HEALTH MANAGEMENT ASSOCIATES
Shelby County Health Care System:
Assuring the Health of the Public
July, 2003
Pat Terrell, Project Leader
Terry Conway, M.D.
Eileen Ellis
Dave Ferguson
Jay Rosen
Steve Scheer
Shelby County Health Care System:
Assuring the Health of the Public
Introduction
In May, 2003, Mayor AC Wharton contracted with Health Management Associates
(HMA) to undertake a two-month study of the following aspects of the health care
delivery system in Shelby County: 1) the potential for short-term financial remedies and
long-term sustainability of The Regional Medical Center at Memphis (The Med) and the
other health care facilities owned or subsidized by the County; 2) opportunities for
enhancing the structural and operational cohesiveness of the existing network of clinics
and hospitals that serve the County’s poor, particularly focusing on TennCare enrollees
and the uninsured; 3) recommendations on enhancing the working relationship between
the health system and its medical staffs; and 4) possibilities for partnerships with other
health care providers to allow the County to more effectively meet its mission to assure
the health of the public residing within its jurisdiction.
Over the past sixty days, members of a diverse HMA team have met personally with
elected officials, physicians, health care administrators, business leaders, community
representatives, and staff from state and local government (a list is attached in the
Appendices). Financial, clinical and utilization data were collected and analyzed.
Comparisons were made to public health care systems in other cities. The analysis and
recommendations that follow are the result of this inquiry.
Overall, several key findings have emerged related to the “health care system” that serves
the medically and socially fragile residents of Shelby County:

The role of Shelby County government in the health care system in greater
Memphis is significant, both in terms of its quantifiable financial commitment of
over $44 million annually and in the breadth of its investment in the continuum of
care. It either directly operates or is the primary source of subsidy for facilities
and programs ranging from public health stations to primary and specialty care
outpatient clinics to inpatient and long term care institutions to correctional health
services. Because of its current and historic role in guaranteeing access to health
care services, Shelby County government is in a unique position to lead a
restructuring that will assure the greatest possible efficiency and effectiveness of
the health care system.

The component parts of a comprehensive health care delivery system are all in
place but need to be coordinated to assure the most effective and accountable
delivery of care to meet the complex needs of a medically vulnerable community.
Additional capacity appears to exist in the system to assure access to all of those
who need services. No one element of the system can stand alone, however, and
the relationships between the various levels of care need to become disentangled
and clarified. The current components of the health network taking care of the
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majority of the TennCare and uninsured patients in Shelby County are: the Health
Loop clinics (primary care), the MedPlex (specialty care), the Med (inpatient and
emergent care), LeBonheur Hospital (outpatient, emergent, specialty and inpatient
care of children), Methodist Hospital (through its operation of Bowld Hospital
and its care for certain patients referred from The Med), and Oakville Nursing
Home (long term care). The University of Tennessee School of Medicine (UT) is
also a major component of the system through its provision of medical staff at
most of the institutions named above.

It is likely that additional money will need to be infused into the system in order
to adequately meet the needs of those who depend upon the safety net for their
health care. There are new avenues to be explored to maximize state and federal
dollars coming into Shelby County and, in addition, there are internal activities
that could generate additional revenue and save costs.

The relationship between the components of the health system and its medical
staff—at all levels of the delivery of care—is an essential element in both
understanding the current situation and in embarking on new directions to
improve the quality, patient experience, academic and financial stability of the
health care system.

Partnerships between the publicly supported components of the health care system
and private providers are already a critical element of the continuum of care.
However, it is essential that these relationships are clear, accountable and
coordinated as part of one “seamless” delivery system. It will be vital to align the
incentives on all levels that assure ongoing participation in the system.

The most essential requirement for the establishment of an effective and efficient
health care system for the most fragile residents of Shelby County is a clear and
universal understanding of the following: who are the patients to be served; what
services need to be provided to adequately care for them; who will provide what
level of care and where will it be provided; how is continuity assured and
duplication prevented, and; how is this care going to be paid for. This vision must
be shared by the providers that deliver care, the funders that pay for the care, and
the patients that rely on the care.
The analysis that follows is built around the findings described above.
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Vision for a Shelby County Health Care System
At first glance Shelby County could simply be characterized as less healthy than the
United States overall. Certain sentinel conditions such as infant mortality stand out
(Shelby County 12.5, Tennessee 8.7, and USA 6.9 per 100,000) as worse than the
national rates. Likewise, HIV/AIDS is high for Shelby County as is homicide and
sexually transmitted disease. When Shelby County is compared to other counties in the
United States of similar size and similar levels of poverty, the residents of Shelby County
are shown to live shorter lives and report their health as worse. More specifically, infant
mortality, adverse birth measures such a low birth weight, deaths from cancer, heart
disease, stroke and injuries are all higher than other poor urban counties. (See additional
data in the Appendices).
Despite its poor health status, Memphis is a city with an impressive amount of medical
resources. The area has more hospital beds than the rest of the USA on average. The
residents of Memphis with Medicare receive 163% more cardiac catheterizations than
others in the country as well as a third more upper gastrointestinal endoscopies and 75%
more MRIs. However, who receives these services does not necessarily seem to be
determined by patient or population pathology or need.
It should be recognized that Shelby County is not composed of one homogenous
population. Certain census tracts, primarily those located within the City of Memphis,
suffer a startling burden of poor health. These communities are much poorer with a
substantially lower median household income than the remainder of the county. In these
communities, mothers are often young and their babies are born smaller and are more
likely to die before the age of one. These are all conditions that are amenable to prenatal
care and general women’s health care.
Adults are much more likely to die of heart disease and stroke in Shelby County than in
similar counties across the country. These conditions clearly respond to ambulatory care
of hypertension, hyperlipidemia and arrhythmias as well as assistance in behavior change
such as smoking. Subspecialty care is also indicated, such as cardiac and vascular
procedures to decrease mortality and morbidity. HIV disease and sexually transmitted
diseases are more prevalent in these communities, requiring treatment, education and
follow-up to decrease effects on the patient but also to prevent spread of these conditions.
In order to best address the health care disparities in the Memphis community, a vibrant
and focused medical care delivery system, coupled with strong public health and social
services, must be in place. The elements exist in Shelby County for such a comprehensive
health care delivery system that would:

be financially stable;

include a comprehensive continuum of care built upon the health care needs of a
defined set of patients, most particularly those patients who are covered by
TennCare or those who are uninsured;
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
foster unique and clearly delineated partnerships between public, publiclysubsidized and private health care providers committed to a common mission and
focus of services;

minimize duplication of effort, assure efficiency and maximize revenue streams;

have services delivered by a dedicated medical staff committed to all levels of
health care within the system, with equal attention paid to the training needs of
future providers and the clinical needs of the patients served;

operate at optimum capacity to care for the greatest number of patients possible,
particularly assuring capacity for all TennCare and uninsured patients who seek
services;

assure that all dollars spent on services within the system are accounted for and
that all levels of care are integrated with the others to guarantee a “seamless”
system for patients and staff alike; and

