A critical role

This special report is based on a roundtable discussion with four rural healthcare executives held Oct. 15 at Modern Healthcare’s offices in Chicago. The executives are:

Scott Bullock, president and chief executive officer of MaineGeneral Health, Augusta.

Patricia Schou, executive director of the Illinois Critical Access Hospital Network, Princeton.

William Sexton, chief executive of the Providence North Coast Service Area of Providence Health & Services in Seaside, Ore.

Philip Stuart, CEO of Tomah (Wis.) Memorial Hospital.

David Burda, editor of Modern Healthcare, moderated the roundtable discussion along with reporters Vince Galloro and Jessica Zigmond. This is an edited version of the transcript of the hourlong discussion. To listen to the complete podcast of the roundtable discussion or to read the complete transcript, visit the Modern Healthcare Events or Extra! Extra! section of Modern Healthcare Online at modernhealthcare.com.

David Burda: At the top of any CEO survey we’ve ever seen—in terms of what issues they are most concerned about—is always reimbursement. Phil, could you tell us a little bit about your payer mix at your hospital and how that is affecting you financially?

Philip Stuart: Roughly 60% of our payer mix is Medicare/Medicaid at this point. I would say that if it wasn’t for the critical-access hospital program … I won’t say we wouldn’t exist but we certainly wouldn’t be doing as well as we are today, so that really has provided us with a great shot in the arm, so to speak.

What we’re seeing is the private-pay or the noninsured or underinsured making up a much larger portion of our population—probably about 20%, or half of what’s remaining after Medicare/Medicaid, is now involved with underfunded insurance programs. So charity-care and bad-debt write-offs are going up every year.

David Burda: Burda: Who’s your major private payer in that part of Wisconsin?

Stuart: Blue Cross and United(Health Group) are our two biggest; they’re probably the two biggest in the country anyway but they’re certainly impacting for us.

Burda: How do their rates compare with those from Medicare and Medicaid?

Stuart: Actually, from our standpoint we actually do very well with our negotiations. I don’t want to give away any trade secrets but we’ve been able to negotiate some pretty reasonably good contracts.

Burda: Bill, can you tell us a little bit about your payer mix and how that’s affecting your reimbursement?

William Sexton: Like Phil’s hospital, probably 60% of our payers are Medicare/Medicaid and that’s consistent with what we see across the U.S. Rural communities are older, poorer and sicker than the urban counterparts, so one of the things that we rely heavily on are the federal payers.

Our commercial insurance is primarily the Blues and our reimbursement from the Blues is better than it is to the federal payers, but what we’re seeing are declining levels of payment, so that causes us to reduce costs and do some things that we probably haven’t had to do in the past.

Burda: Scott, how about at your facility?

Scott Bullock: I think it depends on which part of the system, but the hospital is like the other gentlemen said—about 60% Medicare and Medicaid. It’s a higher Medicaid mix in our physician practices and our nursing homes. Maine has about 20% of its population on Medicaid. We’ve expanded Medicaid greatly in the state of Maine to try and draw the federal matching dollars and provide access to care for people who can’t afford health insurance, but it does create a number of issues for us. We do, frankly, a lot of cost-shifting. Anthem is the largest commercial payer and so we receive overall I would say somewhere a little bit better than 90% of our costs from Medicare, about 70% of our cost from Medicaid and then we shift the balance of those losses onto the commercial payer. So the commercial payer is paying anywhere from 120% to 150% more than the cost of the care for their particular enrollees.

Burda: Pat, can you tell us a little bit about what your members are facing?

Patricia Schou: It’s probably not that much different as far as the breakdown of Medicare and commercial and Medicaid. I really believe that in Illinois had we not had critical access, over half of our hospitals would have closed because the reimbursement for Medicare has really made the difference. It’s allowed them to begin some capital improvements … that’s made all the difference in the world.

We’ve had really good luck with our commercial carriers. It’s a small percentage because these are rural communities that you have. However, if they do have Blue Cross and Blue Shield, Aetna, UnitedHealthcare or Health Alliance, they have been good. What we don’t really know on the horizon is the impact of Medicare Advantage in our rural communities. We are seeing some activity. At this point they are willing to meet us halfway and at least work with our critical-access hospitals as far as reimbursements for our Medicare at least at cost plus—the 101%.

