Tuesday, June 05, 2007

WI Hospitals Fight for Their Right to the Privately Insured

The trend of hospital systems seeking privately insured patients over those on Medicaid is pretty obvious to most observers.

In the last year, for instance, Milwaukee has seen one of its city hospitals close -- St. Michael's -- while the big systems in the area have fought over control of outlying areas in Waukesha, Ozaukee, and Washington counties.

And, to be sure, the decision to move outward is a sound business strategy. The fact is privately insured patients pay more than Medicaid patients and significantly more than uninsured patients. Typically, you're going to find privately insured patients in the 'burbs and Medicaid patients in the city, so the move outward is clearly the way to go from a business standpoint.

Enter the governor's proposal to leverage an assessment on hospital revenues in an attempt to generate more federal matching dollars for Medicaid. The ultimate purpose of the plan is to increase the Medicaid reimbursement rate for hospitals from a paltry 63 percent to a more reasonable 83 percent.

Hospitals have questioned the likelihood that they'll be the sole benefactors of the matching federal dollars, while others -- myself included -- have questioned how wise it is to bank on the federal government for money, at least for the long term, considering even the slightest administrative change on its end can result in costly problems on the other end of the equation.

But all this is masking the broader shifting that's taking place in our existing fragmented health care system toward a focus on care for the privately insured on the provider side and coverage of the healthy on the payer side.

In spite of its questionable long term viability, one good thing that the governor's hospital assessment would do is close some of the cracks that create incentives for our health care system to cater to some segments of the population over others.

Indeed, those health systems that see a lot of Medicaid patients would do quite well under the hospital assessment. Children's Hospital, for instance, would be looking at a $50 million increase in revenue over the biennium. The Waukesha-based ProHealth Care, on the other hand, would lose $1.1 million over the biennium because it cares for a much smaller percentage of Medicaid patients.

Some may view this as unfair that some hospital systems would lose out over others, but it's not exactly a zero-sum game. For starters, there would be more winners than losers under the hospital assessment (again, at least in the short term); overall, the net increase for all systems and individual hospitals in the state, put together, would be $284 million.

Secondly, due to the existence of the "hidden health care tax" -- which is the amount privately insured patients pay to cover the loses hospitals take on by caring for Medicaid and uninsured patients -- what the hospital assessment is really doing is helping to level the playing field for those privately insured people who go to hospitals that also have a large Medicaid population.

In fact, according to the Journal Sentinel this morning, Children's Hospital has pledged to reduce prices for privately insured patients should the hospital assessment go through. The same should be true, ostensibly, for every health system that's coming out ahead under the assessment.

Nevertheless, Children's Hospital is remaining neutral on the hospital assessment. Why? If it can lower health care costs for its customers, why wouldn't it support the proposal?

The simple answer is that it's closing ranks. The Wisconsin Hospital Association is against the plan, so it would be a really bold move to go against the grain.

But, again, there's more to it than that. After all, the biggest health system of all, Aurora, is scheduled to make $47.7 million off the hospital assessment over the biennium. And not only is Aurora not supporting the plan, it's actually opposing it.

Why? For them the answer is likely a little different than the answer for Children's. While Aurora may be pulling in $47.7 million in 2007-2009, that number is probably going to be a lot less in the future when it gets its hospitals built in Waukesha and, eventually, Ozaukee counties.

And compared to how much it'll make from all those privately insured patients in the 'burbs, $47.7 million over two years is next to nothing.

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Blogger Dad29 said...

Is it just co-incidence that Children's is the highest-priced (list) hospital, while ProCare is in the low mid-range?

June 05, 2007  
Blogger Seth Zlotocha said...

Not at all. As I explain in the post, Children's engages in a lot of cost-shifting because it cares for a large number of Medicaid (and uninsured) patients, while ProHealth Care does not. And Children's also has the added market advantage of being the only pediatric hospital in the SE part of the state, which probabaly allows its services to be priced a little higher than the rest of the market.

June 05, 2007  
Anonymous Anonymous said...

Anything that is good for Children's Hospital is good for us all. No question. But if you do question it, go sit in its lobby for an hour and see just a few of the faces of the children in wheelchairs, smiling past their pain because they have hope. See the smiles on the faces under the bald heads, but smiling past their pain because they have hope. It is an extraordinary experience. . . .

Children's is a nationally ranked facility with a group of physicians who add economic value to Milwaukee -- and much of Wisconsin, too. All else that it adds to life here is immeasurable, making this city and state better places for more than a century, since it started on Brady Street to serve the poor.

It still does so today but also serves us all -- and especially those areas with younger populations, such as Waukesha County. Their hospitals do not need full pedriatic facilities because they send patients to Children's -- and they get physicians trained well in pediatric diagnosis because of such a fine pediatric teaching facility here.

(And consider that medical students learn as much from poor patients as they do from the wealthier ones, so we all benefit when our children are next dealing with similar conditions or diseases.)

So no question that surrounding counties ought to pay more for the privilege, too. Their residents take flight from Milwaukee until they need Flight for Life to bring them back to the facilities that cannot continue to serve everyone so well without everyone's help.

June 05, 2007  
Blogger Dad29 said...

Gee, one would think that the PR director for Childrens' doesn't have to be "anonymous."

After my insurer nicked us for several hundred dollars in non-covered (over-priced) charges for a stay at Children's, we took our children elsewhere.

But thanks for the sermon, Anony!

June 06, 2007  
Anonymous Anonymous said...

Dad, I'm not a PR director for anyone or anything. Stuff your well-worn cynicism. (Have you EVER written anything not cynical on any blog?)

I'm someone whose life was saved by Children's Hospital -- which then, half a century later, saved my child's life.

How nice for you that your children got good care elsehwere -- but, again, check and see where those docs trained in pediatric care.

June 08, 2007  

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