provide the best possible opportunity to prevent illness and disability, deliver high
quality personal medical services and make documentable progress toward
healthier patients and communities.
On the following pages, this report documents how such a system could be realized,
funded and structured.
5
Elements of the Shelby County Health System
PRIMARY CARE
Situation
Shelby County, in a contractual agreement with The Med, operates a network of ten
comprehensive primary care centers, called the Health Loop Clinics. These facilities are,
for the most part, co-located with the public health services provided by the combined
Memphis/Shelby County Department of Public Health, providing a unique opportunity
for assuring that the full needs of vulnerable patients are met in as coordinated a system
as possible. In addition, The Med operates primary care clinics within its outpatient
specialty care facility, the MedPlex, located on The Med’s campus. The services
delivered at the Health Loop Clinics are provided by attending physicians and nurse
practitioners on the payroll of The Med (with a few physicians remaining in the
employment of the health department) while the primary care at the MedPlex is offered
primarily by resident physicians in the departments of Internal Medicine and OB/Gyn.
The location of the Health Loop clinics seem to be appropriate to the location of the
geographic pockets of need, as gauged by the residences of TennCare enrollees. (See
map in Appendices). The migration of pockets of poverty around Shelby County,
however, requires that the location of these clinics be regularly assessed.
Over the past three years, there has been a steady drop in utilization at the Health Loop
clinics. This decline is the opposite experience of most primary care systems that serve
the medically indigent around the country, where the demand for primary care continues
to rise. The decrease at the Health Loop cannot be attributed to an increase in private or
federally funded community health centers targeting care to this population because
Memphis has relatively few other such providers. It also cannot be attributed to a
decrease in the uninsured and other vulnerable populations.
It is of concern that the numbers of visits for adults, the group most likely to be
uninsured, has dropped significantly. Just as troublesome, the number of visits for
supplemental food programs for pregnant women and children (WIC) and immunizations
have dropped from 25,536 in 2001 to 17,126 in 2003. These reductions come at a time
when there is heightened awareness of the adverse health status of both adults and
children in Shelby County.
Despite the seeming available capacity and despite the fact that 74% of Health Loop
patients are covered by TennCare, the major TennCare managed care organization
(MCO) serving the Memphis area, TLC, states that they could send additional patients
into the Health Loop clinics but cannot seem to get them in. The Health Loop’s
utilization numbers, compared with the number of providers and physical space, indicate
additional capacity for 34,000 community based primary care visits annually.
6
In 2002, approximately 120,000 patients were scheduled for appointments with 9.5% of
appointments allocated to new patients. More than a third of the patients scheduled did
not show for their appointments. Approximately 27,000 patients were seen as walk-ins. It
is clear that the number of patients originally scheduled is inadequate to reach the normal
productivity level expected for primary care. The number of exam rooms available is
more than ample for this expansion. Support staff for Health Loop clinics is clearly more
than adequate to support full productivity levels of current providers. Using the examples
of other safety net institutions or private sector staffing levels for primary care, the Health
Loop centers are generously staffed with nursing, lab and clerical staff. If additional
provider staff was added and hours extended at selected sites (perhaps based on
proximity to unassigned TennCare patients), that capacity could be further extended. The
irony of having excess capacity is exacerbated by the fact that few if any attempts are
made in any coordinated way to refer either adults from The Med Emergency Department
(ED) or children from the LeBonheur Hospital ED for ongoing primary care at Loop
clinics.
There has been a significant effort over the past several months to solidify the
relationship between the Health Loop clinics and at least some components of The Med.
The referral of primary care patients into specialty services at the MedPlex has received a
focused effort to improve the rate of return of specialty consult reports to the primary
care provider. The providers being hired by the Health Loop as employees of The Med
were initially hired explicitly outside of the usual UT provided staff model. However,
several more recent hires are UT-trained with better connections to The Med and other
University-affiliated hospitals.
There have been some attempts to link the outpatient care at the clinics and inpatient
admissions at The Med. However, almost all adult admissions to The Med from Health
Loop centers are made through referring patients to The Med Emergency Department.
This causes long delays for elective admission patients and unnecessarily utilizes busy
ED resources. This outpatient/inpatient connection seems to function more effectively
with LeBonheur Hospital for pediatric admissions, although there is still a problem in
getting back pediatric specialty consult reports from LeBonheur to the clinics. It is often
unclear where patients are sent for inpatient admissions, although the hiring of
obstetricians for the clinics who have University of Tennessee appointments and
connections at The Med seems to have resulted in a significantly increased rate of
referrals for deliveries.
Finally, the management of the Health Loop clinics appears to be somewhat convoluted
as it is unclear how the health department employees and The Med employees and
contract management interact. There seems to be some distrust between the County and
The Med which could be exacerbated, in part, by a lack of clear expectations for
productivity, linkages between different levels of care/services, and conflicting financial
incentives. Ongoing joint planning to meet the demands of patients seeking care, TLC
referral needs, or community health status seems lacking.
7
Opportunities

The County should pursue Federally Qualified Health Center (FQHC)
designation, including Section 330 grants from the US Department of Health and
Human Services (the Department). This designation would guarantee cost-based
Medicaid and Medicare reimbursement and provide (under Section 330) grants to
cover the costs of providing care to the uninsured. A cursory review of the clinic
system indicates that they would meet the Department’s requirements to serve
populations in need, the partnership with the health department already provides
the full range of services necessary to become designated, and there is only one
other Section 330 FQHC in Memphis, a very small number for a city of this size.
While this designation would require governance change, recent decisions by the
Department indicate a willingness to make some concessions for publicly owned
clinics.

Aggressive measures should be put into place to expand the number of patients
scheduled into appointments at the Health Loop clinics.

A system should be established with LeBonheur Hospital to facilitate referrals of
children without primary care providers into Health Loop clinics. LeBonheur
experiences 72,000 pediatric ED visits annually, many for primary care services.
This effort should be coordinated with TennCare MCOs to assure assignment of
Loop physicians for primary care. In return, LeBonheur should enter into
discussions with the Loop clinics about developing specialty care services on-site
at Loop clinics of particular interest for Loop patients (i.e., asthma or diabetic
services).

A system should also be established with The Med ED to refer adults needing
primary care into Health Loop clinics. It is clear that the staff in The Med’s ED
has very little awareness of the clinics as part of their system and would welcome
a way to refer patients using the ED for primary care. This system would need to
be designed to be as simple as possible, perhaps providing a certain number of
appointments per clinic per day for ED referrals. This should be a priority for
both The Med (which needs to decompress their ED) and the clinics, to address
the decrease in adult visits.

The management of the Health Loop clinics should be clarified so that there is a
single point of accountability to the County for operations and a single set of
goals and objectives.

The physicians practicing at the Health Loop clinics should have admitting
privileges at either The Med or at LeBonheur (for pediatricians). They should be
expected to admit their patients or be a part of a hospital-based group that would
follow their patients as inpatients and return them to the clinics upon discharge.
Discussions should take place with UT to develop a physician group practice for
the Loop clinics.
8