Burda: Where do programs like SCHIP (State Children’s Health Insurance Plan) or the program in Maine, Dirigo … and maybe some of the military payers come in?

Bullock: Of course, SCHIP has been used very effectively in Maine to expand primarily access to MaineCare for children. Dirigo has about 15,000 enrollees. Maine’s total population is about 1.3 million, so it’s still a very small program and it’s going through some changes this year because of some funding issues for that part of the state’s program. So the military is a big part of what we do and I would say that helps. There are a lot of veterans in Maine. Their insurance, I think, is a good program and that’s not a big a challenge for us.

Jessica Zigmond: If you could just elaborate a bit more about the veteran population in Maine, I’m kind of interested in if you think there is any interest on the part of the local hospitals to work with the VA on kind of networking or collaborating in any way.

Bullock: We already work with our local VA. We have a VA hospital in Augusta—the Togus VA Medical Center—and they’re part of our family practice residency. Our family practice residency is in partnership with Dartmouth Medical School and the VA is part of that program as well. So we work where we can to share specialists and other resources. But the federal bureaucracy sometimes makes that very challenging and so there are often changes in federal policy, which you work something out and the next thing you know it’s changed a year later and it doesn’t work quite the way it was envisioned by the people that you worked it out with.

Sexton: Our experience with the military payers is a bit different than Scott’s. One of the things that we find is that Tricare is a federal payer and it probably is at the bottom echelon. They don’t pay nearly as well as Medicaid or Medicare, which is really frustrating to me as a former serviceman. The Veterans Administration is bringing on some additional resources and they have (health resources sharing with the Defense Department), which I think will improve things. But I think there are a lot of things that we need to do for our rural veterans that we currently are not doing. And we need to put the incentives in place to make that happen.

Burda: Phil, can you tell us a little bit about some of the other government programs and how they are as payers in your area?

Stuart: Well, BadgerCare … what we have in Wisconsin, which was part of (former Gov.) Tommy Thompson’s legacy. … We have not seen an increase in our Medicaid reimbursement from the state in over a decade, so there are a lot of issues involved with trying to improve that, and BadgerCare certainly is a part of that.

Burda: Do you feel the same way about the Tricare reimbursement rates?

Stuart: Oh, yes. And as Bill was saying we actually went to the Department of Defense and tried to get Tommy Thompson to help us when he was (HHS) secretary. They won’t recognize critical-access hospitals as an entity. You can go and negotiate as a sole community-provider hospital, but we would have to give up our critical-access hospital status to do so, so we elected not to. But their reimbursement, as Bill said, is very, very low.

The VA medical center in town does not do acute care in our community. They do more long-term care and alternate-site kinds of things, so we see a lot of that and we do have a lot of cooperative relationships, which actually works very well for them and us, so the veterans can get some care at least locally.

Zigmond: You said they won’t recognize … you’re saying they won’t recognize (critical-access hospitals) in the area? Could you talk a little bit about that?

Stuart: Tricare is through the Department of Defense, the VA is through the Veterans Affairs medical system so they’re two separate entities.

When we were looking at trying to increase reimbursement from Tricare or from the Department of Defense and trying to negotiate that, you can go off the fee schedule if you can prove a sole community-provider status. Because we are a critical-access hospital they said that in their vernacular it didn’t exist. Our board of directors looked at that and how we wanted to deal with it because they are such poor payers.

Burda: Pat, you mentioned the word capital. Can you tell us a little bit about your hospitals’ ability to borrow money and how that’s changed in the past year or so?

Schou: When the critical-access program came onboard in 1999 and 2000, as it started to unroll, at that time the rural hospitals had very limited power to borrow anything in the market. There just really wasn’t anything out there. Of course their financial status was not strong; many of them were losing money. And over the progression of the past three years, there has been a change. It started first in about 2002 when (the Department of Housing and Urban Development) came on the scene and off of their Section 242 program, which allowed critical-access hospitals to be reimbursed and go through the loan program of 242, which provides the insurance and so forth.

That was a viable option, except it takes a period of time to go through and may not be the best fit. With that coming on the scene and a lot of studies being done and recognizing that critical-access hospitals were stabilizing—that Medicare was a good payer and that it did reimburse based on a percentage of Medicare patients—the private sector has come into being.

