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Spinelli

by Dave Gardner

 

Like meandering rivers flowing into the ocean, a series of endangered revenue streams are delivering precious dollars into the nation’s overflowing health care system.

Patty Dunsinger, director of finance and CFO with Wayne Memorial Hospital, manages the finances of a genuinely rural facility that serves patients from birth to hospice. According to Dunsinger, for the fiscal year that ended on June 30, the hospital received about 47% of its operating revenues from Medicare, 9% from Geisinger insurance products excluding Medicaid, 15% from Blue Cross Highmark and 17% from all Medicaid products.

In a big move designed to provide future sustainability, the system has joined the pilot program known as the Pennsylvania Rural Health Model. Within the effort, The Centers for Medicare and Medicaid Services and other participants pay participating rural hospitals on a global budget with a fixed amount that is set in advance to cover all inpatient and hospital-based outpatient items and services.

“The Rural Health Model includes a focus on preventative care,” said Dunsinger. “The traditional fee-for-service model of operation for providers is definitely declining.”

Wayne is also included in a new Global Budget Program initiative. Through this system, payments for inpatient and outpatient services are based on historical expenditures and are set across payers in the state, giving hospitals fixed annual budgets and an incentive to curb unnecessary use.

“Wayne joined to help our system stay competitive and sustainable,” said Dunsinger.

She added that providers across the landscape may still have to “jump through hoops” to receive promised payments from private insurers who all operate with different rules. In severe cases, authorization to receive payments, coupled with suffocating government regulations, increases operating costs while delaying the arrival of critical revenues.

Costs for uncompensated care is creating bad debts for services provided to the uninsured or under-insured. At Wayne, this totals in the millions of dollars annually.

“Some private insurance doesn’t even use universal billing codes, or they have a different series of codes than what Medicare dictates,” said Dunsinger. “These types of situations require a lot of administrative time on our part. If we had one set of processes with all the insurers it would greatly reduce our administrative burdens and operating costs.”

Rising demand

Joseph Hollander serves as executive director of the Scranton Primary Health Care Center, where the staff is coping with an 85% increase in patient count over five years. During 2018, the facility served a total of 11,400 clients through 41,000 individual patient visits.

Providing treatment for behavioral issues is vital within this effort. In addition, dental care presents a systemic problem because, if tooth-related problems are ignored, they can compound and cause severe medical issues.

According to Hollander, his system’s $6.5 million annual budget must be balanced, and he will never vote for a deficit balance, even with financial reserves.

“Yes, I do feel some insecurity with the sustainability of our mission,” said Hollander. “Business costs keep going up, and we’ve done our best to control our operating expenses whenever possible.”

With finite revenues a harsh economic reality, the existence of financial competition for all caregivers inflicts anxiety upon Hollander. This market-based demand for talent allows little if no opportunity to cut wages and benefits, and with federal deficits exploding, the futures of both Medicare and Medicaid and their revenues are, at best, unsettled.

“How will people get the care they need if Medicare and Medicaid are cut back?” questioned Hollander. “If people have no insurance, they often use a hospital ER room for the treatment they need, and we all eventually pay for that also.”

In addition, Hollander referred to the system that awards government funding grants as competitive and tough, and said it may unfold on a tilted playing field. This contrasts with grants from private foundations, which are largely regional in nature and utilize fair processes.

“The one thing we can be sure of is that the need for health care is not going away with the patients we serve,” said Hollander. “Despite a very unsettled future, this demand is sure to grow.”

Government streams

Grant money flowing from both Washington and Harrisburg is also a key component of health care revenue streams. Examples include a $1 million grant for the CALO White Haven Development near White Haven in Foster Township to establish a residential treatment facility to treat the effects of early childhood trauma.

Federal grants of $36,000 and $167,000 have recently flowed to the Scranton Primary Health Care Center, with $49,000 to the Rural Health Corporation of Northeastern Pennsylvania. Meanwhile, The United Neighborhood Centers of Northeastern Pennsylvania and the Wright Center for Community Health have benefited from grant awards totaling $2 million.