The Loop clinics should be included in the overall scope of a “public health
authority” to oversee all levels of health services serving the medically
underserved in Shelby County. (See discussion of the authority below).
SPECIALTY CARE
Situation
The primary source of outpatient specialty care for adult referrals from Health Loop
clinics, discharge referrals for inpatients from The Med or from The Med’s ED and
from other primary care facilities throughout the area (the FQHC and faith-based
clinics) is the MedPlex. Operated by The Med, the MedPlex is a modern clinic
facility on the hospital campus. Its outpatient services are provided primarily from
UT residents, supervised by UT attendings.
One of the most universally expressed frustrations throughout various components of
the health system is the difficulty in gaining access to timely specialty care
appointments at the MedPlex. This is a particular issue for TennCare MCOs like
TLC who seek to refer patients to the MedPlex for specialty care but cannot gain
access. This “leakage” from the system cost a significant opportunity for revenue
generation.
An ongoing concern in gaining capacity in the MedPlex is the overall lack of provider
staffing, particularly attending physicians. The current staffing of many
subspecialties is miniscule compared to the demand of a medical center the size of
The Med, its busy emergency rooms, the Health Loop clinics, the TLC managed care
organization, and other safety net providers in the County who have almost no other
option for specialty care. Further, the reliance on residents for the majority of the
care provided constrains productivity. Attending physicians are able to provide care
to a significantly greater number of patients. Thus, the exam room capacity is not
fully utilized and a significant number of patients wait a long time for appointments,
causing a cancellation rate of 31% and no show rates of nearly 40%. In addition, the
regular rotation of residents from service to service disrupts continuity of care for
often the sickest patients. Finally, there is significant concern about the obstacles to
productivity posed by the management of the facility and its general operations.
Despite the national growth of attention to chronic disease management for such
complex illnesses as diabetes and heart disease, management which requires regular
and consistent visits to specialists, the numbers of visits at the MedPlex have
remained nearly flat. The number of exam rooms indicate that, if scheduled
differently and if productivity could be extended by using more attending physician
staff, a significant amount of capacity could be realized. That capacity would be
9
good for chronically ill patients and good for the system, as more revenue would be
generated by serving more TennCare patients.
There appears to be problematic management of the MedPlex itself, with tension
between UT Chairmen and The Med administrative staff. The MedPlex is clearly
seen as an adjunct to The Med’s training programs and its operations can best be
understood as primarily serving residency training needs. For example, when it was
suggested that, at minimum, the appointment scheduling should take into account the
no show rate and appointments should be over-booked by that rate, it was expressed
that only the Chairmen could make decisions about scheduling.
Other specialty services offered within the system—the pediatric specialties at
LeBonheur, the cancer services at UT Cancer Institute, the geriatric clinic, the
HIV/AIDS clinic—seem to function more productively, although there is a common
complaint that information does not get back to the primary care referring physician.
Opportunities

The management of the MedPlex must be reviewed to assess the staffing
levels, the appointment scheduling appropriateness and the accountability of
attending physicians contracted to be present in the specialty clinics. A
thorough review of waiting times for new appointments, by specialty area,
should be completed and should take into account unmet community demand
(i.e., how many diabetics are in the system who will need ophthalmology
visits during the course of a year). Scheduling should immediately take into
account no show rates and over-booking should be instituted. UT and The
Med should engage an independent ambulatory administrative assessment to
recommend a clear management model, develop a staffing plan, and
determine productivity standards and a monitoring mechanism that both
parties agree to. This information should be gathered for inclusion into the
UT medical services contract.

Efforts should be made, when renegotiating the UT/Med contract, to increase
the number of attending physicians paid to care for patients in the MedPlex. It
is clear that there will be a higher level of productivity, allowing for a greater
number of TennCare patients to be referred from TLC, and other MCOs,
generating additional revenue.

A scheduling system should be established for specialty care that institutes
“rules” for referral into specialty care to assure that these referrals are an
appropriate use of scarce specialty resources. For example, all headaches
don’t need to be referred to neurology and referral rules, with appeal
procedures built-in, would be extremely helpful in determining how best to
utilize specialty appointments. Specialty physicians will need to be
intensively involved in establishing these referral rules. Models exist in other
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public and/or academic health systems that attempt to assure the
appropriateness of specialty care referrals.

LeBonheur Hospital should work with the Health Loop clinics to improve its
practice of returning patients to primary care from specialty consults with
reports of their visits and recommendations for follow-up. The hospital
should also explore the potential for making certain pediatric specialty
services available in community clinics.

The operation of the MedPlex should be incorporated into the oversight scope
of the “public health authority.”
EMERGENT CARE
Situation
It is estimated that 75% to 85% of the admissions to The Med come through the
Emergency Department (ED). The emergency services are overwhelmed and, like most
large hospitals serving primarily medically indigent populations, are often the site for
people in search of regular physician care who are not able to otherwise access it. The
clinical and administrative staff in the ED have little awareness of the options available to
them for referring patients for primary care. Patients who do need to be admitted to the
hospital often wait for many hours until available beds are located, causing further backups in the ED. Over the years, the configuration of the various Departments and teaching
services have resulted in the operation of a number of separately administered emergency
services areas (medical, trauma, burn, psychiatric, OB) which may not be the most
efficient use of space or staff.
The psychiatric unit is essentially a holding area for patients who, having been brought in
during a crisis, await evaluation and potential transfer to a State psychiatric facility. For
a variety of reasons, this process can be prolonged. These patients, many of whom are
clearly disturbed, sit for hours and even days in lounge chairs in large rooms (male and
female) awaiting disposition. Although staff may be skilled and compassionate, the
physical characteristics of the unit may actually worsen the condition of patients being
held.
Because the ED is the front door to the hospital, the confusion and over-crowding can
discourage patients who have other options from seeking treatment there.
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Opportunities

A system should be put into place to give blocks of daily appointments at Health
Loop clinics to The Med ED staff so that they can give out real appointments to
patients waiting in the ED for primary care. This system should be jointly
developed between The Med and the Health Loop clinics to assure transfer of ED
discharge summaries to minimize duplication of diagnostic tests.

A procedure should be developed to allow for the direct admission of patients
from clinic settings to minimize the number of patients sent through the ED when
it has already been determined that they will be admitted to the hospital.

The Med should explore, through its current space planning consultants, the
potential for establishing an Observation unit near to the ED. This will allow
patients who are either waiting for beds or who need to be observed for a period
of time before a decision is made whether or not to admit to be moved out of the
traffic of the ED during this period of time. It will also allow The Med to bill for
Observation days in addition to the ED visit. Many other hospitals like The Med
have successfully utilized adjacent observation units to monitor chest pain or
asthmatic patients, preventing a significant number of admissions without
clogging up the ED. The creation of such a unit, or units, could also help to
deflect some patients out of the psychiatric ED, a move that should be a major
priority for The Med.

The Med should explore the potential for the consolidation of its various
emergency services to determine the potential for efficiencies.

The Quick Care clinic, an after hours clinic located at the MedPlex, should be
operationally, if not geographically, better linked to the ED. Patients should be
triaged at the ED and sent to Quick Care for treatment and referral into
community-based primary care.

Pediatric emergency care at LeBonheur Hospital should be linked to primary care
referrals into the Health Loop clinics.

Negotiations should be undertaken with the State to expedite psychiatric referrals
out of The Med’s ED and into State mental health facilities.

