KHI News Service

Hospital chiefs nervous about consequences from health reform

Much remains unknown about how things will play out, executives say

By Dave Ranney | April 19, 2010

Earlier this month, Tom Bell spent two weeks visiting with hospital administrators across the state, listening to their concerns about health reform.

“If I had to sum everything up in one word, it would be ‘anxious,’” said Bell, executive director at the Kansas Hospital Association.

“They’re anxious because, right now, the potential downside in all this is easier to quantify than the potential upside,” he said. “That’s not to say the two won’t even out, it’s just that this is one of those times when the devil is really going to be in the details. There’s so much that we don’t know at this point.”

Most of the changes affecting hospitals take effect in 2014.

Various worries

Among the administrators’ concerns:

• Non-profit hospitals will be required to conduct and submit a “community needs assessment,” after which their progress in meeting the needs will be measured in three-year intervals. Those making little or no progress will risk losing their nonprofit status.

• Hospitals will be responsible for making sure patients know when free or discounted care is available and for helping patients apply for discounts or financial assistance. Unless both requirements are met, hospitals will not be allowed to refer a patient’s bills to a collection agency. Also, they’ll be subject to fines.

• Disproportionate Share Hospitals (DSH) payments will be reduced by 75 percent. The payments, from Medicare and Medicaid, are targeted to hospitals that treat significant numbers of indigent patients.

Created in 1981, the payments are meant to help hospitals offset uncompensated-care costs. But with reform, more patients will be insured, presumably resulting in less charity care.

Currently, Kansas hospitals divide about $41 million in DSH payments. Those providing the most charity care receive the most money.

• Hospitals will be subject to penalties when Medicare patients are readmitted within 30 days, and when their stays are prolonged by hospital-acquired infections.

• Starting in 2014, thousands of uninsured Kansans will be covered through their employer-sponsored plans, government subsidized insurance or Medicaid. The expanded coverage will likely generate more patients for the hospitals. Whether the coverage will be enough to cover their costs remains to be seen.

According to Kansas Health Policy Authority officials, as many as 100,000 additional adults could be added to the Medicaid rolls when the eligibility threshold – now at about 30 percent of the federal poverty level - is raised to 133 percent or $14,404 a year for an individual or $29,327 for a family of four.

Nobody knows the answer

In many parts of the state, physicians and clinics already refuse new Medicaid patients because reimbursements don’t cover their cost, they’re full or both.

“How are we as a state going to handle this kind of an influx when we’ve got the backlog we have now?” Bell said. “And what’s that backlog going to be when we add 100,000 people to the system?

“That’s what everybody is talking about,” he said, “but I don’t think anybody knows the answer.”

Reform assumes that when more people are covered, hospitals will have fewer bad debts. At the same time, increased efficiencies should allow them to see more patients for less money and still come out ahead.

“The expectation is that we’ll somehow make it up in volume,” Dennis George, chief executive at Coffey County Hospital in Burlington, said. “That really worries me.”

He noted that Neulasta, a prescription drug for cancer patients, costs the hospital $2,700.

“Medicare pays us $2,100 – and we belong to the third largest purchasing group in the nation. It’s not like we can get it cheaper somewhere else,” he said. “So even though this patient and this procedure are covered, I still have a shortage of $600 that I have to make up. Somewhere in my books, I have to have positive resources to cover that $600.”

Unsure future

George said he barely has those resources now. He’s not so sure about the future.

“The problem is when something costs me a dollar and I get paid 90 cents for it, I can’t make up that difference in volume,” he said. “I’m capped on what Medicare pays, I’m capped on what Medicaid will pay and I’m capped on what Blue Cross will pay.”

George said he’s also irked by the notion that under reform adults who are eligible for Medicaid will, in fact, be covered by Medicaid.

The hospital, he said, recently delivered babies for two women both of whom refused to sign the documents showing they were eligible for assistance.

One of the patients wouldn’t sign, he said, because she would have had to identify the baby’s father. The other was from outside the area and didn’t want to leave an address in case authorities came looking for her.

“That means we provided the care,” George said, “but we won’t get paid.”

Hospital administrators said they are hoping reform will give them access to ‘presumptive eligibility,’ a process that would allow Medicaid to reimburse hospitals for an uninsured patient’s care if there’s reason to believe the patient will be declared eligible for Medicaid. Coverage stops when the patient is declared ineligible.

“There’s language in the (reform) bill that suggests that this might happen but it’s not specific enough to know how it would work,” Bell said. “But if it were to happen, it would really help.”

Richard Miller runs the Norton County Hospital in Norton. Almost every day, he said, someone asks what he thinks about reform.

“I tell them that some reform was needed and this will get it started,” he said. “But I’m disappointed because I didn’t see all that much bipartisanship. That makes me nervous because a lot of this doesn’t take effect until 2014 and that means we’ll be seeing a lot changes made between now and then. What those changes will be, I have no way of knowing.”

Though he supports reform, Miller said he doubts the initiative will be “revenue neutral” for hospitals.

“When I hear people say this is going to cost $940 billion over 10 years and come out revenue neutral, that tells me providers are going to take a hit,” he said. “I hope that doesn’t happen, but I’m afraid it’s coming.”