Centers of Care
Nassau University Medical Center
A. Holly Patterson Extended Care Facility
Dialysis Center at A. Holly Patterson
South Ocean Care, LLC
Long Island FQHC
Elmont • Westbury • Hempstead • Roosevelt
THE 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 Fund
June 4, 2012 – Washington, DC
Arthur A. Gianelli, MA, MBA, MPH
President and CEO of the NuHealth System
2201 Hempstead Turnpike
East Meadow, NY 11554
516.486.NUMC
www.nuhealth.net
The Train Has Left the Station
• Regardless of the
Supreme Court’s
determination
regarding the
Affordable Care Act,
certain dramatic
changes are
irreversible….
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Reform is Here….
• Governments at all levels are resourcestarved.
• 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.
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….Regardless of What the
Supreme Court Says
“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 Review
May 7, 2012
• In response, hospitals are:
– Reducing admissions (“demand
destruction”)
– Expanding primary care and care
management
– Developing alignment strategies
with physicians
– Integrating with other hospitals and
insurance plans
– Seeking capital from for-profit or
private equity firms
– Entering into quality-driven risk /
shared savings contracts with
payers
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What 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 FQHCs
Source: 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).
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Public 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.
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Commercial Insurers CrossSubsidize Government Payers
Aggregate Hospital Payment-to-cost Ratios for Private Payers, Medicare, and
Medicaid, 1990 – 2010
Commercial
crosssubsidization
is directly
responsible for
hospital
margins
Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2010, for community hospitals.
(1)
Includes Medicaid Disproportionate Share payments.
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Proposed Insurance Expansion
Carries Risks for Public Hospitals
Projected Impact of Affordable Care Act on
Coverage Expansion
54%
Covered by
commercial
expansion
46%
Source: The Advisory Board Company
Covered by
expanded
Medicaid
eligibility
• 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 crosssubsidization, 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.
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Public Hospitals: SWOT Analysis
•
•
•
•
Strengths
Weaknesses
Employed physician base
Extensive primary care networks
Integrated care delivery systems
Experience operating on limited
resources
• Thin or negative operating margins
• Dependence on governmental
payers; often limited ability to
negotiate with MCOs
• Governmentally appointed boards
• Lack of organizational flexibility
• Cost structure
• Difficulty accessing capital
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Public Hospitals: SWOT Analysis
Opportunities
Threats
• Expand current outpatient and
primary care capacity
• Leverage physician alignment to
drive quality/utilization management
• Use integrated systems to
participate in accountable payment
opportunities
• Partner with states to manage dual
eligible population
• Obtain Section 1115 waivers
geared towards delivery system
redesign
• Obtain State Action Anti-Trust
protection from states to permit
unique provider collaboration
• Supreme Court decision (either
way): exchanges, DSH, adverse
selection
• Incongruence between integration
imperative and Stark/anti-trust/antikickback laws
• Inflexible organizational structures
may limit integration opportunities
• Accountable care or population
management business model has
not been established with
confidence
• Ongoing downward pressure on
payers (governments strapped,
MCO Medicaid penetration,
commercial premium review)
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How Can Policymakers Help?
• Focus Medicaid Dollars
– Exchange 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 Dollars
– Focus 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 Waivers
– Many 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).
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How Can Policymakers Help?
• Organizational Flexibility
– Policymakers 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 Concerns
– The 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!!
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Questions / Comments
Please feel free to contact me at:
Arthur A. Gianelli
Address:
2201 Hempstead Turnpike
East Meadow, NY 11554
Phone: 516.572.6011
E-Mail: agianell@numc.edu
Website: www.nuhealth.net
@Artgianelli, @NuHealthSystem
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