Opinions & Observations: For cities, safety net hospitals are now more vital than ever
Governor Cuomo’s reassembling of a Medicaid Redesign Team came at a critical moment. New York’s healthcare costs related to Medicaid are spiraling out of control and threatening to cascade into other crucial state-funded initiatives.
It is vital that the program’s longterm viability be stabilized. Therefore, any changes made by the MRT should address a fundamental flaw in our system: Healthcare providers who serve the highest need populations are allocated the fewest resources. We cannot balance the state’s budget on the backs of our most vulnerable health care institutions and patients.
Hospitals serving the neediest — a mix of poor residents and seniors — are safety-net providers, offering access to care without consideration for an individual’s ability to pay. This includes a high population of Medicaid and Medicare patients, for which the government is paying for services.
While these providers perform a truly heroic service, their viability is the most tenuous. Most healthcare providers need at least a 30 to 35 percent contribution margin to cover the total cost of running their institutions. Medicaid reimbursement, however, typically only results in a 20 percent contribution margin, while Medicare pays closer to the 30 to 35 percent margin range.
Said another way, Medicaid covers only about 70 percent of a hospital’s cost, while Medicare covers only about 90 percent. This leaves little for innovation or investment in truly life-saving technology and additional human and capital expenses.
Brooklyn, having a population that on its own would be the fourth largest city in the country, has significant areas with a predominantly-governmental-payer mix. In many cases, the New York State Department of Health subsidizes a number of safety net hospitals by the hundreds of millions annually, adversely affecting the resources available for other state programs. Troublingly, there have been further reductions to the Indigent Care Pool proposed, an additional safety net program meant to subsidize free treatment for low-income, uninsured patients.
Now is the time for New York state to truly tackle these healthcare disparities and level the playing field. The viability and effectiveness of healthcare providers should not be dictated by their mix of payers or location. It is time to more equitably distribute reimbursement for healthcare services to ensure that community hospitals can not only survive, but can thrive and provide healthcare to all communities, particularly those serviced by a safety net hospital.
I think back to my time in Maryland, where I started my career in healthcare. Maryland was and remains an “all-payer” state for reimbursement. It is the only state in the country that operates under this methodology through a waiver by the Centers for Medicare & Medicaid Services. The waiver is conditional on healthcare expenses in Maryland increasing less than the percentage increase nationally. Not only has Maryland been able to maintain this waiver, it has one of the lowest healthcare costs of any State in the Country, while maintaining some of the highest quality goals.
What is most intriguing about the Maryland system is that all payers, including Medicaid and Medicare, pay the same fees for like-services at any one hospital. The rates charged by each hospital are based on their unique costs. As such, each hospital has an ability to charge rates that cover their costs. Therefore, each hospital is generally viable on its own.
What is important to note about the Maryland system, however, is that, for it to remain successful, the rationale for paying for healthcare services must be based on a sound financial model.
Most significantly, the reallocation of reimbursement does not increase reimbursement as a whole, but redistributes it on a more equitable basis. In fact, it should result in lower healthcare costs as the most underserved are cared for in a proactive way, thus improving the health of the entire population.
It has never been more apparent than with the coronavirus crisis at hand that safety-net hospitals need to be protected and allowed to be viable. There is not going to be a better time in our history to not only recognize the disparities of healthcare in New York, but to finally do something about it.
With our frontline healthcare workers putting their lives on the line every day, it is a small ask for our public officials to take some risk and to materially change a system that is not working.
I believe the Governor, who has shown amazing leadership in this crisis and makes me proud to be an American, now needs to extend that leadership to ensuring that the MRT comes up with recommendations that will not just “tweak” a system that needs to be revolutionized.
Gary Terrinoni, whose career spans Johns Hopkins in Baltimore and Jefferson Health in Philadelphia, is the CEO of The Brooklyn Hospital.
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