As Gov. Tim Pawlenty tackles Minnesota's epic budget deficit this year, he faces the huge dilemma with Medicaid. The federal-state health insurance program for the poor, elderly and disabled is growing at a frightening pace in every state. But cutting it could end up costing Minnesota more in lost federal revenue. Moreover, Pawlenty is up against those in the Legislature who want to expand healthcare coverage for the poor. In Minnesota, the state government's $3 billion half of the Medicaid bill represents about one-fifth of its annual budget. That's expected to rise by 12% in each of the next two years.
Los Angeles County hospitals are standardizing the forms patients sign before surgery in response to a malpractice lawsuit that cost the county $1.6 million to settle. Health Services Department official Carol Meyer said the new standardized consent forms will be in use by the end of the year. A patient filed a lawsuit following a back surgery that left her paralyzed in 2005, and claimed no one explained the risks of the surgery to her.
A judge issued a temporary restraining order against Anthem Blue Cross, barring the company from sending a notice to former customers offering them $1,000 to drop all legal claims against the health insurer. The order stems from a class-action lawsuit filed by the Los Angeles city attorney against the health insurer for allegedly dropping coverage to people who file expensive medical claims. Anthem Blue Cross reached a settlement with the state Department of Managed Health Care last July that required the insurer to send out offers of new coverage to about 1,700 people who had their policies canceled. The company also offered former customers $1,000 each if they drop all legal claims.
Expanding a medical video network in Tennessee will allow small-town doctors who treat pregnant women to consult electronically with obstetrics specialists in Knoxville and Chattanooga when there are serious problems. The telemedicine project will serve women at 11 rural sites: Winchester, Tullahoma, McMinnville, Cooke ville, Livingston, Crossville, Jellico, Morristown, Newport, Sevierville, and Athens. Perinatologists from Regional Obstetrical Consultants will link with the patients through high-speed, secure Internet connections, specialized computer video equipment, and digital medical devices.
Caritas Christi Health Care chief executive Ralph de la Torre, MD, said the hospital chain is close to signing a payment deal with Blue Cross and Blue Shield of Massachusetts. The move to an "alternative quality contract" will boost payments to Caritas Christi from Blue Cross, and give it an opportunity to earn more than it could in a traditional contract based on annual payment increases. Blue Cross-Blue Shield's proposal involves a flat fee based on the number of patients treated, but caregivers can also earn bonuses by meeting quality targets.
Medicare has expanded its coverage of drugs for cancer treatments not approved by the Food and Drug Administration. Cancer doctors had clamored for the changes, saying that some of these treatments were essential if patients were to receive the most up-to-date care. But for many such uses there is scant clinical evidence that the drugs are effective, despite costing as much as $10,000 a month.
The new Medicare rules are the latest twist in a protracted debate over federal spending on drugs prescribed for uses other than those for which they have been specifically approved.
Holy Cross Hospital in Silver Spring, MD, has one of the nation's first ERs designed to serve a population 65 and older. Each patient in the new center has an uncluttered cubicle, with a comfortable chair for a family member or visitor. Holy Cross drew on experts in lighting and audiology to make the experience as soothing as possible on aging eyes and ears. Staff members are also given training in geriatrics, including techniques for communicating with patients whose hearing may be impaired or who process information slowly but don't want to be patronized.
The election of President Barack Obama and the power shift in Congress towards Democrats means that organized labor will have new friends in high places. That, coupled with Americans' anxiety over the state of the economy and their own threatened job security, could usher in a new expansion for organized labor, with union membership potentially growing by the millions across all industrial sectors—including healthcare.
Jim Trivisonno, president of Detroit-based IRI Consultants, says executives at hospitals—where thousands of employees perform high-stress jobs that can't be outsourced—should understand that as one of the nation's few growth industries they'll be the targets of an intense union membership drive over the coming months and years. "This is a severe economic downturn. There is some real concern across the country about job security and losing benefits," Trivisonno says. "Healthcare in that respect is no exception. The unions can certainly leverage that anxiety for signing union pledges."
