Two Amer­i­cas

Hos­pi­tals see big dif­fer­ences be­tween Med­i­caid ex­pan­sion and non-ex­pan­sion states

Modern Healthcare - - NEWS - By Beth Kutscher

McMinnville, Ore., shares a few sim­i­lar­i­ties with McMinnville, Tenn., about 75 miles west of Chat­tanooga. With fewer than 35,000 res­i­dents, both McMin­nvilles are the largest cities in their coun­ties. Both ap­peal to out­door en­thu­si­asts, one for wine tast­ing, and one for hik­ing and other out­door ac­tiv­i­ties. Both are home to hos­pi­tals owned by Capella Health­care. But on one ma­jor health­care is­sue, there is a world of dif­fer­ence be­tween the two, which are 2,500 miles apart.

Demo­cratic-con­trolled Ore­gon ex­panded Med­i­caid un­der the Pa­tient Pro­tec­tion and Af­ford­able Care Act to adults with in­comes up to 138% of the fed­eral poverty level and ag­gres­sively signed up peo­ple for ex­panded Med­i­caid. At 88-bed Wil­lamette Val­ley Med­i­cal Cen­ter, emer­gency de­part­ment vis­its in the first half of the year were up 10% and self-pay ED vis­its were down 65% com­pared with the same pe­riod in 2013. Un­com­pen­sated care de­creased 51.4%. “So far to­day, it has been a re­ally pos­i­tive story,” said Mark Med­ley, pres­i­dent of hos­pi­tal op­er­a­tions for Capella.

Repub­li­can-con­trolled Ten­nessee has not ex­panded Med­i­caid, which means many low-in­come adults who would be el­i­gi­ble for cov­er­age un­der the health­care re­form law have not got­ten it. About 30% of McMinnville, Tenn.’s res­i­dents live below the fed­eral poverty line. At 85-bed River Park Hos­pi­tal, ED vis­its in­creased 2% and self-pay vis­its rose 1% in the first half of 2014 com­pared with the same pe­riod last year. Un­com­pen­sated care is up 1.8%.

“In the sec­ond quar­ter of this year, we started to see some pretty sub­stan­tial dif­fer­ences,” Med­ley said, com­par­ing the Ore­gon and Ten­nessee hos­pi­tals.

Of the six states where Capella op­er­ates, three have ex­panded Med­i­caid. But those three states ac­counted for about 90% of the de­cline in Capella’s self-pay rev­enue in the sec­ond quar­ter, when it re­ported a 51% de­crease over­all. Med­i­caid ad­mis­sions were up 24% over­all.

Across the coun­try, hos­pi­tals in Med­i­caid ex­pan­sion states are see­ing deep re­duc­tions in their unin­sured vol­ume and the amount of un­com­pen­sated care they de­liver. That’s not hap­pen­ing in non­ex­pan­sion states, which is why hos­pi­tal lead­ers in those states con­tinue to push elected officials to ac­cept fed­eral Med­i­caid money to

cover more of their res­i­dents.

The con­trast­ing ap­proaches to ex­pand­ing Med­i­caid are start­ing to pro­duce two sep­a­rate and un­equal health­care sys­tems in Amer­ica—one where a grow­ing per­cent­age of the pop­u­la­tion has in­sur­ance and providers are get­ting paid, and the other where the unin­sured rate re­mains high and hos­pi­tals and doc­tors strug­gle with pro­vid­ing care for pa­tients who have no way of pay­ing their bills.

“I wouldn’t be sur­prised if we saw some sys­tems mov­ing out” to fo­cus on Med­i­caid ex­pan­sion states, said Craig Becker, pres­i­dent of the Ten­nessee Hos­pi­tal As­so­ci­a­tion. “I hope we can get the Leg­is­la­ture to (ex­pand Med­i­caid) be­cause I think it has some real cat­a­strophic im­pact if we don’t.”

Yet there’s also con­cern that per capita health­care costs for Med­i­caid pa­tients are grow­ing sig­nif­i­cantly in ex­pan­sion states. Ex­perts say pre­vi­ously unin­sured Med­i­caid pa­tients of­ten have sub­stan­tial pent-up med­i­cal needs. And hos­pi­tals that pick up a larger caseload of Med­i­caid pa­tients could feel a strain be­cause Med­i­caid gen­er­ally pays lower rates than other in­sur­ers.

In Camden, N.J., where nearly 40% of res­i­dents have in­comes below the poverty line, Cooper Univer­sity Health Care has seen its self-pay vol­ume drop 40% and char­ity care de­cline by a third. Cooper also re­ported that its op­er­at­ing sur­plus nearly dou­bled in the first half of 2014 as rev­enue in­creased 5.2%.