Emergent care should be included in the oversight scope of a “public health
authority.”
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INPATIENT CARE
Situation
It is important to note at the outset that it is a testament to the leadership of The Med over
the past decades that it has been able to successfully continue to care for the medically
indigent in Shelby County, despite the many obstacles that it has and continues to face.
The challenges ahead are exacerbated by the rise in the numbers of the uninsured, the
increasing cost of the delivery of medical care, and the changes in the hospital and health
system industry that have refocused how and where patients are getting their care. The
Med will need to respond to these changes in order to continue to play the necessary role
that it has for more than 170 years.
The Med is the centerpiece of an inpatient system for TennCare and uninsured patients in
Memphis that also includes LeBonheur Hospital for children, Methodist Hospital (close
to The Med campus), and the Bowld Hospital, operated by UT and Methodist. These
relationships are critical to understanding the current situation at The Med, as it is not a
stand alone hospital for all patients targeted by this assessment.
The Med has several Centers of Excellence (neonatal, burn, trauma) but none of these
services should be viewed as isolated “silos” of care. In the same way that inpatient
services should not be viewed outside of an overall context of a comprehensive system of
care, pockets of inpatient services should not be evaluated without looking at the entire
range of hospital care necessary for a defined population.
Access to inpatient beds, whether from the ED or from referrals from MCOs, is a
significant problem at The Med. The hospital has made significant progress in recent
years in addressing the overall length of stay (LOS) for its patients. The Department of
Medicine, in particular, has reduced LOS for its patients. The LOS for surgery patients,
however, is till of concern and the efficiency surgical services—particularly the turnover
of the operating rooms—seems to be a universally recognized problem for The Med. If
the ORs ran at full capacity, it is likely that the hospital’s overall LOS would be reduced,
more elective (and paying) surgery cases could be brought into the hospital, and there
would be greater capacity for TennCare referrals.
Bed control is a significant issue in freeing up inpatient beds. The average time that it
currently takes from the writing of discharge orders of one patient to the admission to the
same bed of the next patient is about 7 hours. In addition, there are approximately 8900
inpatient days now generated by ventilator patients who are difficult for The Med to
move out but who don’t need to be in an acute care hospital. There are likely other patient
populations that could be better and more efficiently cared for in other settings.
Alternatives should be explored for these patients.
The Med also relies on a number of relationships with other providers to assure a full
range of services for its patients. While there are many positive aspects of these
13
arrangements, and they are critical in assuring the availability of the full spectrum of
service, there is also little scrutiny of the details of how these institutions fit together. For
example, despite the fact that The Med operates the only Level 1 trauma center in the
region, and despite the fact that heart disease disproportionately impacts the type of
patients seen in this system, it relies on the cardiac surgery at the Bowld Hospital for
referrals. The Bowld is currently operated by Methodist in partnership with UT. It has
been determined that the Bowld will close within the next year and the services will be
moved to Methodist. There appears to be little intensive planning about what this change
will mean to the patients from The Med or its larger system. In addition, the closing of
the Bowld will mean a net loss to The Med in annual revenue that it currently receives by
contracting out its interventional radiology services to support the Bowld.
Further, The Med refers its neonatal surgical cases to LeBonheur Hospital. It was
determined several years back that TennCare was not an adequate payor for LeBonheur
so it requires that The Med provide direct reimbursement rather than bill TennCare.
There seems to be a willingness to rethink this practice. Finally, patients from The Med
requiring cancer services are cared for through the UT Cancer Institute and Methodist
Hospital. While there is no payment required of The Med for this care, it should be
clearly documented for which patients these institutions will continue to provide care and
what scope of treatment is included.
One of the more problematic arrangements at The Med is the contractual relationship
between the hospital and UT and the UT Medical Group (UTMG). While all parties
agree that the role of The Med in training residents is of vital importance to both the
school and the hospital, there is less conviction, on both sides, that there is equal
commitment to the scope and quality of the clinical services provided. The contract is
particularly concerning in its lack of specificity for what The Med is buying and the
accountability of both the hospital and the school and/or UTMG in meeting the clinical
needs of the patient population.
Moreover, it is likely that there are areas of the contractual agreement that are underfunded (medical sub-specialties seem to be especially short). There needs to be a
comprehensive evaluation of the clinical needs of The Med and the contract should
reflect those needs, with clear accountability over what clinical care, housestaff and
supervision is being purchased.
In addition to concerns about the contract itself, the structure of the medical staff
relationship needs to be explored. Clinical direction and accountability is widely viewed
to reside in the UT Chairman, with some delegation to on-site “chiefs.” There are clearly
a great many UT medical staff—and its leadership—who are committed to the mission of
The Med and who choose to work there. There is no organized process, however, for the
Med and its physicians to collaboratively determine clinical priorities, allocate resources
to match those institutional priorities, and assure accountability. There should be
designated medical staff who primarily work in The Med, the MedPlex, and the Health
Loop clinics and who would identify themselves as a cohesive group practice. The
clinical services are dominated by residents at all levels. The emergence of the
14
UT/Methodist relationship as the University’s primary teaching focus will most likely
have significant impact on The Med, although that impact has not yet been clearly
defined. The importance of the relationship between The Med and UT cannot be
understated and, thus, its effectiveness is of critical importance to both institutions.
Opportunities

All of The Med’s inpatient partnerships (LeBonheur, Methodist, Bowld) should
be documented in writing, assuring that each party has a clear understanding of
the roles of each institution in the inpatient configuration. This process should
also address the potential for new collaborative opportunities, building on the
strengths of each hospital. For example, the idea of creating a regional women’s
and infants’ center as a partnership between The Med and LeBonheur should be
explored for what it could bring to both hospitals and, even more important, what
it could bring to the women and children of Shelby County.

The issue of bed control should be a top priority for The Med administration.
This effort should include: restructuring the ORs to open capacity and decrease
surgical length of stay; implementing processes to significantly decrease the
waiting time for new admissions; developing alternatives to keeping chronic
ventilator patients in an acute care setting, and; exploring the establishment of
observation bed capacity near to the ED (see discussion in previous section).
Opening capacity for additional patients will mean bringing in additional revenue,
particularly from TennCare patients.

A commitment should be made by The Med, UT and UTMG to re-negotiate the
current contract for clinical and resident services. This discussion should focus
on the following issues:
1) contracting for provider services based on an assessment of the areas of
clinical deficiency at The Med and the MedPlex;
2) establishing a mechanism to assure that the services contracted for are
provided;
3) paying for additional attending physician time in the inpatient and the
outpatient settings to address both productivity and continuity of care;
4) identifying all physician revenues generated as a result of the agreement and
adding them to the mix in contract negotiations;
5) creating a designated medical staff for The Med and the MedPlex, the Health
Loop clinics (and, perhaps, Oakville Nursing Home), with Chiefs of Service
in all clinical areas who are dedicated to the system full or nearly full time;
15
6) establishing a Medical Director position for The Med and the broader system
who is also an Associate Dean at UT and also has a role at UTMG, with
authority over the clinical care and the contractual services at The Med and
the other services within the system; and
7) committing to a regular assessment of the arrangement, based on agreed upon
measures of productivity, community demand, institutional support committed
by The Med, and changes in the health care delivery system.

The operation of inpatient care, either at The Med or at affiliated/contracting
institutions, should be included in the oversight scope of a “public health
authority.”
LONGTERM CARE
Situation
Shelby County operates a 237 bed long term care facility called Oakville Nursing Home.
The County subsidizes its operation by providing it with $3 million annually and
providing the 82-year old physical plant which it occupies. Oakville has had some
success in recent years in addressing quality of care issues and this past State survey
resulted in 7 deficiencies—no Type 1s—compared to the State average of 9 and the
Oakville’s prior year’s 15. The facility is operating at about 90% of capacity and 93% of
its patients are covered by Medicaid and Medicare.
Oakville has a modest relationship with The Med. It contracts with The Med for its parttime Medical Director and also for the hospital’s wound care van services. The Med
sends about 10% of all of its long term care referrals to Oakville, usually those without
any source of payment and those who are sicker or who may have other compliance
problems. Despite these connections, Oakville is not viewed by most at The Med as a
part of their system of care.
The patients at Oakville include traditional “nursing home” patients, some HIV/AIDS
patients, others who are paraplegics or quadriplegics transferred from the trauma unit at
The Med. Besides the Medical Director, there are only two other physicians who care for
the patients at Oakville, one who is a radiologist. Although there was once medical
teaching at Oakville, there is not any longer. Physical, occupational and speech therapy
are contracted out to private providers.
16
Opportunities

Oakville could become a vital component of a continuum of care for the Shelby
County system, particularly in partnership with The Med. The 8900 days in
chronic ventilator care currently provided at The Med could be cut drastically if a
unit could be provided at Oakville. Long term IV antibiotic therapy patients,
“rule out tuberculosis” patients and others who do not need to be in an acute care
hospital beds could be transferred to Oakville, given the appropriate medical
staffing.