The Employee Free Choice Act, up for debate in Congress this year, is expected to be an early test of the newfound power of organized labor after eight years in the wilderness under the Bush administration. The bill was co-sponsored last year by then-U.S. Sen. Obama, D-IL. Defeating the so-called "check card" bill is also the highest legislative priority of business groups like the U.S. Chamber of Commerce.
The Obama administration has also nominated pro-labor U.S. Rep. Hilda Solis, D-CA, as labor secretary. That nomination is expected to go through, despite Republican opposition. And, Obama will nominate three people to fill now-vacant seats on the five-member National Labor Relations Board, which oversees and interprets the thousands of laws and regulations that bind unions and employers.
With the ground clearly shifting toward organized labor, Trivisonno says hospitals should take the time now—if they haven't already—to determine whether or not they are vulnerable to a union drive. "In its simplest term, maintaining a union-free environment is something called 'good management.'" he says. "Unions usually don't exist unless management has made a mistake and they've gone off course somehow. Workers rarely organize or vote for a union because of wages or benefits. It's usually management treatment, and employee involvement and engagement."
In other words, if you've got a union knocking on the door, it may be your fault.
Symptoms of a dysfunctional working environment include high employee turnover and productivity and quality slides. Trivisonno recommends conducting vulnerability assessments. "It's important to use diagnostic tools like surveys, focus groups, and ongoing assessments to keep your finger on the pulse, and then do something with the results," he says. "The worst thing you can do is ask a question and then not doing anything with the answer. Then you're further behind than when you started."
Hospital executives must also be able to explain to employees why they should vote against a union. "You can clearly state that you respect unions and employees right to organize but your preference is to deal directly with employees," Trivisonno says.
Hospital executives must also have an action plan in place before any attempt to organize workers is underway. Trivisonno says that's because the final negotiated version of EFCA that passes Congress will probably include an expedited election process. Currently, employers have about six weeks to prepare for a union vote after a petition is filed. EFCA may reduce that to five days. "They can't wait. Employers should already state what their position is on labor unions to their employees," Trivisonno says. "You will have a few days to communicate to everyone in your organization you position on why they should or should not vote for a union. That is an incredible departure from what we have today. That is why executives need to reexamine their communications systems. Where do people get their information, and how is it delivered?"
Despite your best efforts, if employees vote to organize, deal with it. You lost. Get over it. Trivisonno says it's important for employers to recognize the vote and pledge that they will respect that right and bargain in good faith.
Here's my take: Trivisonno makes a lot of sense. The fact is, working Americans are righteously ticked off. Despite what is written about sub-prime loans and people living beyond their means, the vast majority of American workers plays by the rules, and acts responsibly. Nevertheless, they're losing their jobs and seeing their benefits cut through no fault of their own while reading about the people who created this mess giving themselves multimillion-dollar bonuses for failure.
Broadly speaking, if there is a huge resurgence of organized labor, management has nobody to blame but itself. It's not the healthcare industry's fault that the economy is in the tank, but it is going to absorb the aftershocks. It won't be the first time that healthcare cleans someone else's mess.
John Commins is the human resources and community and rural hospitals editor with HealthLeaders Media. He can be reached at jcommins@healthleadersmedia.com.
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Editor's Note: This feature is a response to Finance Editor Philip Betbeze’s take on community benefit in a column he wrote last November entitled, Just Not Good Enough.
The truth of the issue of community benefit lies somewhere between your "just not good enough" sentiment and Sen. Chuck Grassley's views. The community benefit definition and discussion needs proper time and thought. Simply measuring community benefit by how much free or discounted care is provided by a particular hospital is missing the big picture by a mile.
