Kathy Young knows that the idea of health-care reform is scary. But as CEO of St. Joseph Hospital, she sees things that are even more frightening under the current system. Uninsured and underinsured people are putting off health care until its too late, and the ever-diminishing rate of reimbursement of costs is bleeding millions from hospitals’ bottom lines. It is a situation that threatens lives and the ability of health-care providers to exist.

“Health-care reform scares a lot of people, and I understand that,” said Young. “The politicians are hashing that out, and we don’t all understand the complexities. But the reality is we have to do something. There are way too many people out there not getting what they need. Hospitals want to have a voice in how reform happens. We think we can help, but we certainly don’t have all of the answers.

“It’s going to take a lot of voices and probably more than one try to get really meaningful reform. It needs to be more than insurance reform. It needs to truly look at the system of how health care is delivered. A large number of our patients are already on a national health-care program — 30-40 percent. We know a lot about how those things work. It’s not always a bad thing if we can figure out how to meet the needs of all the people out there and come up with options. I think what scares a lot of people is they are afraid they won’t have options.”

Tackling costs

The options are few for the millions of people across the country without health insurance. Because even primary care costs can be insurmountable for the unemployed or underemployed, they tend to put off wellness visits or avoid having what seems to be minor health problems addressed. According to Howard Regional Health System CEO James Alender, those delays compound into severe problems for everyone involved.

Acuity is the keyword. People who put off their health-care needs eventually show up in the emergency rooms with serious, life-threatening problems. These are cases where maintenance health issues such as diabetes and high blood pressure have gone unchecked or undiagnosed to the point that other illnesses develop. That means a longer hospital stay, increased cost to the health-care provider and the patient, and a greatly diminished quality of life.

Alender explained how an acute and preventable illness gone untreated affects the entire health-care system.

“For example, if the standard acute length of stay is 4.1 days,” said Alender. “If it was 4.0, that would mean $1 million saved in operating expenses annually for the hospital. We’d like to see an acute stay average of 3.8. That would be a $3 million reduction in operating expenses that Howard would be looking at. If folks start getting preventable care and wellness care, that will bring us back to a shorter length of stay.”

The current Medicare/Medicaid reimbursement system is transitioning to a “pay for performance” model, Alender said. In that scenario, standard practices are established. A person suffering from a stroke, for example, is expected to stay in the hospital for a predetermined number of days, barring complications or other illnesses. Reimbursement of expenses, therefore, is limited to that standard length of stay.

“We get paid for three days,” said Alender. “If the patient stays four-five days, we have to write it off.”

According to Young, even meeting those length of stay standards doesn’t mean that the hospital is making money. Medicare and Medicaid reimbursement covers a fraction of the hospital’s cost. And when things like Gov. Mitch Daniels’ recent announcement that Medicaid reimbursement rates will be cut another 5 percent come along, health-care providers are left with little choice but to bleed even more money.

“It’s a 5 percent reduction on an insurance plan that pays us between 16-17 percent of charges,” said Young. “Certainly, it’s our hospital’s mission to make sure everyone is taken care of. It doesn’t change our services or commitment to the community. However, it increasingly challenges us to figure out how to do with less money.

“At some point, I don’t know what’s going to happen. If hospitals have to continue to bear the burden, at some point it becomes difficult. We’ll have to look at what we offer. We have to save somewhere if it continues this way. I hope that health care reform with help level this out for everyone.”

A different approach

The primary component of the health-care equation is the patient. If people want to see affordable health care for everyone and a sustainable health-care system, regardless of reform, it starts with personal responsibility. According to Alender, that is a disconnect that is most difficult to bridge.

“There is nothing that says the patient has to take ownership of their own wellness,” said Alender. “There is a lack of that in the proposed program. We’d all like to see people have healthier lifestyles — weight management, smoking cessation, and exercise. Recently, some of the insurance plans are incentivizing our physicians to make sure wellness is a component of the office visit. But it’s the population that currently doesn’t have access that we’re trying to reach to provide primary care.”

If people avoid caring for their health because of cost or lack of access, then it is the system that must change to rectify the issue, Alender explained. That is the purpose of health-care reform.

“The system is not sustainable,” said Alender. “It is time for people to get their heads out of the sand. You can’t force health-care providers to provide service and pay them 30-40 cents on the dollar of actual cost. But money is not the issue. The issue is the system itself. The idea in America of entitlement is going to have to change. This industry has to go through a metamorphosis of what is appropriate care. If it is appropriate care, you don’t have to worry about tort reform or cost. You don’t worry about having access to plenty of physicians to take care of people.”