Geriatric training is a significant deficiency for UT and one that they would be
interested in exploring in connection with services at Oakville. Such an
arrangement could provide the medical school with a training site and Oakville
with expanded medical staff coverage.

A relationship with The Med also offers significant opportunities for sharing of
ancillary and support services (laboratories, food services, housekeeping, etc.).
This potential could be realized to an even greater extent if Oakville was located
in greater proximity to The Med.

The potential for moving Oakville from its 82-year old facility into the soon to be
vacated Bowl Hospital should be explored. The County owns the building and,
although there may need to be capital infrastructure investment, the long term cost
and system benefits could be significant.

The Veteran’s Administration Hospital has a contract with Oakville for its longterm care patients, but few referrals currently take place. It is likely that these
referrals would be in greater number if Oakville were located closer to The Med
and the VA.

Oakville now contracts for certain services with private companies that could be
“bought” from The Med and The Med now sends patients to private nursing
homes that could be sent to Oakville, supporting both institutions.

Oakville represents an area of financial opportunity for the County that is
described more fully on the following pages.

Longterm care services at Oakville should be included in the oversight scope of a
“public health authority.”
17
MEDICAL STAFF
Situation
Just as the various levels of medical service within the Shelby County health system are
not well connected into one continuum of care, there is no true medical staff that
practices within its hospitals and clinics. Instead, there are separate groups and
categories of providers with uneven abilities, different levels of provider staffing, and a
seeming lack of planning to assure the appropriate types and numbers of providers to
meet need and demand. The Med has a medical staff that is composed of physicians
from UT, some through the UT Medical Group (UTMG). Although the physicians are of
high quality, and many are ardently committed to the mission of The Med, they work
within a teaching model that has largely gone by the wayside at most high quality
hospitals, even in public hospitals and academic health centers. In almost all situations,
direct hands-on care is provided by residents under variable attending supervision. While
teaching actually can be a powerful aid to providing quality care, it has been widely
recognized that effective teaching must be an adjunct to care directly delivered by senior
clinicians who maintain a personal relationship with and responsibility for patients.
The UT/UTMG physicians are university personnel who report primarily to their
department chairmen, although there are chiefs of service, appointed by the chairmen, at
The Med. The chairmen and the medical college leadership may be sympathetic to the
clinical needs of The Med and its patients but the mission, first and foremost, of the
university is to excel in academic endeavors. The mission of The Med should be, first
and foremost, to assure comprehensive and high quality clinical care for its patients.
These two missions need to be aligned in such a way that both institutional needs are met.
Advancement and prestige in a medical college are based upon research and publishing
first, teaching a surprisingly distant second, and direct clinical care trailing in third place.
This is reflected at The Med by an attending physician staff with a significant number of
doctors dedicated only part-time to patient care in order to allow for other academic
pursuits.
The lack of coordinated planning for the effective allocation of medical staff resources is
a responsibility of The Med as well as UT/UTMG. The Med has not been aggressive
about determining what clinical services are required to meet the needs of its patients and
the broader community or working collaboratively with UT/UTMG to decide on the best
use of limited medical staff dollars.
The Health Loop clinics are staffed by primary care physicians with little or no
relationship to UT/UTMG, even though many of these physicians are UT-trained. There
is a haphazard connection to inpatient services and a very limited relationship with
outpatient specialists who might offer consultation. One result of this disconnect, as well
as the general difficulty in gaining access to specialties at the MedPlex, is the referral of
some primary care patients, particularly those with insurance, to facilities and physicians
outside of the health system.
18
The Department of Public Health employs a few physicians who have some relationship
with the Health Loop and The Med staffs, but these connections are based more on
personal relationships and less on planned and coordinated staffing as part of a
coordinated system. Oakville Nursing Home has what appears to be an inadequate
physicians staffing level and plan. Except for the contractual connection with The Med
for Oakville’s Medical Director, the physician services appear to be private enterprises
that are clear outliers in even the disjointed staff arrangements that make up the rest of
the system.
Opportunities

Discussions should begin to create a medical staff that is dedicated to the Shelby
County health system. Its members should practice and teach full time or nearly
full time within the system. A strong link and relationship with the UT Medical
College is important and should be maintained and formally extended to all the
components of the health system. Several options are available to accomplish this
consolidation including, but not limited to, creating salaried positions directly
with the system, deriving salaries partially from the health system and partially
from the UT or UTMG for teaching activities, or contracting with UT or UTMG
for physicians that they salary. There could also be a combination of the
scenarios listed above. The most significant issue is the development of a medical
staff dedicated to the service of the health system.

All options for a single medical staff are predicated on a newly negotiated
agreement between the Shelby County health system and UT/UTMG, broadening
the scope of the current contract between UT/UTMG and The Med. This
agreement should delineate the level of affiliation between the two bodies, the
expected types and level of clinical services provided by the medical staff (to the
system and UT), and payment that is tied to the delivery of patient care services as
measured by agreed upon productivity levels.

The membership of the medical staff can be drawn from many of the physicians
currently working in the institutions that will make up the system. However, it is
likely that some current staff may not meet criteria for staff membership by
credentials or willingness to commit enough time or effort. Unmet needs of the
patient population or institutions will require the recruitment of additional new
providers including subspecialists.

The medical staff members should work under new job descriptions that describe
direct service expectations, such as necessary clinical skills to address prevalent
health status problems or certain cultural competencies.

The system’s medical staff will report to the Medical Director of a Shelby County
public health authority (see description below). The medical director and chiefs of
19
service at The Med, as well as medical directors at the MedPlex, Health Loop
Clinics, TLC and Oakville will have reporting responsibilities to the system
Medical Director. They in turn should have responsibility for recruitment,
evaluation and retention of the health system medical staff.

The University of Tennessee Medical College has the opportunity to train
physicians and medical students to address the profound health disparities that
exist in the population served by the Shelby County health system. In addition,
research and program planning to discover the causes of these health disparities
and to craft and test effective solutions to address them is an opportunity for the
health system and Medical College. The system may be charged to encourage and
support such academic activities.

The system’s medical staff should be included in the oversight scope of a “public
health authority.”
OTHER ELEMENTS OF THE CONTINUUM OF CARE
Situation
In addition to the elements of care described on the previous pages, the County operates,
in conjunction with the City of Memphis, a public health department that delivers
comprehensive services to the most vulnerable residents and communities of the area.
Given the adverse health status of the County, these services are critical to successfully
address the broader determinants of health and prevention of disease and disability. It is
also crucial that these services be well-integrated into the overall health care delivery
system. There have been some attempts to coordinate care, most notably through the
Health Loop clinics and in particular disease areas such as HIV/AIDS. There was also an
historic attempt to create a new model in past years through a collaboration between the
health department and The Med/UT in the design of disease treatment protocols used by
public health nurses in community settings. In 1998, the Health Department, Shelby
County government and The Med entered into a joint venture to operate a ten-clinic
primary care network – the Health Loop. This primary care system consists of six public
health clinics and four primary care centers of The Med.
The County also provides approximately $5.6 million in a contractual agreement to
provide health services at the County’s correctional facilities. Transfers from these
facilities account for approximately 2800 inpatient days at The Med annually, with a LOS
of 6.4 days. There is little attention now on efforts to minimize inpatient transfers through
an examination of services provided at the jails. Further, other counties have aggressively
utilized their connections between correctional, public health and medical services to
address significant community health problems.
20
In addition to the services directly provided by the County, there are many other social,
mental health, substance abuse, educational, violence-prevention and other activities and
programs which are critical components to the overall health of the community. It
appears that there is minimal coordination of all of these services.
Opportunities

The health department should be freed up to focus on those public health services
that directly impact the health status priorities of Shelby County. The
management of the Health Loop clinics should be re-evaluated, through the public
health authority, to minimize the current duplicative management structure.