New Jersey not only ex­panded Med­i­caid but al­lows hos­pi­tals to as­sume that pa­tients are el­i­gi­ble for cov­er­age as long as they meet in­come re­quire­ments. “So far, it’s been a very pos­i­tive thing,” said John Bucci, Cooper’s direc­tor of pa­tient ac­counts. “If (pa­tients) walk in as self­pay, we try to make sure they don’t walk out as self-pay.”

Pub­licly traded chains with hos­pi­tals in ex­pan­sion and non­ex­pan­sion states saw a sim­i­larly stark di­vide when they re­ported quar­terly earn­ings this month. Four chains raised their fi­nan­cial ex­pec­ta­tions for the full year, in part be­cause of health­care re­form.

So far, 26 states plus the District of Columbia have ex­panded Med­i­caid while 24 have not. Many of the ex­pan­sion states also set up ro­bust in­sur­ance ex­changes and en­roll­ment ef­forts, fur­ther re­duc­ing un­com­pen­sated care.

Af­ter the U.S. Supreme Court in 2012 made Med­i­caid ex­pan­sion vol­un­tary for states un­der the Af­ford­able Care Act, the is­sue be­came highly par­ti­san, with many Repub­li­can gov­er­nors and leg­isla­tive lead­ers op­pos­ing ex­pan­sion. They of­ten ar­gue that the fed­eral govern­ment will re­nege on its com­mit­ment to pay for the lion’s share of the ex­pan­sion, and that states will have to eat the costs.

In states that have not ex­panded Med­i­caid, that pol­icy de­ci­sion poses a dou­ble-whammy for hos­pi­tals. Not only do they miss out on hav­ing a greater num­ber of pay­ing pa­tients, un­der Oba­macare they also will see phased-in cuts to dis­pro­por­tion­ate-share hos­pi­tal pay­ments, which help make up some of their short­fall for de­liv­er­ing un­com­pen­sated care.

“The the­ory was those pay­ments would be­come less nec­es­sary as more peo­ple gain cov­er­age,” said Judy Solomon, vice pres­i­dent for health pol­icy at the lib­eral Cen­ter on Bud­get and Pol­icy Pri­or­i­ties. “That’s play­ing out ex­actly as planned in the states that have ex­panded. I think that sends a mes­sage, par­tic­u­larly for states in the Deep South that rely heav­ily on DSH pay­ments.”

The Colorado Hos­pi­tal As­so­ci­a­tion pro­duced some of the ear­li­est data on the ef­fect of Med­i­caid ex­pan­sion through its study of 465 hos­pi­tals in 30 states. It found that in the first quar­ter of 2014, hos­pi­tals in ex­pan­sion states saw Med­i­caid charges ac­count for 18.8% of their to­tal rev­enue, an in­crease of 3.5 per­cent­age points over the first quar­ter of 2013. Also, self­pay charges fell to 3.1% of the to­tal, down from 4.7%. And the av­er­age amount of char­ity care per hos­pi­tal de­clined to $1.9 mil­lion from $2.8 mil­lion—a de­crease of 32.1%.

In con­trast, Med­i­caid and self-pay charges at hos­pi­tals in non­ex­pan­sion states re­mained steady at 13.6% and 5% of to­tal charges, re­spec­tively. These hos­pi­tals de­liv­ered an av­er­age of $4.2 mil­lion in char­ity care, a 10.5% in­crease from $3.8 mil­lion dur­ing the first quar­ter of 2013.

At Tenet Health­care Corp., the num­ber of unin­sured and char­i­ty­care ad­mis­sions in its five Med­i­caid ex­pan­sion states—where it has about a third of its beds—fell 54% in the sec­ond quar­ter com­pared with the same pe­riod last year. The de­cline was 8% in non­ex­pan­sion states. Tenet’s Med­i­caid ad­mis­sions in­creased 23% in ex­pan­sion states and 3% in non­ex­pan­sion states.

Tenet CEO Trevor Fet­ter said that at least some of the in­creased vol­ume could be due to high uti­liza­tion among the newly in­sured. “There’s un­doubt­edly pent-up de­mand for health needs in that pop­u­la­tion,” he said.

Fet­ter also at­trib­uted Tenet’s re­sults to its outreach ef­forts, such as train­ing em­ploy­ees at Conifer, its rev­enue­cy­cle man­age­ment arm, to serve as cer­ti­fied ap­pli­ca­tion coun­selors and guide pa­tients through in­sur­ance ex­change and Med­i­caid en­roll­ment. “Within the states that did ex­pand, our strat­egy has been to be very ac­tive in ed­u­cat­ing peo­ple about their en­roll­ment op­tions,” he said.