For Howard Regional, that metamorphosis may involve a new approach to primary care. Alender revealed that it is the hospital’s intent to expand access to care through the clinic model.

“Assuming there is not enough physicians to provide the access, what is another way to manage it?” said Alender. “We’re looking at urgent care centers instead of ERs. The medical home model is out there where a family physician or primary care provider may have three or four nurse practioners or physician assistants working with them to provide more basic care.

“In our plan, we’re looking at developing urgent care centers, which would create jobs, lower the cost of health care, increase access, and do the right thing. As an industry, we’re going to find ways to deliver care in lower cost settings. You don’t want someone coming to the ER because they have an earache. You want to provide care for them at a lower cost setting.”

Access for all

Young and Alender support the idea of health-care reform. In fact, they contend it is mandatory. The current system will not sustain itself much longer. For Young, the primary focus is providing affordable access to health care to all people.

“One of the problems we run into is we have people who are completely uncovered,” said Young. “We hope health-care reform will promise 100 percent access to decent medical coverage. I don’t know what the politicians will figure out, but for us, it has to provide 100 percent access, and it has to cover everyone with basic coverage.”

“We also have a fair amount of patients who are underinsured. And what we have started seeing in the last couple of years are people with extremely high deductibles and co-insurances. As employers have had to try to decrease their cost of insurance, we see families with very high deductibles, which makes it just as hard. We get some coverage, but the families can’t pay their portion. It’s too much for what their income is.”

These coverage problems only promise to get worse locally in coming months as benefits to hundreds of retirees from Delphi have disappeared entirely. That, coupled with high unemployment rates, means that fewer people have conventional insurance.

“Certainly as more people lose insurance or as insurance becomes less affordable, it becomes more of an issue,” said Young. “Given this economy, we have people falling through the gaps as they lose their jobs. Insurance isn’t transferrable. There may be a gap in coverage. COBRA is definitely not affordable, particularly for families. There are all these gaps in coverage that can affect even people who have always been insured who suddenly find themselves without many options.”

And if health-care reform doesn’t succeed? Already St. Joseph Hospital has seen a 2 percent increase in bad debts. Young said that translates into an additional $2 million a month in losses. And the default rate rose by eight-tenths of a percent just in the past four months.

“It makes you think maybe we’re not quite to the top of the wave yet,” said Young. “Things may be starting to look at little bit better, but as a community I’m not sure that we’re out of the woods yet. We have a lot of people at risk or are on the verge of losing their benefits.”

Sharing the load

There are other aspects of health-care reform that must be considered, according to Alender. Howard Regional is experiencing increases in bad debts, decreases in reimbursement rates, and increased costs associated with acute care. Those must be addressed. But they must be addressed in such a way that it is equitable for everyone on the provider side of the equation, he said.

“Health-care reform is asking us to look at the total continuum of care,” said Alender. “Ultimately it will be the physician and the hospital and extended-care facilities that share the burden. The disconnect right now is that the incentives for hospital, physicians, and extended care providers are not aligned.

“As health-care reform comes along, the term ‘bundle payments’ is coming out. That means the hospital will receive the total payment — hospitalization fees, physician charges, and extended care fees. We’ll negotiate with our physicians and extended-care providers. That will help the providers align the incentives.”

Alender said that the hospital is taking an educational approach with its physicians now regarding the cost issue.

“We’re not doing it from a punitive standpoint,” said Alender. “We’re helping the physicians that fall outside the mean to understand. Some physicians use the best practice protocols, some don’t, but as this moves forward protocol management will be one of the tools we use under the auspices of best practices.”

Under the bundle-payment scenario, the hospital, the physician, and extended care facility get paid the expected amount as long as the patient is handled according to best practice protocols and unreimbursable expenses aren’t incurred. Should a hospital length of stay exceed that standard, however, the loss will be shared, Alender explained.

Proper case management will come into play even more when it comes to the rate of re-admission, Alender said. That means the hospitals will be working with extended-care facilities to ensure patients are managed properly after discharge to avoid a significant loss of reimbursement.

“If someone is here for congestive heart failure, we manage them on the acute side, get them stabilized, and discharge them,” said Alender. “We’ll tell them to watch the sodium, watch their weight, and watch their water intake through our discharge instructions. We did our part. What happens if something happens and there wasn’t a following of instructions, and that patient gets readmitted to the hospital within 30 days?

“Medicare is going to pull from the hospital the original reimbursement for that stay. So we are at risk from re-admissions. The bundle payment will have us working together to co-manage the patients after discharge. We’re already having conversations with our extended care facilities. We want to be a partner with them on managing care.”