We actually had a critical-access hospital in Illinois that was able to even go out with their own bonds in the private market and (obtain) … what is it, a BBB rating, which is very unusual, for a rural hospital to even be able to be rated. So it has really opened up.

Burda: Bill, do you find that borrowing money is easier now than it has been?

Sexton: Well, borrowing money should be easier because one of the things, as Pat says, is that with critical-access hospital legislation, we’ve been able to change a nonprofitable entity to a slight margin. And of course, one of the things that the lenders are looking (at) is the ability to repay.

The concern that we have at the current time, is many of the (aging) facilities—trying to retrofit a building of that age to current standards will be far more expensive than to build new. So the current strategy is to build new with the current tactics and the current philosophy that the CMS supports. They are putting restrictions on that and they will not certify that a new hospital close to the old hospital, when it is completed, will be certified as a critical-access hospital. So if you’re a lender, you don’t know that you’re going to have an entity that will be viable when it’s done.

Burda: You’re mentioning a lot of capital expense but it seems most of it is going toward construction rather than maybe new technology.

Schou: Back in 2000 or so most (critical-access) hospitals were lucky to have a CT scanner. Now they’re looking at a 64-slice (imaging unit), and so the access to capital allows them to do that as well as moving into the information technology arena, where they can have PACS (picture archiving and communication systems) and other kinds of things to begin to modernize. They’ve been able to add a number of different types of lab and X-ray and so forth. … They’ve been able to outfit their surgery (facilities) to really bring things up to speed.

Burda: Bill, how about your hospitals?

Sexton: A lot of the expenditure is in information technology—probably 40% of the capital goes toward information technology or something that’s related to that. One of the things that we’ve been able to do in Seaside is really be a leader for the system, because rurals can develop things and you can test it on a small platform. So we’ve had an electronic medical record now for over 10 years and as we migrate other systems and titles together, I think part of the challenge is the interface that you develop. But a part of it is the ability to share information and as you begin to build on the IT, you’re able to improve the quality and the safety of the patient care that you provide because you’re putting in safeguards and you’re sharing information that you otherwise couldn’t share in the past.

Burda: Scott, do you think it would surprise most people to hear that rural hospitals are on the cutting edge of IT and medical technology? Does that buck conventional wisdom?

Bullock: I hope not. I think that there is a great tradition of rural healthcare, and I think that very commonly we do the things that really need to be done and can get them done more quickly sometimes than our urban counterparts. So I know the image is such that may not quite fit with the picture. But I’m often struck by … we have people that send their kids to camp and they’re often from very wealthy parts of New York and other parts, and they send their kids up to camp and they’ll have to come to our hospital and we get the calls from the parents saying they think we have witch doctors in Maine. We’ll say our doctors have graduated from the finest medical schools and have completed the best residencies in the country. They just prefer to live in a rural part of the country.

Burda: Bill, would you agree with that?

Sexton: Absolutely. I think rurals have been survivors for a long period of time. They’ve had to be. They’ve had to be innovative, they’ve had to be creative and I think they still are. We’re able to do things, as Scott said, more quickly. It’s kind of the parallel of trying to turn a PT boat or turn an aircraft carrier. We can turn the PT boat much more quickly.

Burda: We do a lot of coverage of patient-safety issues and I’m just wondering if you see any organization out there that you would say is kind of leading the charge on safety, whether it’s the Joint Commission, Leapfrog Group, Institute for Healthcare Improvement, National Quality Forum—or is it all homegrown for you?

Stuart: They all have great points. The issue is, and including our insurance carrier, they all want to get on the bandwagon. They’re all using different metrics. There isn’t any consistency and when you’re trying to figure out which metrics to use and what you’re being forced to use, there isn’t any consistency, so it’s just a hodgepodge of stuff out there until we get this figured out. So I don’t know that anyone is better than the other.

I think the awareness factor certainly is a positive thing for all of us. I think the technology that we’re putting in helps us understand and reduce those errors, but I think there really needs to be a national standard on this stuff because it is really all over the board.

