Hospitals cope with cuts, uncertainty as health reform takes effect

Published October 30, 2013 by Marjolijn Bijlefeld

There’s no shortage of uncertainty these days in the business of health care. Nobody’s quite sure how well the new insurance exchanges will work or whether Virginia will grudgingly decide to expand its Medicaid program.

One thing is sure, though — doctors and hospital leaders are getting used to not knowing what’s next. They’ve already spent the past few years dealing with huge changes.

There has been, for example, the 10-year, $155 billion reduction in federal Medicare reimbursements that started in 2010 before Congress passed the Affordable Care Act (ACA). The Medicare pullback was followed this year by sequestration-related cuts to health-care providers.

Many hospitals and doctors expected an expansion of Medicaid under the ACA to offset some of these cuts. But, for now, all Virginia’s health-care industry has is “a definite ‘maybe’ from the General Assembly,” says Laurens Sartoris, president of the Virginia Hospital and Healthcare Association.

The federal government promises to provide all of a state’s additional cost in expanding Medicaid eligibility during the first three years. States would pick up an increasingly larger share each year until 2020. 

Opponents of Medicaid expansion aren’t buying this offer. They believe the feds won’t have the money to cover the states’ increased costs, leaving them on the hook with huge Medicaid enrollments. 

If Virginia doesn’t expand Medicaid, however, the net effects of Medicare cuts for hospitals will be sharper each year. “If we don’t get the Medicaid expansion, it’s a double whammy for hospitals,” Sartoris says. The first whammy is that hospitals still will have patients coming in for uncompensated care. The second whammy is that, at the same time, providers’ payments are being reduced.

Many variables in the health-care puzzle are in play as the first Virginians sign up for coverage in the online insurance exchange marketplace. How many will opt for the subsidized insurance? What will these plans pay providers and how accurate are their models going to be? How will the exchange impact the commercial insurers? And how, in 2015, will employers respond? “It’s a hazy crystal ball now,” says Sartoris.

Changes under way
Despite this unclear vision of the future of health care, hospitals have been making changes for some time, not necessarily in anticipation of the implementation of the ACA.
Carilion Clinic in Roanoke, for example, has been expanding the capacity of its primary-care practice and is training more health-care providers, says company spokesman Eric Earnhart.  Carilion’s Jefferson College of Health Sciences now has an enrollment of more than 1,000 students, many of whom go to work for Carilion when they graduate.

In addition, the Virginia Tech Carilion School of Medicine will graduate its first class of 42 doctors next spring. One goal of the public/private partnership is to have physicians trained in the region choose to practice there once they have completed residencies.

In addition, Carilion Clinic has opened four urgent-care facilities to provide non-emergency care during and after primary-care office hours. The four VelocityCare locations — two in Roanoke, one at Smith Mountain Lake and one in Christiansburg — are doing better than expected, Earnhart says. “They are at or exceeding the levels we forecast. We’re seeing some Medicaid patients take advantage of the locations, too. So they have been successful in drawing in patients who might have delayed care or would have gone to the emergency room.”

Carilion Clinic operates the clinics, so they are all connected to the health system’s electronic health records, allowing providers in one location to see the medical records and test and lab results from any previous visits.

The health-care system is developing handouts to distribute in its VelocityCare locations alerting visitors to the online insurance marketplace.
As more people are covered by some kind of insurance plan, Earnhart says, Carilion Clinic will get some help in spreading the message about the advantages of preventive care and the most appropriate place to seek care. “If people are able to get coverage, they’ll be more likely to go to the appropriate venue. But if they’re uninsured or can’t afford a co-pay, they know they’ll be able to get care at an emergency room.”
That’s where Carilion expects the benefit of increased access to health insurance will be seen. “We’re taking care of these patients now, but we wrote off $67 million in charity care last year,” Earnhart says.

A flood of patients?
Sheryl Garland, vice president for health policy and community relations for VCU Health System, says preparation there for health-care reform has been underway for years.

When Congress approved ACA in 2010, VCU created its Office of Health Innovation to study a variety of health reforms, not just those required by the law. “We look at the regulations and try to figure out: How does it affect our day-to-day operations?” she says.

Consumers need the same sort of help because, if they don’t find the best way to use the health-care system, they risk getting inadequate care and paying more for it. Patients need help figuring out whether they qualify for Medicaid, Medicare or indigent care, Garland says. “So as the health insurance exchanges start to come on line we are training our staff to understand how people can enroll in them.”

Garland sees one big uncertainty ahead, saying the ACA could produce a flood of new patients. When Massachusetts rolled out its health reform plan in 2006, she says, suddenly 94 percent of state residents had insurance. “The problem they ran into was finding a place to go,” she says. Some safety-net hospitals saw their emergency department visits “go up significantly,” Garland says. 

Nationwide, millions of people are now eligible for health insurance under ACA, but there’s a significant physician shortage in many places, including parts of Virginia. “Once they understand” the law, she asks, “is there any place they can go?”

Financial incentives
The ACA offers some financial incentives to health-care providers. Bon Secours Health System, for example, is participating in the new Medicare Shared Savings Program offered by the Centers for Medicare and Medicaid Services.

Under that program, if providers can show they’re giving high quality care to Medicare fee-for-service users and also cut costs from one year to the next, they get to keep half of the savings. “That is a potential revenue stream for us that didn’t exist” before ACA, says Robert Fortini, chief clinical officer for Bon Secours.

It will help keep people out of the hospital, he says, and create “a way of getting paid for things that will make a difference that were not traditionally reimbursable. Isn’t that a win-win?”

In spite of uncertainties on how the law will play out, developing plans to improve care and cut costs is the only option, Fortini says. With Medicaid, “I do know that if we do nothing, we’re bankrupt in seven years or less,” he says. “We can’t not try. The cost of not trying is catastrophic.”