All-time high

Linda Thomas-Hemak, MD, CEO of The Wright Center for Community Health and president of The Wright Center for Graduate Medical Education, anticipates her organization will utilize a total budget of $50 million for 2019, an all-time high for the organization. These revenues are paying for compensation with 441 employees, which includes all staff members and residents/fellows, plus costs for operating eight patient-care locations in the region.

Revenues are also flowing from multiple sources that include Medicare, private insurance, and federal agencies such as the Department of Veteran’s Affairs and the Health Resources and Services Administration. More than 40% of Wright’s patient population is insured by a state Medicaid plan, thereby creating a situation where the organization is “underpaid” for services rendered.

Fewer than five percent of Wright patients are insured with policies from the Accountable Care Act (ACA). Additionally, total uncompensated care is approximately eight percent for dental services and two-and-a-half percent for medical.

According to Dr. Thomas-Hemak, a bright spot has occurred with Medicaid processes at the state level. Harrisburg stepped up its central authority and is allowing more practitioners to process their own decisions.

“We are working more efficiently to match the patients with payment organizations,” said Dr. Thomas-Hemak.

However, she also warned that practitioners are still expending excessive resources chasing information that should be readily available. This inefficiency is affecting the delivery and outcome of care.

“From a caretaker standpoint, primary care intersects with other primary providers, and when you’re dealing with organizations that are not early adapters as we are, it can be frustrating.”

Maria Montoro-Edwards, Ph.D, Wright’s vice president for strategic initiatives and grants, noted 18 grants were awarded to the organization during 2018. She explained this accomplishment utilized a careful application process, with some applications skipped over due to the realities of the selection process.

According to Montoro-Edwards, the system that can usher in a grant is competitive. Yet, when an organization creates a reputation for success with its applications, it can further raise the success rate of future efforts.

“We also use the information about patient metrics and outcomes to evolve better care,” said Montoro-Edwards.

Perverse system

Two former hospital CEO’s now teaching at the University of Scranton offered some pointed commentary about health care financing, as well as the environment where the money is utilized.

John Wiercinski, MHA, faculty specialist, health administration, said the current reimbursement system to providers, based on fee for service that rewarded volume versus value, has been perverse for years. This has continued despite the knowledge that it is less expensive to curb illness versus providing treatment for entrenched physical problems.

“Almost every developed nation around the world has emphasized primary and preventive care within their systems,” said Wiercinski. “However, that has not been the case in our country. The key to lower costs involves a healthy lifestyle, with all of the patients and providers cooperating.”

He also charged that knowledge about America’s health care finances has become ripe with misinformation. Institution of the ACA, also known as Obamacare, is not the fundamental reason why premiums for insurance have been rising steadily for decades.

“The steep cost increases are not a Republican or Democratic issue,” said Wiercinski. “It’s all about usage, price and quality.”

He also cited data indicating that health care is not in normal commodity because it is not market-based. Within the system, 20% of the patients utilize 80% of the resources, while high policy costs with patient groups are guaranteed by use of the actuarial risk system which is the bedrock of all the insurance programs.

Medicare patients also use the majority of the nation’s pharmaceuticals, while Medicaid’s number-one payment sector is to nursing homes after people exhaust their savings and fall back on Medicaid to pay for institutional care. Wiercinski firmly claimed that Medicaid revenues, in reality and as opposed to great deal of misinformation, are not largely being channeled to pay for illegal immigrant care.

“Abolishing Medicare and then going to the politically conservative model of premium assist with explosive insurance costs for seniors would also be a disaster for the patients,” said Wiercinski. “We can’t do it.”

Robert Spinelli, DBA, assistant professor, department of health administration and human resources, noted that the traditional fee-for-service model is still around. Value-based payments, however, are moving forward as health system survival becomes a matter of volume and quality.

“We’re finally in a transition period of moving payments to quality with both primary and preventive care,” said Spinelli. “Strategies are being pursued that are truly value-based with all of the many players understanding that the hospitals must pay their bills.”