Medicaid expansion has hospitals reframing their value proposition

With the expansion of Medicaid insuring more Ohioans, hospitals and healthcare providers aren't having to provide as much charity care—simply because the number of uninsured patients needing providers to pay for the cost of their care is shrinking.

As such, Northeast Ohio's nonprofit health systems are rethinking their so-called community benefit strategies and finding new ways to serve the region in order to prove their value to residents and ultimately defend their tax-exempt status. Previously, the amount of free care they provided for the poor spoke for itself.

“It was kind of easy to sit back and count your charity care and not think about the other things you were doing in the community,” said Rob Whitehouse, Summa Health System's senior vice president for marketing and community relations.

Between 2013 and 2014, for example, Akron-based Summa's community benefit total dropped from $93.1 million to $67.1 million after a significant drop in charity care and Medicaid shortfall dollars. Other buckets of community benefit—education, research, subsidized health services and community health improvement services, programs and support—remained the same.

Because Summa was able to rely on the charity care number, a “great deal” of its community benefit went unreported, Whitehouse said. The system is working to put processes in place to educate employees about what community benefit is and how to report it.

“I'm willing to bet our numbers are going to be good just by reporting what we're actually doing,” Whitehouse said.

Although the Affordable Care Act dramatically increased access to health insurance coverage, it hardly turned hospitals into cash cows.

While many saw an increased number of insured patients access their systems, rarely does the coverage, especially Medicaid, cover the full cost of care. While health systems typically saw a healthy decline in the amount of completely free care provided, they saw significant increases in the amount of dollars they shifted to covering the cost difference between what Medicaid pays and the cost of treating those patients.

The Cleveland Clinic, for instance, saw charity care dollars shrink by 40.5% from $169.8 million to $101 million between 2013 and 2014. At the same time, the amount of funds the Clinic put toward covering Medicaid shortfall grew by 75%, from $124 million in 2013 to $217.5 million in 2014.

The shortfall funding need grew faster than the charity care declined, representing more than a simple shift. That difference is in part due to the Clinic increasing the number of locations in the system that provide services for Medicaid patients. But also, with Medicaid available, people who are newly qualified are signing up and actively seeking out primary care and other services, according to Steve Glass, chief financial officer for the Clinic.

This significant shift of charity care cost over to shortfall cost is the bulk of the change Glass expects to see from the Medicaid expansion.

“I would hope that we would continue to see some of this migrate,” he said, “but we've seen it start to flatten out over the last year, so I think we've seen the biggest impact of it.”

He'd like to continue to see that cost shift from charity care toward shortfall as more people are insured, but since that initial jump, it's flattened out.

Meanwhile, at University Hospitals, both charity care and Medicaid shortfall funding rose between 2013 and 2014. The Medicaid shortfall spike, however, was much more drastic, increasing by 33.3% to $76 million 2014. Charity care only rose by about 3.4% to $61 million in 2014.

The charity care bump was likely the result of UH bringing medical centers in Elyria and Parma into its fold, but even factoring that in, the charity care cost hasn't decreased as dramatically as one would think, said Heidi Gartland, UH's vice president of government relations.

“We still have a lot of folks that, even with the Affordable Care Act, are for whatever reason either not willing to sign up for Medicaid—although I don't know how often that happens—or not eligible to sign up. There is still population above 138% of poverty that is not eligible to apply,” Gartland said.

When a new social program is available, it inspires plenty of new eligible participants to surface—something dubbed the “woodwork effect”—which contributed to there not being a one-for-one transition from charity care to Medicaid shortfall costs, said MetroHealth CEO Dr. Akram Boutros. In addition, new programs often inspire non-eligibles to come out for services.

Also, being insured doesn't necessarily equate to knowing how to access care, Gartland said. So, UH has worked to more proactively educate patients who came into the emergency department for non-emergency care. A big piece of that has involved steering more patients toward its medical access clinic, where non-emergency patients are treated by a provider and a social worker teaches them how to enroll in Medicaid or other insurance, how to use that insurance, how to find a primary care doctor, why having one is important and more.

“We took care of their medical issue and then we had a social worker come in and actually talk to them about and get them set up with a primary care physician,” Gartland said.

More than 90% of the patients that came through the medical access clinic did not come back to the emergency room for a non-emergency issue, meaning “we got them into a medical home, which is exactly the big hopeful outcome of the Affordable Care Act,” Gartland said.

As for Summa, it saw its charity cost drop between 2013 and 2014 from $15.6 million to $6 million. Unlike other hospitals, however, Summa saw a decline in its Medicaid shortfall from $23.3 million and $5.4 million, which it chalks up to Medicaid expansion and a rebounding economy. Those freed up dollars present an opportunity to look at how Summa's community benefit strategy should evolve, Whitehouse said. He said Summa is developing more programs to ensure those newly insured patients aren't underserved.

“Just because people have access to insurance now doesn't mean they're necessarily getting the screenings right or they're necessarily using the benefit properly,” Whitehouse said.

Population health strategies are also becoming more entrenched in hospitals' community benefit strategies.

For example, of MetroHealth's more than 1.1 million patient encounters each year, only 0.3% are inpatient, but that sliver of encounters represents about 45% of revenues for the health system, Boutros said. That remaining portion and vast majority of encounters, however, is where providers can have more of an impact on the community, he said. Beyond community benefit, various federal programs incentivize focusing on a holistic picture of health, such as the Readmissions Reduction Program and the Hospital-Acquired Condition Reduction Program.

“99.98% of your life is outside of the healthcare system,” Boutros said. “So we need to figure out how to impact that 99.98% of your life because we've been focusing on the .02% of your life that happens to come in the healthcare system.”

Whitehouse said there will be a period of adjustment from big charity care numbers to reporting existing and building new programs, “but I'm confident we'll get there.”

“I think because we are evolving, going from charity care into true proactive community benefit, communities will be healthier because of it, particularly the underserved populations,” he said.

"Medicaid expansion has hospitals reframing their value proposition" originally appeared on the website of Crain's Cleveland Business.