The health department should be supported to provide ongoing epidemiological
assessments of the health care needs of the Shelby County community.

The County should begin an analysis of the referral patterns for detainees in their
correctional health system to determine ways to minimize any unnecessary
transfers to The Med for care. An assessment should also be made of the
opportunities for using the correctional health facilities for public health
interventions.

Both the health department and the correctional health program should be
included under the scope of the “public health authority.”
21
Financing the Shelby County Health System
TENNCARE
Situation
The Medicaid Program is a joint state/federal program that requires local funds as match
to access federal funding at a prescribed rate. When state Medicaid program costs
increase due to increases in enrollment, utilization, or provider payment rates, the federal
government participates in those increased costs at the prescribed “matching rate” for that
state. Absent a waiver, payment levels under Medicaid are constrained only by the
availability of non-federal funds to support the program and the federally defined upper
payment limits (UPLs) for various provider groups.
By electing to operate its Medicaid program under a comprehensive waiver, Tennessee
has gained flexibility that in part allows Tennessee to extend coverage to populations that
are not normally eligible for Medicaid service, but has in exchange given up several
funding opportunities used in other states. One particular constraint is the overall cost
neutrality requirement in the TennCare waiver.
The cost neutrality ceiling for the entire TennCare program is computed as the sum of
three components:

Group 1 -- A per member per month (pmpm) amount for Medicaid eligible
TennCare enrollees times the actual number enrolled.

Group 2 -- A pmpm amount for individuals who were not eligible for
Medicaid under the pre-TennCare Medicaid program, but could be Medicaid
eligible without TennCare, times the number of such individuals that are
enrolled in TennCare.

The amount of Medicaid Disproportionate Share Hospital (DSH) payments
that Tennessee would receive for disbursement to fee-for-service (FFS)
providers under the state-by-state federal limits on Medicaid DSH payments.
Many of the Medicaid financing options used in other states (e.g., provider taxes,
intergovernmental transfer agreements (IGTs), special payment groups) have limited
applicability in Tennessee due to the overall federal funding limitations that were created
as part of the TennCare waiver.
Expenditures that count against the ceiling include:

The TennCare managed care payments for Group 1 and Group 2 members.

The TennCare expenditures for uninsured or uninsurable persons who would
otherwise not be eligible for Medicaid (Group 3).

TennCare Essential Access Hospital (EAH) payments.
22

TennCare Graduate Medical Education (GME) payments.
The State’s actuary, PricewaterhouseCoopers (PwC), determines the pmpm payment
levels for all Groups. The size of both the EAH and the GME pools are limited by the
Centers for Medicare and Medicaid Services of the federal Department of Health and
Human Services (CMS) as part of the waiver approval process.
At present, the State of Tennessee has limited the number of persons enrolled in Group 3
(those that do not meet traditional Medicaid eligibility criteria) due to a shortage of nonfederal funds. Should additional state funding become available, enrollment in Group 3
could be increased.
Under the assumption that Medicaid Disproportionate Share Hospital (DSH) payments
were intended to assist hospitals that primarily served the uninsured and that the
expanded eligibility made available by the Section 1115 waiver would eliminate the
uninsured in the State of Tennessee, the State eliminated Medicaid DSH payments when
it implemented TennCare. Several years later the State created the Essential Access
Hospital (EAH) program to partially compensate those hospitals, such as The Med, that
serve a high proportion of Medicaid and uninsured patients. EAH is currently set at $100
million, far less than the over $413 million federal ceiling on DSH payments that
Tennessee could pay without the TennCare waiver. It is important to note that the $313
million difference between EAH and what would have been the DSH ceiling is built into
the waiver and is eligible to be paid on a pmpm basis to enrollees in any of the TennCare
Groups, including those that do not meet traditional Medicaid criteria.
Under the current configuration, EAH payments only consider Medicaid activity and not
the number of uninsured at each hospital. EAH pays high Medicaid hospitals for a
portion of the difference between regular Medicaid payments and the cost of treatment of
Medicaid clients. This approach harms hospitals such as The Med and has directly
contributed to its current financial crisis because of the large volume of services to
uninsured patients.
In a report to Mayor Wharton dated May 23, 2003 The Med presented data illustrating
the cost of unreimbursed charity care. In FY 2001, The Med incurred over $51 million in
unreimbursed costs for uninsured patients, an amount more than twice as high as any
other hospital in the State.
TennCare disburses a pool of $50 million per year through university medical schools to
fund Medicaid’s share of GME costs. Before TennCare, Medicaid GME in Tennessee
was paid using a formula similar to Medicare. Currently all Tennessee Medicaid GME
payments are allocated to the states’ four medical schools, based primarily on the number
of primary care residents being trained. Funds are directed from the medical schools to
the sites where residents are being trained. The goal of TennCare is to have 50% of
aggregate residency positions in the primary care specialties.
23
Another aspect of current TennCare financing is the Stabilization Plan that was created in
response to recent issues of solvency for MCOs participating in TennCare, including the
actions of some MCOs seeking to withdraw from or reduce their participation in
TennCare. The TennCare Quarterly Report to the Legislature dated October 15, 2002
describes the Stabilization Program:
In order to provide increased stability for the TennCare program, it was decided that
TennCare MCOs would temporarily operate under a non-risk agreement effective July 1,
2002. This arrangement will last 18 months, until December 31, 2003. The purpose of the
plan is to allow a period of time to establish greater financial stability while maintaining
continuity of the managed care environment for enrollees. Each MCO must demonstrate
throughout the period of the Stabilization Plan that it has sufficient financial capital to
insure uninterrupted delivery of health care on an ongoing basis.
Under the Stabilization Plan, MCOs are being paid an administrative fee to manage a
medical fund for health care services. Efficient management of the medical fund will
result in a sharing between the state and the health plan of any savings generated.
Administrative bonuses will be used as rewards for the achievement of high priority
targets. Changes in provider contracts are subject to TennCare approval.
During the period of the Stabilization Plan, we expect to be able to generate actuarial data
that will provide an improved picture of the elements of risk in the TennCare enrollee
population. Because the plans will be operating on a non-risk basis, the data will be less
influenced by MCO solvency issues, enrollment shifts, and other variables that affect the
actuarial calculation of risk. The data should allow us to establish improved rate
structures so that MCO operations can return to a risk basis at the end of the stabilization
period.
CMS recently allowed the State to expend up to $175 million for the Stabilization
Program. The CMS action allows TennCare to access federal matching funds for
Stabilization Program expenditures that would not otherwise be eligible for matching
funds. These expenditures must be applied to the TennCare 5-year overall budget ceiling.
Opportunities

Changes within the TLC payment arrangements from TennCare could benefit
The Med and affiliated physician groups. If the changes can be done in a
manner that modifies the actuary’s underlying assumptions and increases the
pmpm rates paid to TLC after the stabilization period has expired, the net
effect would be positive on all involved parties.

Identification of Medicaid GME funding opportunities within the existing
distribution methodology should be explored. It may be that the State’s
emphasis on primary care has unintended adverse impacts upon tertiary
hospitals like The Med.
24

The Med should be proactive in the reconfiguration of EAH payments. Access
to the base data for all hospitals is necessary to develop a proposed
distribution methodology that appropriately recognizes the cost of treating
uninsured patients.
TLC PAYMENTS TO THE MED
Situation
The Stabilization Plan for TennCare removes the MCOs from risk arrangements. In
essence, the MCOs are operating as administrative service organizations (ASOs) on
behalf of TennCare. To minimize the State’s risk during this period, all rates paid to
providers by the MCOs have been frozen at rates those MCOs were using before the
beginning of the stabilization period.
Prior to the stabilization period, the reimbursement from TLC to The Med was set at a
low level. This arrangement provided an incentive for TLC to use The Med and enabled
TLC to operate profitably. TLC is restricted from changing provider reimbursement
levels while within the stabilization period. As a result, The Med is losing money on the
care that it provides for TLC enrollees.
Opportunity

TennCare staff have indicated a willingness to consider a proposal to increase the
rates paid by the TLC to The Med, provided that the overall impact on expenditures
for TLC members was budget neutral. This could be supported by other hospitals
that have an interest in maintaining The Med as a viable provider of Medicaid
services for Memphis and the region.
OAKVILLE NURSING HOME
Situation
Current Tennessee Medicaid reimbursement to long-term care (LTC) facilities is subject
to a ceiling at the 65th percentile of average cost per day. Tennessee Medicaid places all
facilities in a single group. The reimbursement methodology assures that approximately
35% of the facility days in Tennessee are reimbursed below the cost of providing
services.
25
Like many states, Tennessee uses intergovernmental transfers (IGTs) from the local
governments that own LTC facilities as a means of increasing the extent to which federal
funds are available to fund LTC services. Some interviewees indicated that while
longterm care is not part of the basic TennCare program, total Medicaid LTC
reimbursement in Tennessee is part of the global budget cap created by the TennCare
waiver. These individuals indicated that as a result of the global ceiling on expenditures
for Medicaid related to the TennCare waiver, Tennessee was unable to maximize IGT
opportunities with public LTC facilities like other states. Under the present arrangement,
Oakville is allowed to keep 2% of the IGT amount as an administrative fee. However,
other than this nominal fee, the net reimbursement to Oakville is still subject to the 65th
percentile ceiling. This is unlike the situation in some other states where the public
entities derive greater benefit from their status and ability to provide IGT funding as the
non-federal share of enhanced payments.
The limitations on LTC reimbursement are not related to the calculation of the Upper
Payment Limit (UPL), a provision of federal law that limits Medicaid reimbursement to
what Medicare nominally would have paid for the same services. The Tennessee Health
Care Association has been aggressive in calculating the Tennessee UPL, with the result
that current Tennessee LTC payment levels, including the IGT opportunities, are not at
the UPL. Instead the limits on LTC reimbursement are due to an overall spending cap on
Medicaid related to the TennCare waiver.
HMA contacted the Centers for Medicare and Medicaid Services (CMS) regarding the
inclusion of longterm care services in the TennCare budget neutrality limit. The CMS
official stated that LTC was outside of the TennCare budget neutrality limit. As this
report was being finalized, HMA was able to receive the definitive answer from Eugene
Grasser, the Chief Operations Officer of TennCare, that LTC is outside of the State’s
budget neutrality limit.
Oakville’s cost per day is about $160. Medicaid reimbursement for Oakville’s Level 1
patients is $114 per day (70% of all days) and Level 2 Medicaid days are paid $162 (22%
of all days). Thus, the weighted average rate of about $125 per day covers about 78% of
the cost for serving the 92% of the population that is Medicaid.
Opportunities

Establishing policy that increases per day reimbursement to Oakville is clearly
possible. This could occur through creation of a new facility class, exempting
Oakville from the percentile limit, or allowing Oakville to retain a greater
share of the IGT arrangement. This action should be pursued immediately.
26
STATE FMAP CHANGE
Situation
The current FMAP rate for Tennessee is 64.59%. The regular Tennessee FMAP declines
to 64.40% for FY 2004. Recent federal action provides enhanced FMAP for five fiscal
quarters - from April 1, 2003 to June 30, 2004. For Tennessee that means one quarter of
the state fiscal year that ended June 30, 2003 and all of the current state fiscal year. The
estimated dollar value of this 2.95% increase in FMAP is $232.5 million for Tennessee.
In addition to the increased matching rate, each state is receiving a “Flexible Spending”
amount from the federal government. The lump sum grant for Tennessee totals $193.5
million, with half to be paid in the current federal fiscal year and half next year. These
funds can be used for most any purpose since they can be used for "essential government
services.”
Opportunities

The potential opportunities related to the FMAP change seem to be in the area
of the retained benefit from the nursing home IGT arrangement. Fewer nonfederal dollars are needed to maintain provider payments at current levels. At
minimum, about 4.6% more federal funds will be available for all public LTC
facilities. With State level direction, a proportionately larger share of the
benefit than would otherwise be obtained could be directed to Oakville.

There may also be an opportunity to capitation increase rates to Medicaid
MCOs and still be within the overall TennCare budget ceiling. That would
require an increase in the actuarial assumptions and could be offset by
physician reimbursement increases that are either funded by the new FMAP or
through a new IGT.
INTERNAL OPERATIONS
Situation
There are several opportunities within the facilities that make up the health system in
Shelby County to either save costs or generate additional revenue. Attention is already
being given to some of these pursuits.
27
Opportunities

The Med should annually review the cost report to identify opportunities to
maximize Medicare reimbursement and situations where costs incurred by
The Med are not being covered by Medicare reimbursement.

The Med’s high DSH rate makes it likely that adding Medicare patients with
“average’ costs would be cost beneficial. The impact of adding a geriatric unit
should be explored and evaluated.

The Med appears to exceed the Medicare ceiling for resident and intern count.
This issue should be further explored.

Oakville Nursing Home should institute aggressive billing for all reimbursable
services. There may an opportunity to increase Medicare Part B revenue. A
thorough assessment of all Part B billing opportunities should occur.

The Health Loop clinics should pursue FQHC designation and seek Section
330 grants for the care of the uninsured. The grants would provide ongoing
operational support, as well as open the possibilities of capital improvement
dollars and other benefits.

All entities within the system should review current service contracts to assure
accountability, explore ways to decrease reliance of “outside” providers by
directing service contracts internally and functioning as a real system. (For
example, it might be beneficial for Oakville to contract with The Med for PT
services).
OTHER STATES
Situation
Mississippi Medicaid pays adequately for services to Medicaid patients and also allows
The Med to participate in an IGT funded DSH payment. The federal Center for Medicaid
and Medicare Services (CMS) has indicated that the opportunity for The Med to provide
funds to Mississippi through an IGT is not permitted. It is the CMS position that IGTs are
permissible only within a State and not across state lines. Should this interpretation be
upheld, both Mississippi and The Med would be adversely affected. Discussions are
underway on ways to resolve this issue in a positive manner.
28
Arkansas Medicaid is severely limited in their ability to make DSH payments. The pool
for the entire state is approximately $20 million and is distributed proportionately to
hospitals that meet the federal minimum requirements regarding the proportion of
patients that are Medicaid or uninsured. Since the ratio of Arkansas Medicaid services to
the entire hospitals inpatient services would need to be high, it is unlikely that The Med
would meet the federal minimums and be eligible for an Arkansas DSH payment.
The Arkansas Medicaid inpatient payment per day is limited to a ceiling of $675.
Exceptions are granted to teaching hospitals with Arkansas affiliations.
Opportunity

If positively resolved in discussions with CMS, it may be possible to expand
the IGT opportunity with Mississippi and to create a similar arrangement with
Arkansas. Given limited DSH capacity, the Arkansas potential would need to
focus on rate increases funded through IGTs.
FEDERAL GOVERNMENT
Situation
The TennCare waiver budget ceiling restricts Tennessee’s ability to recognize the costs of
one provider without adverse impact upon others. Exceptions are needed in selected areas
to allow providers that are using a significant amount of local funds to be able to use
those funds as the non-federal share of Medicaid payments.
As the waiver was developed, the base cost was derived without consideration of local
supplementation. As costs have risen faster than Medicaid rate increases, it is appropriate
to allow these local funds to be matched as a way of covering medical costs.
Opportunities


Expansion of the Essential Access Hospital Pool with the non-federal share
funded through IGTs
Continuation of IGT arrangements with Mississippi and expansion to include
Arkansas.
29
The Structure of the Shelby County Health System:
The Creation of a Shelby County Public Health Authority
Why is a New Oversight Body Important?
While Shelby County faces daunting issues of poor community health status, it is in the
unique position of having all of the elements in place for a comprehensive system of
health care delivery. The County is overseen by a government that has demonstrated
financial commitment to assuring the health of the public. All segments of the
community, including all of the other hospitals and health centers, have strongly
expressed their support of The Med and the role of the public system of care. The
facilities and personnel exist to create a seamless continuum from public health and
outreach through primary and specialty outpatient services through acute inpatient and
longterm care, assuring both patient access and appropriate and efficient utilization of all
levels of service. Shelby County could be in the position of becoming a national leader
in the creation of a local “safety net system” of care that includes public and private
providers, all dedicated to a vulnerable and growing population in need.
A coordinating entity, such as a Public Health Authority, is essential to perform the
following functions to bring about and maintain this continuum of care:

community-wide health planning and the establishment of service priorities
based on documentable need and demand;

assurance of appropriate use of all levels of care (i.e., chronic ventilator
patients taken care of in Oakville instead of The Med) and ease of access
between levels of care for patients;

creation of one designated medical staff serving an entire system instead of
one institution or one Department;

coordination of information to minimize duplication of effort and expenditure
of resources and enhance the continuity of care as the patient moves through
the system;

realization of efficiencies in the sharing of services (i.e., purchasing, legal,
billing, planning, ancillaries) between institutions within the system; and

enhancement of financing and advocacy potential.
30
Who Should be Included in Such a Public Health Authority?
There should be several tiers of participants in such a system. The first tier should
consist of all of those providers that are either operated or funded by Shelby County
government. These entities would include: The Med (and the MedPlex), the Health
Loop clinics, Oakville Nursing Home, the public health department and UT/UTMG
(through their contractual agreement to provide medical staff). It should be noted that
this oversight Authority need not require any dissolution of any existing governance
structures, such as the not-for-profit Board of The Med or the UT Board. In fact, if the
Health Loop clinics are successful in gaining FQHC designation, they will need a
Community Board to govern their day-to-day operations. Memoranda of Understanding
(MOUs) can be generated between these institutions to ensure participation.
The second tier of participants would include those entities with a direct responsibility in
the continuum of care for the patients of the system. Currently, those providers would
include: LeBonheur Hospital, Methodist Hospital (also representing the Bowld Hospital)
and TLC managed care organization. In addition, there are several free-standing primary
care centers that care for the medically underserved in the County. These providers
represent critical components of the system and need to be active participants in the
setting of priorities and allocation of resources.
A final tier of participants would include those mental health, substance abuse, primary
care, violence-prevention, social service, education and other organizations who have a
significant role in preserving the broader definition of health of the patients and the
communities that are the core of the Shelby County health system’s focus. A formal
mechanism needs to be in place to assure the input of and the coordination with these
organizations in order to most effectively address the adverse health status of the
community.
Who Convenes and Organizes the Authority?
The most logical organizer for creating a governmental body that provides oversight for
the health system that services the most vulnerable residents of Shelby County is the
Mayor of Shelby County.
What is the Composition of the Authority’s Board and Staff?
The most important element in the effectiveness of a coordinating Authority is the skill
and leadership ability of the governing Board and the senior staff. The Board should be
representative of the broader community, including business, labor, religious and civic
leaders who are committed to the common mission of the health care system. It will also
be important to involve the key unions in the discussion of this restructuring, providing
some avenue for representation from the onset.
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The Authority should not duplicate the staff of the individual institutional components of
the Authority but should, at minimum, include a Chief Executive Officer, a Medical
Director, a Chief Financial Officer, a Chief Information Officer and planning staff. It is
critical that these positions are filled with highly skilled and dynamic people who are able
to provide leadership to the effort to move from a set of diverse institutions to a cohesive
system of care. The CEO, in particular, will need to be highly experienced, able to move
diverse institutions and maintain the focus of the system on the needs of the patients and
communities that it is designed to serve.
What are the Functions of the Authority?
There are a variety of models for coordinative bodies for safety net health care systems
throughout the country, including organizations that include both public and private
institutions. The most effective of these systems maintain the following basic functions:
 budget approval;

coordination/linkage of information systems;

consolidated medical staff;

health system planning and priority setting;

contract negotiations for services;

approval of the leadership of participating institutions;

coordination of governmental advocacy activities; and

potential for taxing authority.
What are the Next Steps in Establishing Such an Authority?
It would be wise to research other health system restructuring efforts as a first step in
establishing a health authority for Shelby County. Each community is different and it is
important that a new structure reflect these local issues. Funding of both the
establishment of an authority and maintaining its ongoing operation should also be
explored. There are many options, ranging from contributions from participating
institutions to using the administrative dollars from the Medicaid program to seeking a
demonstration project grant from the US Department of Health and Human Services.
Discussions will need to taken place with those institutions that will need to be a part of
the system. While the Mayor can mandate the participation of the institutions that are
directly operated by the County, he will need to work with the Board and leadership of
The Med, UT and the private hospitals and health centers that will need to be included to
assure their participation in this system. In addition, a group of civic leaders should be
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brought into the process at an early point to demonstrate that the creation of this
Authority is a community response to a community problem, not just a reaction to the
financial troubles of an institution or institutions.
Finally, a workplan should be developed, with timelines, that outlines the movement
toward the establishment of the Authority. Leadership, both for the staff and Board of the
new entity, should be recruited as an early component of such a plan, as these individual
should be involved in the creation of the entity, not come into the process after it is
completed.
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Conclusion
HMA has been universally impressed by the commitment of the administrative, academic
and clinical leadership of all of the health care providers reviewed as a part of this study
to the creation of an effective system of health care services for the most vulnerable
residents of Shelby County as well as their stated willingness to bring their institutions to
the table to find new ways of meeting that mission. We believe that the
recommendations in this report targeting the various levels of care, the financing of
health care services and, most important, the creation a comprehensive system of care for
Shelby County provide the framework for an innovative model in which a community
comes together to address the complex health care needs of the people who live there.
Coupled with the support of the health care institutions and government and civic
leadership that will need to make it happen, this model could have tangible national
implications.
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