How will the Affordable Care Act affect employment opportunities and medical care for the Huntsville Hospital Health System, which includes Decatur Morgan Hospital, Lawrence Medical Center and Athens-Limestone Hospital?
The answer, said Chief Executive Officer David Spillers, depends on whether Gov. Robert Bentley agrees to expand the state's Medicaid program. If he fails to expand the program, Spillers said, medical services and employment opportunities will contract.
Question: How would a rejection of the Medicaid expansion affect the Huntsville Hospital system?
Answer: Health care reform was intended to get most everybody to have health insurance. Expanding Medicaid was a major component of getting a lot of people health insurance. If you were between 100 and 133 percent of the federal poverty level, you were going to get your insurance through an expansion of Medicaid.
In Alabama there are a lot of people that fall into that 100 to 133 percent category, at least 400,000 to 500,000. The way the health care reform was set up was a hospital system like ours, including Decatur and our other hospitals; the federal government has actually taken away some of the money we get for Medicare patients with the thought that we would get that back because we are not treating uninsured patients. Everybody was to have insurance in some form or fashion.
They already started taking the money away. For the Madison County campus, that's about $20 million a year in reduced Medicare payments. If we don't get an expansion of Medicaid, we're going to give up $20 million but we're still going to be treating almost as many uninsured patients as we have today. That is a worst-case scenario for the hospitals in Alabama.
Q: How does the ACA reduce the Medicare payment?
A: There is a portion of the Medicare payment called the Disproportionate Share payment, or "DISH," that's specifically for hospitals that take care of a disproportionate share of the uninsured and the underinsured. Most public hospitals fall into that category, including Huntsville and Decatur. So there's a piece of the payment in Medicare that helps offset the cost of the uninsured care, the free care.
The theory is you don't need that if everybody's got insurance. But, depending on the governor's decision, we don't know in Alabama whether everybody will have insurance. They've already started taking that money away. We had the first cut in that payment this year.
Q: Does the governor's decision affect whether you lose that money?
A: No. We're going to lose that money no matter what happens.
Q: If the governor does not expand Medicaid, how will it affect services you can provide?
A: It's about $20 million we have to make up by cutting our costs. We can't reduce our bottom line, which is already what the rating agencies would say is the bare minimum you should have as a health system, about 4 to 5 percent. Rating agencies say you need that in order to sustain the organization, so that's not really an option. If we have to cut those costs out of the system, we'll look at every possible way we can do that. The last thing we would do is eliminate services. We'd try to find it some other way.
Q: Gov. Bentley has talked about managed care options for Medicaid. Can you explain?
A: If you look at the cost of delivering care in north Alabama, what you would find is that a large portion of the what you are spending is on a very small percentage of the patients. The numbers could be as much as 5 percent of your patients taking 50 percent of your resources. So we have systems in place to try to find out why that 5 percent costs us so much, what can we do better to manage it. It can be anything from them not getting their medications when they need them, to they don't know they have diabetes and it's not being treated.
We currently have a pilot project here that the state has helped fund where an organization we set up hired a group of nurses and case managers and social workers and pharmacists. They're targeting those high utilizers of Medicaid. We're having some pretty significant impact at keeping them out of the hospital.
Q: How does managed care work?
A: Someone comes to us and says, "For these 10,000 people, we're going to give you $5,000 per year for each one of these people. You're responsible for everything that happens to them." Think about how all the incentives change in that scenario. I've now got $5,000 to take care of you in a year.
The first thing I'm going to do is probably send someone out to ask, "Are you smoking? Let's help you quit smoking and help you get in shape. Have you got diabetes? Are you getting your drugs?" We probably will be a lot more proactive managing the care. Because if you end up having to come in and have heart surgery, it just cost us $45,000. There's nine years of premiums right there that are gone. The whole system's incentives would change through this Medicaid managed care that we're talking about. "We're going to give you X amount, now you go take care of somebody." If you can keep them well, you make more money.
Q: Does failure to expand Medicaid create unique problems for Alabama?
A: Yes. Our costs are already lower than most hospitals in the country. Today, our Medicaid payment is one of the lowest in the country. Our Medicare payment is one of the lowest. And our payment from Blue Cross is one of the lowest in the country. That's all of our payments. When you already are paid less than every other hospital in the nation, if you don't have your costs managed extremely well, you're losing money.
When we compare peer hospitals around the country, our costs are at the sixth percentile nationally compared to peer hospitals. If you look at 100 hospitals, 94 of them have higher costs than ours. That reflects the changes we've had to make to survive in Alabama. If your costs are already low and somebody cuts your DISH payment, where do you go to get more costs? It makes it a very challenging situation. We'll figure it out, but it's going to be extremely difficult to go find $20 million.
Q: Is this related to the Capella Healthcare problem, the for-profit company that sold Parkway Medical Center, closed the Hartselle hospital and left Alabama?
A: It's the same issue. Their payments were so bad they could not satisfy the shareholders or the owners. You can't make much money in health care in Alabama because the payments are bad.
Q: A federal formula keeps Medicaid and Medicare payments low. Why does Blue Cross reimburse at low rates?
A: Because they can. When they have 90 percent market share, they can. In Blue Cross's defense, you're probably paying less for insurance than you are in other states.
Q: Imagine Gov. Bentley announced it would be David Spillers who would decide on Medicaid expansion and decide on any reforms of state Medicaid. What would you do?
A: I would expand Medicaid. The federal government says it will pay 100 percent for three years, with the state paying 5 percent and eventually 10 percent of the additional money that's coming into the state. I truly believe if we choose not to do that, in the long term, we'll be at such an economic disadvantage to other states we won't be able to recruit or retain industry.
Those uninsured people are still going to get care. The ones who are paying for it are going to feel the burden. That's going to make us less desirable than the states that expand Medicaid. I can't argue with the state moving down the path to better manage the Medicaid population. I saw managed care in North Carolina. I'm seeing it in our Medicaid pilot program here. We can save the state money by better managing that population.
Eric Fleischauer can be reached at 256-340-2435 or firstname.lastname@example.org.
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