Sexton: I think we’ve also been leaders for a long time in the area of quality and quality reporting. One of the challenges that we have in the rural areas is that our numbers are very small. So if you do three cases and you miss one—I mean it’s a significant challenge for you in some of those areas. I think one of the other things that we tend to do is we tend to know our patients because we are closer to them. One of the things that I’m familiar with is there was a study done by the University of Washington about 10 years that measured outcomes between rurals and urbans and in all but one case the rurals outperformed the urban counterparts.

Vince Galloro: Scott, where do you see public recording of outcomes data and the patient-safety movement?

Bullock: I think we have tried to be as transparent as we can possibly be, and we have the Maine Quality Forum, which is again part of the Dirigo health legislation. Our health system has been active with the IHI, with 100,000 Lives Campaign and now the 5 Million Lives Campaign.

You’re trying to transition the U.S. health system, which essentially was built on taking physicians that were often the smartest people we could find, train them, and then saying “Now go and do what’s best for your patient.” So we’re almost turning this entire system upside down by now saying we want to be very systematic and predictable and let’s all treat patients in a consistent manner.

So I see our physicians really having made major leaps over the last five years and now (they) are really putting pressure on us to say, “Give us the systems to be sure that we can care for all diabetics in a consistent manner and help us do this well.” And that’s a real change that we’ve seen in our medical communities over the past five to 10 years.

Burda: Why don’t we take some last comments on issues facing rural providers. Phil, any comments on where your facility will be a year from now?

Stuart: A year from now we’ll probably be the same. I think more like five or six years down the road I think there are going to be challenges. I think the primary-care (physicians)—which we rely very heavily on with our providers ... for the first time are recording that there are actually openings, that people aren’t even applying for some internal (medicine) residency slots. I think that’s going to create a fundamental shift in rural healthcare.

The other thing that I find somewhat troubling is we’ve gone to where pharmacists now are Ph.D.s, our physical therapists are going to be Ph.D.s, and nursing is going to make the nurse practitioners be Ph.D.s. We’ve got a lot of creep in that, which creates a shortage because of the longer education. It’s going to drive up costs. I have yet to see too many studies that actually show the outcome is better, but we certainly have seen a lot of changes that way.

Sexton: We’ll be better and stronger than we are today in the future, at least in the near term, primarily because we’ve been able to add capacity. The key for us is having the capacity with physicians. I tell my staff that it’s very simple. Nothing happens on our campus without a physician’s order. If you don’t have the physicians, you don’t have the orders, you don’t have the care being provided to the patients, you don’t have the reimbursements—so that’s kind of a vicious cycle.

The one issue we didn’t talk enough about is EMS. One of the things that our emergency medical services struggle with is that most of that is provided by volunteers and the support and the structure for our emergency medical systems are very difficult at best. One of the things that we’re challenged with in the rural areas is it’s not a few blocks for us, it’s several miles. And it’s the time from injury until the EMS staff arrives and they’re able to transport them to the rural facility. We’re able to really provide that first level of significant care, so I think EMS is going to continue to be a challenge for us, too.

Bullock: I am very optimistic about the future. I’ve watched the health system in this country adapt to so many things over a 30-year career that I’m very optimistic about our ability to continue to adapt.

We’ve just entered into a collaborative relationship with Eastern Maine Healthcare, which is a large system based (near) Bangor and MaineHealth, which is a large system based in Portland, so all of the systems in Maine are trying very hard to collaborate on connecting our disparate information systems. We have electronic ICUs now; we’re working on 24-hour pharmacies that can be used to help the pharmacy shortage throughout the state of Maine, so we seem to be headed in a more collaborative direction than we have in the past.

I guess one final thing I would just suggest is we need to keep aligning, if you will, the payment system with the actual needs of the population so where we talk about needing to prevent illness more in the future. … We have a huge issue with behavioral health, substance abuse and issues like that. We just need to constantly look at how our payment system funds the things that the people need so that we keep working on how to best deliver the care that the people of our country need.

Schou: I would like to think that after the next couple of years that we’ll be able to really put innovation back into patient-care delivery. Right now information technology and all these diagnostics are driving us. Instead of the providers and the care being driven, it’s the technology. I have to learn how to do electronic medical records rather than thinking how can I make that work better for us. And I think once we get a lot of our IT equipment and other diagnostics installed that will allow us to think better how we can deliver the care, how we can be safer and how we can even move to the direction of better chronic-disease management.

What do you think?

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