In some states, the im­pact of Med­i­caid ex­pan­sion has been harder to see in hos­pi­tal earn­ings re­ports. In Ver­mont, for in­stance, Med­i­caid eli­gi­bil­ity for child­less adults al­ready started at 150% of the fed­eral poverty line. But other ex­pan­sion states such as Ken­tucky, West Vir­ginia and Arkansas pre­vi­ously had much less gen­er­ous Med­i­caid pro­grams. In those states, the fi­nan­cial ben­e­fit to hos­pi­tals of Med­i­caid ex­pan­sion has been siz­able and swift.

For ex­am­ple, in Michi­gan, which ex­panded Med­i­caid through its Healthy Michi­gan pro­gram start­ing April 1, Tenet’s unin­sured and char­ity ad­mis­sions de­clined 85% and Med­i­caid vol­ume in­creased 26%. “That’s a very pro­nounced and im­me­di­ate ef­fect,” Fet­ter said. Tenet had en­tered Michi­gan through its 2013 ac­qui­si­tion of Van­guard Health Ser­vices and has five hos­pi­tals in the Detroit metro re­gion.

Healthy Michi­gan has been en­rolling in­di­vid­u­als at a rapid clip and has ex­ceeded ex­pec­ta­tions. Wayne County— which in­cludes the Detroit metro re­gion where many of the state’s largest health sys­tems are lo­cated—saw 28% of the new en­rollees even though it ac­counts for only 17% of the state’s pop­u­la­tion, said Josh Fang­meier, a health pol­icy an­a­lyst at the Univer­sity of Michi­gan Cen­ter for Health­care Re­search and Trans­for­ma­tion.

Although many of Michi­gan’s sys­tems have yet to re­port sec­ond-quar­ter re­sults, MidMichi­gan Health, a four-hos­pi­tal sys­tem based in Mid­land, re­ported an 8.8% year-over-year in­crease in Med­i­caid charges as a per­cent­age of to­tal rev­enue af­ter see­ing the num­ber of Med­i­caid charges de­cline 1.1% in the first quar­ter. In ad­di­tion, its sur­plus nearly tripled in the sec­ond quar­ter com­pared with the same quar­ter last year, which an earn­ings re­port at­trib­uted to higher out­pa­tient ac­tiv­ity com­pared to the prior-year pe­riod. MidMichi­gan did not re­spond to a re­quest for com­ment.

St. John Prov­i­dence Health Sys­tem, a Detroit-based sub­sys­tem of As­cen­sion Health, has helped 4,200 pa­tients sign up for Med­i­caid and 2,000 have been ap­proved so far, an As­cen­sion spokesman said.

But there are chal­lenges as­so­ci­ated with the Med­i­caid ex­pan­sion, par­tic­u­larly for safety net providers that serve a large per­cent­age of Med­i­caid pa­tients. Some of the newly in­sured are more likely to re­quire a sub­stan­tial amount of med­i­cal care. “There are a lot of peo­ple who have gone with­out cov­er­age who are now good pa­tients and are go­ing for their pre­ven­tive care,” said Chris Mitchell, direc­tor of fed­eral af­fairs at the As­so­ci­a­tion of Amer­i­can Med­i­cal Col­leges. “Of course they’re go­ing to iden­tify health needs.”

On top of the cost of car­ing for these newly in­sured pa­tients, Med­i­caid pays some of the low­est rates, which could put a fi­nan­cial strain on hos­pi­tals that pick up vol­ume but treat pa­tients at a loss. “It’s quite log­i­cal that the first peo­ple who would want in­sur­ance would be the ones who need it the most,” said John Mor­row, ex­ec­u­tive vice pres­i­dent at iVan­tage Health An­a­lyt­ics. With Med­i­caid re­im­burs­ing below cost, “the cal­cu­lus says that at a cer­tain vol­ume, that’s not a good deal for you.”

But Capella ex­ec­u­tives note that hav­ing more pre­vi­ously unin­sured pa­tients gain Med­i­caid helps in­cre­men­tally in cov­er­ing their hos­pi­tals’ costs, free­ing up funds for new jobs or ser­vice ex­pan­sions. And get­ting Med­i­caid pa­tients in the door for pre­ven­tive care can lower costs over the long term.

Many of the non­ex­pan­sion states al­ready have poorer pop­u­la­tion health than ex­pan­sion states. Ten­nessee ranks 42nd in the coun­try in health sta­tus while Ore­gon ranks 13th, ac­cord­ing to a re­port card from the United Health Foun­da­tion.

“It’s hard to imag­ine a sce­nario where health sta­tus im­proves if peo­ple don’t have ac­cess to health­care,” Capella’s Med­ley said.

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