Your Wal-Mart analogy is not that far-fetched, although one key difference is that Wal-Mart exists for the benefit of, and returns all profits to, the shareholders. Benefiting the community is just a vehicle for that to happen. Our community-based healthcare model, and that of most community health systems, turns that model upside down. We exist to serve the healthcare needs of our community, and we use the resources we generate to accomplish that. If there is anything left over at the end of the day it is required by law to remain with the organization and further its mission. Wal-Mart does not sell to anyone who doesn't pay. Also, if Wal-Mart's customers do pay by check and that check is returned for insufficient funds, they won't sell to them again. So the community benefit from Wal-Mart ends when the funds are gone.
Defining community benefit
Back to defining what community benefit is for a nonprofit health system. Having one definition—and getting that definition right—are both critical to understanding not only community benefit, but how the healthcare system really works. The biggest mistake we hospitals and health systems make regarding community benefit is not properly accounting and reporting it. I would guess that a majority of nonprofit systems already meet any reasonable definition of community benefit but fail to account for it and report it well.
Sen. Grassley's preferred definition seems heavy on accounting for charity care and Medicaid underfunding. Those two elements are certainly cornerstones of community benefit. There are other items that rightfully should be in the discussion about community benefit, but Grassley, for one, doesn't appear to want to consider those ideas. Those two big items are Medicare underfunding and bad debt costs. Here is why both are relevant:
Medicare is a government-mandated program. To fulfill our mission we need to serve those covered under the Medicare program. I'm not sure that Wal-Mart would continue to sell to a certain population if payments from that population were mandated by the government and were 20% below cost. Wal-Mart might come up with another way to do it, and maybe we have to as well, but that's another story. So we should at least get community benefit credit for the fact that we take everyone regardless of their ability to pay or the level of payment that we receive. In the case of our small system, we experience about $4.5 million a year in Medicare underfunding—about 4.5% of our annual revenue.
Bad debt, likewise, is not viewed as community benefit, but if you peel back a few layers of the onion, you start to understand that we carry more bad debt than any for-profit business would ever tolerate. Why is that? Part of the reason is that it is our mission, and part of it is that we are prevented from trying to collect a bill in the same manner that a for-profit business would.
Some of our bad debt should be charity care, but we are not always able to gather enough information from the patient to make that determination—either they don't want to provide it, or they are too proud to put themselves into a category of "charity." We also work with individuals on payment plans, and do so without charging interest. Except for the rare small-town mom-and-pop business, who does that? Certainly not Wal-Mart.
Far from for-profit
In Minnesota, regulations do not allow us to report someone who has the ability to pay, but does not, to a credit reporting agency. So guess what people figure out? They figure out that if they don't pay the hospital, it won't show up on their credit report. Guess what that does to the desire to pay?
What we also can't do is refuse needed service if someone hasn't paid their previous bills. Again, that's not going to happen at Wal-Mart. So, a good portion of our bad debt happens because of our mission or regulations that limit our ability to collect. A for-profit business would not operate this way.
In Minnesota, we also pay significant "taxes" and "surcharges" as well. Our Minnesota Provider Tax (as a nonprofit) amounts to about $1.1 million per year, and the Medicaid Surcharge is about $900,000 per year. In addition, our local taxing bodies don't recognize some of our organizations' work to be exempt from property tax, so that counts for another $100,000 per year.
So if you add it up for us, the traditional calculation of community benefit (according to Grassley's definition) equals about 3.9% of our net revenue. Medicare underfunding adds another 4.5% to that and bad debt another 2%. That totals more than 10% of our net revenue. If our organization were a for-profit business that was not entangled in healthcare regulation, I could eliminate probably 8% of our costs.
It's not that simple, but you can also see it isn't as simple as just free and discounted care or the Wal-Mart model either.
Mike Allen is chief financial officer at Winona Health in Winona, MN. He can be reached at MAllen@WinonaHealth.org .
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That's the punchline from that old joke attributed to Ronald Reagan about the nine most terrifying words in the English language. I thought of that phrase after seeing details on how the $825 billion Obama stimulus bill would be divvied up, should it pass. To be sure, there's a lot of healthcare in the bill, but there's precious little healthcare reform.
