Hospitals see increase in community benefit

Hospitals are having to cover more of the cost of caring for Medicaid patients, and that growing figure is being increasingly reflected in their community benefit reports.

Community benefit reports are important tools for hospital systems nationwide, as they are useful in proving their worth to the communities they serve and as a defense for their tax-exempt status. Traditionally, hospitals' community benefit totals had largely been comprised of the free care they provided to the uninsured, but the coverage expansion made possible by the Affordable Care Act dramatically reduced those figures.

While many saw an increased number of insured patients access their systems, rarely does the coverage, especially Medicaid, cover the full cost of care. That shortfall is driving the increase in the amount of community benefit they report.

"Is that where we're seeing the biggest bucket? Yes," said Tim Jarm, president and CEO of the Center for Health Affairs, an advocacy group for Northeast Ohio's hospitals. "Because of the expansion of Medicaid, patients who were traditionally self-pay charity care went (to) coverage with Medicaid, of which we're not getting paid cost."

Summa Health System, Cleveland Clinic and University Hospitals all increased their community benefit totals in 2016, according to documents that show the value they report for their contributions to the community.

Akron-based Summa Health System reported a modest increase in its community benefit between 2015 and 2016, moving from $95.9 million to $100.3 million.

University Hospitals and the Cleveland Clinic, however, saw greater community benefit growth of nearly 11% and 17%, respectively. UH reported $304 million and the clinic reported $808.7 million in community benefit.

All three saw double-digit percent increases in their total spend on Medicaid shortfall. Changes in the other buckets of community benefit — education, research, charity care and more — varied by system. Because it a public health system, MetroHealth is not required to report its community benefit totals as the other not-for-profit health systems are.

The Center for Health Affairs, which represents 36 hospitals in nine Northeast Ohio counties, calculated the total community benefit of hospitals in the region as more than $1.5 billion. Medicaid shortfall accounts for about 27% of that, according to numbers from the center.

The state's Medicaid expansion initially contributed to the growth in Medicaid shortfall, said Steve Glass, the clinic's chief financial officer. Now, the biggest driver of that growth is inflation. As costs to provide care climb, the reimbursement rate has been going down, he said. Just last month, the state delayed a proposed rule that would have cut hospital rates by 5%.

"The expansion has not grown over the last year," Glass said. "We saw that several years ago, but now that you have a larger population of individuals that are getting access to their care through Medicaid, it has had a profound impact on the growth in these losses because you have that compounding effect of inflation on expenses, but you're getting cuts."

While it's great that Medicaid patients have access to care that hospitals are able to provide, Glass said that "unfortunately," hospitals across Ohio lose money on Medicaid patients that come in for services.

The clinic's Medicaid shortfall grew by 35% between 2015 and 2016.

The Medicaid population is a "tougher, tougher population," said Dr. Cliff Deveny, interim CEO of Summa Health. They tend to use services more, often require readmission and access emergency rooms more regularly, he said. Summa's Medicaid shortfall totals increased by more than 40% between 2015 and 2016.

The payer mix, which is heavily Medicare and Medicaid patients, has also attributed to Medicaid shortfall's growing portion of community benefit.

Summa is continuing to right-size the organization, control expenses and improve operating performance, Deveny said, "because we can't always go back to the well and ask for more. We understand the governor's position, we understand where the state's at from a revenue standpoint is that they've got limited resources. So we've got accountability to be good stewards of the resources that we get and that we're provided to take care of this population."

The opioid epidemic has also helped drive up the Medicaid shortfall amount, he said.

Heidi Gartland, vice president of government and community relations for University Hospitals, agreed, noting that the crisis has driven more patients to come seek care.

UH's Medicaid shortfall grew by more than 24% between 2015 and 2016.

The region's infant mortality rate is also contributing to the rise, as babies born too early and too sick can be costly to care for, she said. To help address this, UH has a program that connects pregnant women and new mothers to resources. Programs like this, Gartland said, are important pieces of the community benefit.

"We really see this $304 million of investment as investment into the future of the health and wellness," she said. "We really want to keep people as healthy as they can so it's not about provision of care. It's more about the provision of trying to really invest in population health and community health and wellness."

Glass said that depending on Medicaid policy decisions, he expects to see the Medicaid shortfall bucket of community benefit continue to increase.

"As long as these Medicaid programs are in place in their current form, I expect to see the losses continue to grow," he said, "because we really are not seeing any signs of getting increases from the state in the rates that we get paid for Medicaid."

"Hospitals see increase in community benefit" originally appeared in Crain's Cleveland Business.