Back on the chopping block

Healthcare providers last week questioned how a federal commission's proposal to lower the national debt could be good for America if it ends up weakening the nation's healthcare infrastructure and risking the health of millions of Americans.

Given that healthcare is responsible for about 16% of the nation's total economic output, it was no surprise that the leaders of the National Commission on Fiscal Responsibility and Reform, a bipartisan group tasked with finding ways to save federal money, considered healthcare as one of the many domestic spending programs to cut in their Nov. 10 proposal to stabilize—and eventually lower—the country's debt. Included in the proposal were recommendations to fix the physician-payment issue, as well as objectives to expand successful cost-containment demonstration projects by 2015 and identify an additional $200 billion savings in federal health spending. It also set a global target for total federal health expenditures after 2020, would review costs every two years and keep growth to gross domestic product plus 1%.

But what has officials for the nation's hospitals, physicians and medical schools angry is that the proposal suggests cutting billions more in federal healthcare payments just as the healthcare segment is preparing to swallow the reductions in payment that were established by this year's Patient Protection and Affordable Care Act, including $155 billion in federal funding to hospitals over a 10-year period. See chart on proposed healthcare cuts (PDF)

“The whole notion that we'd revisit these issues before the ink is dry on healthcare reform—we think is not very thoughtful,” said Richard Pollack, executive vice president of the American Hospital Association. Pollack also said it was as if the proposal was developed in a vacuum. The AHA released a statement last week highlighting the parts of the proposal it found most troubling, such as accelerated payment cuts to the disproportionate-share hospital program; a recommendation that hospitals be subject to the Independent Payment Advisory Board; and reductions to graduate and indirect medical education. Pollack said it's important not to look too granularly at the measures, but rather view the proposal in a broader context—and one that considers the cuts that hospitals have already sustained.

“We ought not to pile on and revisit what we've already done,” Pollack said. “We ought to be looking at things that need work.”

The report came from the commission co-chairmen, Erskine Bowles, former chief of staff to President Bill Clinton, and former Sen. Alan Simpson (R-Wyo.). They also suggested reductions in congressional and White House budgets; freezes to federal salaries and bonuses; reforms to federal tax policy and Social Security; and cuts to a host of other federal programs, including defense, diplomacy and agriculture.

For healthcare, the proposed cuts come at a time when providers believe they already gave at the office. And a new report from Moody's Investors Service last week said sudden changes to government reimbursement systems “have triggered bankruptcies in the past, including nursing homes and home health companies in the late 1990s and early 2000s.”

The proposal's suggestion to accelerate the phase-in of cuts to the disproportionate-share program included in the health reform bill can have devastating consequences on the nation's public or “safety net” hospitals.

“DSH funding is how we care for the uninsured in America,” said physician Bruce Siegel, who serves as CEO of the National Association of Public Hospitals and Health Systems. “Since the beginning of the recession, we've seen millions of people lose their jobs and lose coverage. The number of uninsured shot up 4 million in the last year,” he added. “Even today, we don't cover the whole cost. This is the worst. This is balancing the budget on the backs of the poor.” Siegel said the group estimates that each public hospital has, on average, annual costs of $24 million in uncompensated care.

This supplemental federal funding is crucial to institutions such as Harris County Hospital District, a community-owned healthcare organization in Houston that operates a three-campus hospital, 13 community health centers, 13 homeless shelter clinics and five mobile health units. The hospital district has a budget of about a $1.2 billion a year and receives about $200 million in DSH and upper-payment-limit payments, according to David Lopez, the district's president and CEO. Lopez said about 60% of the hospital district's patient volume is charity care or self-pay, while Medicaid patients account for about 25%.

Lopez called DSH payments the “lifeblood” of institutions such as his, and said estimates show the region will still have between 300,000 to 500,000 uninsured in the community by 2019. And he's also concerned that come 2014, some of the patient population will choose to pay a penalty, rather than purchase health insurance, thereby adding to the hospital district's financial burden.

Physician Patricia Gabow, CEO at Denver Health, also emphasized the precarious position of the nation's safety net hospitals, which she said represent 2% of the nation's hospitals but assume responsibility for about 25% of uncompensated care. Gabow praised the commission's co-chairmen for addressing the tough issue of the nation's debt and said it would have been irresponsible of them not to consider healthcare. But she said there are other places to look before focusing on what she called “the most vulnerable.” These other areas include cutting costs by eliminating waste; eliminating over-use; eliminating the failures of coordinated-care efforts as the nation moves to an integrated system; and taking money from those making the most money in the current system.

According to Gabow, Denver Health serves one-third of the area's population; delivers 37% of all babies in Denver; and treats about 40% of the region's children. It's also a major provider for Medicaid patients and the uninsured. “If we went away, and our patients had to be distributed to other hospitals, they would be overwhelmed clinically and they would destabilized financially,” Gabow said of the other areas hospitals.

In addition to cuts in supplemental funding, industry executives say reductions in graduate and indirect medical education could seriously hurt institutions now and in the future—especially as healthcare providers are bracing themselves for the millions of Americans who will gain health insurance coverage in four years.

“It's totally contradictory to what the nation needs right now,” said Christiane Mitchell, director of federal affairs at the Association of American Medical Colleges, referring to the proposal's recommended $54 billion in cuts to graduate and indirect medical education between 2012 and 2020. Graduate medical education usually refers to payments for resident benefits and stipends, while indirect medical education payments help teaching hospitals maintain the necessary environments and technologies to train professionals. “It's a massive reduction of support for training the future physicians of our nation. It drastically erodes support and that erosion endangers teaching hospitals' ability to continue producing the physicians we need as we enter the coverage expansion.”

Mount Sinai Hospital in Chicago is a 317-bed teaching hospital that has made great strides in preventive care through community-outreach programs on the city's West Side. Both the graduate medical education payment reductions and the DSH spending cuts will have a negative effect, according to Alan Channing, president and CEO of the hospital's parent, Sinai Health System.

“Sinai has 160 graduate medical students, so we are a teaching hospital—we teach physicians, nurses, pharmacists, nurse's aides, physician assistants—a whole array of direct-care providers,” Channing said. He said that about 20% of Sinai's payer mix comes from Medicare; about 60% is from Medicaid; 15% is uninsured and 5% is commercial insurance. Because Sinai has a relatively low percentage of Medicare patients, it doesn't receive as much support as hospitals with a higher Medicare mix, Channing said. “But it is significant to us,” he said, adding that the hospital receives about $6 million a year for graduate medical education, so the reductions would be a “huge hit.” (For more on Mount Sinai, see story on p. 32 involving its use of medical interpreters.)

And the proposed reductions to medical education come just as estimates project a shortage of 150,000 physicians by the year 2020, according to Steven Lipstein, an AAMC member who serves as president and CEO of BJC HealthCare in St. Louis.

“Coming on the heels of the Affordable Care Act as it does, the challenges it would pose to America's teaching hospitals and medical schools would be so substantial it would cause us to rethink the level of service and the number of those we train,” Lipstein said.

The proposal, for now, is just that: a proposal. The 18-member commission will vote on a final report that contains a set of recommendations no later than Dec. 1 of this year, and the final report requires the approval of at least 14 members. And even if approved, as co-head of the commission Simpson told the Associated Press last week, any vote in Congress this year would be nonbinding. That could give hope—and time—to healthcare groups who think the proposal needs to be amended.

“Changes this dramatic require some open discussion and open debate on all sides,” said Siegel of the National Association of Public Hospitals and Health Systems. “And so far we really haven't seen that. I hope this commission will take public comment and consideration very seriously.”