With appreciation to CIT Healthcare's John Cousins, who monitors government healthcare spending better than anyone I know, here's how the bill breaks down (Stay with me after the following list, because it's long and cumbersome):
Major healthcare spending included in the bill are:
Medicaid aid to states: $87 billion, increasing through the end of FY 2010 the share of Medicaid costs the federal government reimburses states.
COBRA healthcare for the unemployed: $30.3 billion to extend health insurance coverage to the unemployed, extending the period of COBRA coverage for older and tenured workers beyond the 18 months provided under current law. The subsidy will be at a rate of 65% of the premium for the first 12 months of COBRA coverage for eligible persons who have lost their jobs on or after Sept. 1, 2008.
Medicaid coverage for the unemployed: $8.6 billion to provide 100% federal funding through 2010 for optional state Medicaid coverage of individuals (and their dependents) who are involuntarily unemployed and whose family income does not exceed a state-determined level, but is no higher than 200% of poverty, or who are receiving food stamps
Health information technology: $20 billion to jumpstart efforts to computerize health records to cut costs and reduce medical errors
Prevention and wellness fund: $3 billion to fight preventable chronic diseases.
Healthcare effectiveness research: $1.1 billion for Healthcare Research and Quality programs to compare the effectiveness of different medical treatments
Community health centers: $1.5 billion, including $500 million to increase the number of uninsured Americans who receive quality healthcare and $1 billion to renovate clinics and make health information technology improvements
Training primary care providers: $600 million to address shortages by training primary healthcare providers, including doctors, dentists, and nurses.
Indian Health Service facilities: $550 million to modernize hospitals and health clinics and make healthcare technology upgrades.
National Institutes of Health biomedical research: $2 billion, including $1.5 billion for expanding good jobs in biomedical research to study diseases such as Alzheimer's, Parkinson's, cancer, and heart disease and $500 million to implement the repair and improvement strategic plan developed by the NIH for its campuses
I'm not arguing about whether certain sectors in this bill deserve funding. Some do. I might feel like I deserve a raise, too, but it sure isn't coming if my company can't balance its books. And the federal government, as we've seen, can't even come close to balancing its books.
What this level of (borrowed) spending tells me is that Congress is great at taking an arbitrary "stimulus" number in the multiple billions and divvying it up among the squeakiest wheels. But when it comes to true big-picture ideas on what needs to be fixed in healthcare—and a big part of what needs to be fixed is cost—I'm deeply skeptical that Congress has what it takes.
I know it's fashionable to think that the incoming administration will be able to fix healthcare, among many other problems it's inherited, but how much real influence can any executive branch, no matter how popular, have on such a systemic attempt at a fix? Meanwhile, expensive-to-administrate Band-Aids slapped on because they look "targeted"—like, for example, the COBRA coverage idea—isn't going to make any difference in the long run and I argue will provide little economic "stimulus" in the short run.
Instead, why not come with a big-picture idea, like a national version of Massachusetts' health insurance mandate that requires every person in the state to have insurance. It hasn't been perfect, but it has critics and advocates on both sides, which is a good first start. It's also dramatically cut down on the number of uninsured, and the cost per person has actually been less than expected.
The trouble with such a plan is that it wouldn't get rolling quickly enough to fit the bill of many in Congress who can't resist the urge to "do something now." Of course being seen as doing something, to many in Congress, is better than actually doing something substantive. The trouble with the kind of spending in the stimulus bill is that it seems to make so much sense that no one opposes it, yet when the details are ironed out, the spending only nibbles at the margins, making very little substantive difference.
But they're here to help.
P.S. Check out our two new blogs on leadership and marketing. I think you'll be happy you took the time.
Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at pbetbeze@healthleadersmedia.com.Note: You can sign up to receiveHealthLeaders Media Finance, a free weekly e-newsletter that reports on the top finance issues facing healthcare leaders.
