care visits and 18% of inpatient services for uninsured patients. Uncompensated care represents 16% of NAPH member total costs (6% for all other hospitals); NAPH members provide 20% of the total uncompensated acute care in the US, but they represent just 2% of all acute care hospitals.Outpatient Visits: NAPH members provide 45 million non-emergency outpatient visits, and the average NAPH member provides more than 5 times the volume of non-emergency visits as other US acute-care hospitals.Payer Mix: Medicaid (27%); Medicare; (26%); Commercial (24%); Uninsured (19%); Other (4%).Source of Financing for Uncompensated Care: Medicaid DSH (22%); Supplemental Medicaid Payments (15%); Medicare DSH (5%) Medicare IME (4%); Commercial (1%); State/Local (32%); Other (21%).Source: NAPH, America’s Public Hospitals and Health Systems, 2009: Results of the Annual NAPH Hospital Characteristics Survey.
7Commercial Insurers Cross-Subsidize Government Payers Aggregate Hospital Payment-to-cost Ratios for Private Payers, Medicare, and Medicaid, 1990 – 2010Commercial cross-subsidization is directly responsible for hospital marginsSource: Avalere Health analysis of American Hospital Association Annual Survey data, 2010, for community hospitals.(1) Includes Medicaid Disproportionate Share payments.
8Proposed Insurance Expansion Carries Risks for Public Hospitals Most of the increase in coverage will come through expansion of the Medicaid program.Medicaid under-reimburses hospital costs, which will necessitate sustained supplemental payments, commercial cross-subsidization, or large risk contracts.In some states (like NY), Medicaid expansion due to ACA will be marginal.In either case, public hospitals without strong commercial contracts will suffer.Projected Impact of Affordable Care Act on Coverage Expansion8Source: The Advisory Board Company
9Public Hospitals: SWOT Analysis StrengthsWeaknessesEmployed physician baseExtensive primary care networksIntegrated care delivery systemsExperience operating on limited resourcesThin or negative operating marginsDependence on governmental payers; often limited ability to negotiate with MCOsGovernmentally appointed boardsLack of organizational flexibilityCost structureDifficulty accessing capital
10Public Hospitals: SWOT Analysis OpportunitiesThreatsExpand current outpatient and primary care capacityLeverage physician alignment to drive quality/utilization managementUse integrated systems to participate in accountable payment opportunitiesPartner with states to manage dual eligible populationObtain Section 1115 waivers geared towards delivery system redesignObtain State Action Anti-Trust protection from states to permit unique provider collaborationSupreme Court decision (either way): exchanges, DSH, adverse selectionIncongruence between integration imperative and Stark/anti-trust/anti-kickback lawsInflexible organizational structures may limit integration opportunitiesAccountable care or population management business model has not been established with confidenceOngoing downward pressure on payers (governments strapped, MCO Medicaid penetration, commercial premium review)
11How Can Policymakers Help? Focus Medicaid DollarsExchange network limits for safety-net provider commitments to take accountability for quality, cost containment, and population management. Partner with safety-net hospitals to manage dual eligibles.Focus DSH DollarsFocus DSH dollars on hospitals with highest Medicaid and uninsured; Connect to performance; Reverse ill-advised cost exemptions from DSH calculation (DSH Audit Rule).Grant Section 1115 WaiversMany safety-net providers need significant capital investment and operating support to make the transition to the new payment paradigm. Section 1115 waivers are an exceptional vehicle to accomplish system transformation (California “Bridges to Reform” waiver).
12How Can Policymakers Help? Organizational FlexibilityPolicymakers at state and local levels can update public hospital statutes to permit greater organizational flexibility (exemptions from Civil Service, less costly pension system, ability to convert to NFP or more readily integrate).Clear Up Anti-Trust ConcernsThe ACA encourages collaboration, integration, and consolidation. Federal law and regulations must track this policy objective. State Action Anti-Trust protection, in particular, is a very powerful tool through which states can permit what would otherwise be anti-competitive activities among providers (11th Circuit Case).Don’t Continuously Change Rules!!
13Questions / CommentsPlease feel free to contact me at: Arthur A. Gianelli Address: 2201 Hempstead Turnpike East Meadow, NY Phone: