NEWS ANALYSIS

THOMAS HARDY

Background on Indigent Medical Care Funding

We closed our last article with a quote from Anne Marie Suriano, Executive Director of the Indian River County Hospital District, that “the philosophical thought for the District Trustees is the conflict between doing their duty to provide medical care for indigent patients while taxing property owners for those {Indian River Medical Center} costs they cannot control.”

To briefly review the relationship between the Hospital District and the Indian River Medical Center, the Hospital District has two main legal agreements with the Medical Center. First, it leases the facility to the Indian River Memorial Hospital, Inc., (now doing business as Indian River Medical Center). Second, the Hospital District reimburses IRMC for costs incurred treating indigent patients. The Hospital District’s obligation to reimburse IRMC for indigent care is governed by an Indigent Care Agreement between the two parties.

The District has the authority to impose ad valorem property taxes on Indian River County residents to raise revenue needed to reimburse IRMC for providing indigent care.

For the 2013/2014 fiscal year, the Hospital District reimbursed IRMC approximately $ 8.1 million. For the 2013/2014 fiscal year the Medical Center is requesting roughly $ 9.7 million, plus an additional $ 490,000 to cover the shortfall from the prior year (previously unreported), for a total of $ 10,190,000 (+26%). An agreement by the Hospital District Trustees to accept this request would result in an increase in taxes for Indian River County property owners.

During their renegotiation of the “Indigent Care Agreement” with the Indian River Memorial Hospital, Inc., the Hospital District Trustees countered the Medical Center’s request with an offer of roughly $7.5 million, including the $ 490,000 shortfall.

The two sides now stand some distance apart, with the prospect of arbitration looming on the horizon.

Hospital District’s Response to Medical Center’s Request

At a Hospital District Trustee’s meeting on June 30, the Trustee’s agreed to advise IRMC that the $7.5 million was their final offer. If the Medical Center does not accept their final offer, the Trustees have indicated that they will, at their next meeting on July 10, vote on whether to enter into arbitration with IRMC. The District estimates that their cost for the arbitration would be $ 200,000, which has been included in their own 2014/2015 budget proposal. Even if indigent care reimbursement were kept at the $ 7.5 million level, with the addition of the $200,000 allocated for arbitration, ad valorem taxes would increase 5 percent.

In seeking arbitration, the Hospital District Trustees believe the “discovery” process would enable them to obtain information about IRMC’s actual costs for providing indigent medical care.

How the Partner’s in Women’s Health Program Fits In

Although $1 million of the roughly $7.5 million the District is offering the Medical Center is for the “Partners in Women’s Health” Program, that program is not part of the Indigent Care Agreement. As such the District has the authority to discontinue this funding.

Founded in 1995, the Partners in Women’s Health Program was the result of a cooperative effort between the Hospital District and the IRMC to ensure that all indigent women have access to prenatal care. Although Medicaid provides a small level of benefit, the program will not pay full medical benefits to a woman until she goes into the hospital and delivers her baby.

The Partner’s Program was established to provide these women with full coverage for prenatal medical care. These services include obstetrician, gynecological and pediatric care. The intent of the Program was to make every effort to ensure that a mother delivers a healthy baby.

The Impact of The Patient Protection and Affordable Care Act (PPACA)

The Patient Protection and Affordable Care Act (PPACA), commonly referred to as “ObamaCare,” together with the Health Care and Education Reconciliation Act, represents the most significant regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965.

Previous to passage of ObamaCare, a person qualifying for indigent care was treated by the IRMC, and the Hospital District, through its authority to impose ad volorem taxes, reimbursed IRMC for their care.

With ObamaCare, indigent people are now able to enroll in a medical insurance plan, financed by ObamaCare; however, unbeknownst to them (perhaps without the privilege of an advisor), although they may now have health insurance with affordable low monthly premiums, they are subject to large deductibles and coinsurance payments, which they cannot afford. Since they are now no longer considered indigent because they have health insurance, who is going to pay for what they cannot afford?

It is as though these people, who previously qualified for indigent medical care, are being penalized with Obamacare. ObamaCare will also have a negative impact on the IRMC’s finances, too, by putting more pressure on the IRMC to fund “underinsured” care. These are two unintended consequences in the new healthcare arena.

The Impact of the Heart and Scully-Welsh Cancer Centers on Indigent Care

Hospitals have an innate need to grow. But as IRMC continues to expand its patient services, such as with the Heart and Cancer Centers, these programs provide more opportunities for those qualified for indigent care to seek these additional services.

While it is heartwarming that those qualified for indigent care have these additional services available to them, they will undoubtedly create a further burden on IRMC to seek additional indigent care reimbursement from the Hospital District. Unavoidably, the burden will be passed on to Indian River County property owners. Additionally, these expanded services will have cost structures totally different from others services such as the Emergency Room, Stoke Center or ICU Unit.

How it all comes down to the Medical Center’s Costs for Medical Care

There is obviously tension between IRMC and the Hospital District over the disparity between what the IRMC seeks to be reimbursed for indigent medical care and what the Hospital District is willing to offer.

The issue for the Hospital District is what IRMC’s real cost is for providing these services.

According to Uwe E. Reinhardt, professor of political economy at Princeton University, “the pricing of hospital services is best described as chaos behind a veil of secrecy.” Professor Reinhardt is recognized as one of the Nation’s leading authorities on health care economics.

In their negotiations with IRMC for a new Indigent Care Agreement, District Trustees have indicated they would like to move toward the direction of how Medicaid pays for hospital inpatients receiving medical care.

On July, 1, 2013, in accordance with 409.905(5)(f), the Florida Agency for Health Care Administration (AHCA), which operates the Florida Medicaid Program, implemented a Medicaid payment plan based on Diagnosis-Related Group Payments (DRG).

DRG payment is a system to classify hospital costs. The intent of the DRG’s is to identify the “products” that a hospital provides and pay for those services as products, rather than pay for services based on a “cost based – per diem -reimbursement”. This means payments would be made on the type of care the patient receives rather than the hospital’s cost structure.

Each DRG has a payment weight assigned to it. Examples of different DRG’s are burns, virus infections, poisonings, ear, nose and throat issues and bronchitis.

Effectively, the way the program works is that each time a patient is admitted to a hospital, the hospital assigns a DRG to their admission. Medicaid pays the hospital a fixed amount for that DRG, regardless of how much money the hospital actually spent for the treatment.

If a hospital can effectively treat a patient for less money than Medicaid pays it for the DRG, then the hospital makes money on that hospitalization. If the hospital spends more money caring for a patient than Medicade gives it for their DRG, then the hospital loses money on that hospitalization.

By proceeding into arbitration with the IRMC over the Indigent Care Agreement, the Hospital District would finally have access to the data on what the hospital’s delivery of indigent care really costs, which has previously been unavailable. Subjects for Further Series by the Author

Even though the Medical Center is a Not-for-Profit Organization, why can’t it still aim to make money?

Wikipedia, the free encyclopedia, defines a nonprofit organization (NPO) or not-for-profit organization as “an organization that uses surplus revenues to achieve its goals rather than distributing them as profit or dividends…while not-for-profit organizations are permitted to generate surplus revenues, they must be retained by the organization for its self-preservation, expansion, or plans.”

Is this a reasonable objective for the Medical Center?

The Indian River Medical Center Foundation What is it?

It has been referred to me as both the “engine that drives everything” and “the biggest elephant in the room.”

Over the last 10 years, the Foundation has received philanthropic support totaling more than $100 million, for the benefit of the Medical Center.

How is this support used? Can it assist the Medical Center with operating costs and can it be sustained?

Interaction between the Indian River Medical Center, Foundation and Hospital District

Each entity has different boards and trustees, who sit on each other’s committees. Between the Medical Center and the Foundation there are some overlapping members. As a public entity the Hospital District Trustees must observe Florida’s Sunshine Laws. In it’s lease with the Medical Center, the District requires Medical Center Board Member committees to adhere to the Sunshine Laws. However, there are several committees not required to provide the public with the content of their meetings, presumably protected by HIPPA. What are those committees?

How does the Medical center rank in its quality of healthcare

Two leading organizations that rank hospital medical care are The Leapfrog Group and the Centers for Medicare and Medicaid Services (CMS). Leapfrog is a voluntary program that compares hospitals’ performance on the national standards of safety, quality, and efficiency. CMS is an agency within the US Department of Health & Human Services responsible for the administration of Medicare and Medicaid. While both organizations provide rankings for hospital medical care, according to Kaiser Health News Staff Writer Jordan Ru, as reported on March 18, 2013, “Hospital Ratings are in the Eye of the Beholder.”