Wednesday, April 29, 2015

Why inner city hospitals move to greener pastures

Kaiser Health News' Phil Galewitz has a story about inner city urban hospitals that are moving, or seeking to move, to greener pastures -- that is, into nearby suburbs:
By moving to wealthier areas, hospitals can reduce the percent of uninsured and lower-paying Medicaid patients, while increasing the proportion of privately insured patients—what hospitals refer to as attracting better “payer mix."
The "payer mix" concept reminds me of the old joke about economists. A research team made fifty people sit on blocks of ice and another fifty on radiators. On average, they were comfortable.

Hospitals serve people whose payers pay too much and others who pay too little. On average, if their administrators jigger things right (and their location allows, or can be changed), they're comfortable -- often very comfortable, nonprofit or no. The mix includes providing as many high margin procedures as possible -- "such as transplants, cardiac surgery, cancer treatments, and CT, MRI, and other imaging," as Ezekiel Emanuel summarizes in Reinventing American Healthcare (2014). But it also includes minimizing charity care and Medicaid and, to a lesser extent, Medicare in favor of privately insured -- or, best case, wealthy foreign uninsured -- patients.
Galewitz documents the human cost when hospitals move out of the inner city -- in access to care for people dependent on public transportation, in jobs and economic stimulus, in overcrowding at remaining hospitals. Sometimes the hospitals are genuinely trapped in an unsustainable payer mix*. Which raises the broader issue: the U.S. is trapped in an insane payment system, unique among developed countries.

In Emanuel's book, I shook my head as I read about early twentieth century physicians charging their wealthy patients more than their poorer ones. But such personal calibrations could be humane and even honest -- and the institutional stratification we have now is not so different. In most states (with 11 exceptions as of 2008),** Medicaid pays less than Medicare -- sometimes far less (40% in NY, NJ and RI as of 2008). Private insurers pay wildly varying rates in excess of Medicare. Here's Emanuel's hypothetical sampling:
...the Mayo Clinic’s Medicare rate for a hip replacement is $ 16,109, but its rate for commercial payer A may, for example, be 180% of the Medicare rate, while Mayo’s rate for commercial payer B might be 140% of the Medicare rate and, for commercial payer C, 220%. Because individual negotiations determine these commercial rates, the rate with any one insurer will depend on a hospital’s bargaining power, how many patients the insurer covers, whether the hospital wants those patients, and whether the insurer perceives it needs to have the hospital in their network of hospitals. Also because these rates are determined one on one between insurers and each hospital, there are significant administrative costs to these negotiations (Kindle Location 1225-1243).
Worse, hospitals generally charge uninsured patients, or insured patients billed for out-of-network services performed at the hospital (often without their knowledge of permission), the wildly inflated retail rates listed on their "chargemasters," Hospitals' pursuit of payment for these bills is by no means limited to wealthy patients.

Maryland, alone among U.S. states, has an "all-payer" regime. Medicaid, Medicare and private insurers all pay the same rates; recently the system has been rejiggered to experiment with value-based payment and global payments with capped per capita cost growth. I'd be curious to learn whether Maryland -- including  stratified and poverty-plagued Baltimore -- is troubled by these inner city hospital exoduses.

*Aging and inadequate facilities also drive hospitals out of the inner city.

** Kaiser charts state-by-state differentials in Medicare and Medicaid payment rates for physician services -- but not, as far as I can see, for hospitals.

1 comment:

  1. As always, the American kludge system makes health care harder to maintain.

    If America expects inner city hospitals to care for anyone in need --and we do, in the EMTALA law -- then these hospitals should be public institutions. They would get all their budget from taxes, both local and federal, and it would not matter what kind of patients they attracted. In the majority of American cities, fire departments serve all neighborhoods the same, rich or poor.

    But of course my solution takes real taxes. God forbid that we use taxing power, when we could be dancing around with baffling subsidies.