Safety-Nets: Can They Go From "Last Resort" to "Hospitals of Choice?"

Of all American healthcare organizations, safety-net hospitals are facing one of the largest curveballs, as nearly 30 million Americans stand to gain coverage under the Patient Protection and Affordable Care Act beginning in 2014. Nationwide, only 2 percent of acute-care hospitals are safety-net facilities, but they currently provide about 20 percent of all uncompensated care to provided to the uninsured.

Despite this statistic, a decline in America's uninsured is unlikely to relinquish the need for safety-net hospitals, according to experts. Public hospitals for the poor will still have a place in the American landscape, especially since most safety-nets are responsible for training physicians and take on significant patient volumes would otherwise incapacitate markets. Instead, it's the traditional role and public perception of safety-nets that's poised for the biggest transformation.  

"These hospitals don't always set out wanting to be the safety-nets, but it's a position they get forced into," says Igor Belokrinitsky, a strategy consultant with Booz & Company in Chicago. "They become a hospital of last resort, but they really want to be a hospital of choice. Do you want to stay a safety-net hospital or find something else that will set you apart?"

One safey-net's approach
Newspaper editor Henry W. Grady founded Atlanta-based Grady Health more than 120 years ago, concerned about a lack of quality healthcare for Atlanta's poor. Today, Grady's payer mix is roughly 34 percent uninsured, 32 percent Medicaid and 17 percent Medicare, with the rest covered by commercial insurance and workers' compensation. Grady provided roughly $200 million in uncompensated care to 100,000 uninsured patients in fiscal year 2011, and the system also trains roughly one-quarter of Georgia's physicians.  

Like many safety-nets, Grady is facing questions about patients' behavior once they gain coverage under healthcare reform. Largely, will patients opt to continue visiting the largest safety-net hospital in the state or choose to go elsewhere?

Grady CEO John Haupert says safety-nets will take on a different role in the reformed healthcare landscape, but it will take "heavy lifting" to position these institutions as providers of choice in some markets. There are five other general acute-care hospitals within Atlanta's city limits that neighbor Grady Memorial Hospital, and Mr. Haupert is cognizant of the niche people have traditionally expected GMH to fill in that market.

"There's a perception out there, especially with the commercially insured, that Grady is only the place you go to after a bad car accident or for burns," says Mr. Haupert. "We need to change that perception, but it's hard to do that overnight."

The stubborn dichotomy facing safety-net hospitals
Massachusetts has been the crystal ball of American healthcare reform since it enacted its own statewide reform in 2006. Despite the significant reduction of uninsured patients since then, a 2011 study published in the Archives of Internal Medicine found demand for care at safety-net hospitals and community health centers continued to rise.

Most safety-net patients surveyed did not view these facilities, such as Boston Medical Center or Cambridge Health Alliance, as providers of last resort. Instead, nearly 80 percent said they visited safety-nets because of their convenience and more than 70 percent cited their visit to safety-nets' affordability. The availability of services other than medical care and difficulty getting appointments at non-safety-net providers were also common reasons patients visited safety-nets, even though they could have gone to one of Boston's many prominent academic medical centers.  

Despite this promising finding, other studies have shown a gaping dichotomy in how consumers perceive safety-nets. Specifically: Patient experience ratings do not correlate with safety-net hospitals' clinical outcomes, suggesting public hospitals for the poor have their work cut out for them when it comes to improving their public perception.  

A 2011 study published in Health Affairs showed outcomes varied for acute myocardial infarction, heart failure and pneumonia across safety-net and non-safety-net hospitals in select urban areas, but mortality and readmission rates were broadly similar. Non-safety-net hospitals outperformed safety-net hospitals on average by less than one percentage point across most conditions — better clinical performance from the safety-net hospitals than many people would expect.

Despite this demonstrated clinical proficiency, patients remain generally less pleased with their experience at safety-nets. A 2012 study from the Archives of Internal Medicine found safety-nets scored worse in patient satisfaction compared with hospitals that didn't provide a disproportionate amount of care to uninsured and Medicaid patients.

"There is a belief — and I would affirm it — that safety-nets have not always done everything they can to endear themselves to patients," says Mr. Haupert. "We've been forthright about letting the community know we need to do better."

A realistic definition of "patient choice"
President Barack Obama's administration has emphasized the need for health systems to act as the mouthpieces for the reform law, particularly when it comes to educating the public about health insurance exchanges. Georgia declined a state-run exchange, meaning the federal government will operate the HIE.

In response, Grady has stepped up to the challenge and is concerting communication efforts to ensure patients know about their new insurance options. "We're taking a leadership role on the patient side, making sure patients are aware of the exchange, qualified and get into the HIE," says Mr. Haupert.

Even in states that do not implement the Medicaid expansion, such as Georgia, the presence of either a state-based or federally facilitated health insurance marketplace paired with the individual mandate to obtain insurance coverage is likely to affect participation in Medicaid by people who are eligible under the current rules but have not enrolled.

Still, it would be overly simplistic to link health insurance coverage to increased provider choice, as the two are hardly synonymous. Realistically, "provider choice" could remain very narrow for the newly insured, depending on the market. Physician groups, hospitals and health systems may not accept the new insurance product, particularly if it reimburses at a level similar to Medicaid, which typically pays hospitals 93 cents for every dollar spent.

Fewer physicians are accepting Medicaid patients, too, which paints a stark picture about what "provider choice" really means under healthcare reform. A 2012 study from Health Affairs found about 69 percent of doctors nationally accept new Medicaid patients, but that figure ranges from 99 percent in Wyoming to 40 percent in New Jersey.

Payers participating in the exchanges must offer three levels of coverage, organized by "metal tiers," and it appears the silver plan will be the most widely purchased by consumers. A silver plan is required to have an actuarial value of 70 percent, meaning covered individuals would be expected to pay 30 percent through deductibles, co-pays and other cost-sharing features.

Mr. Haupert says he has significant concerns about health systems and physicians not accepting newly insured patients. Grady may very well continue meeting that safety-net need, if so. "Even in Atlanta, there are some social issues I think may pop up with some health systems that have historically not provided care to the poor," he says. "That's not an excuse to change what we do at Grady."

There's also the vice-versa scenario, which has been coming to a head as insurers in California, New Hampshire and Illinois limit the choices of providers who can treat patients in their new health plans. Will these narrow networks include safety nets? The jury is still out, judging from insight from a couple of different experts on the payer and provider sides.

An executive vice president with Blue Shield of California told the New York Times the payer would tailor networks to avoid providers in more affluent areas. "Not many folks who are uninsured or near the poverty line live in wealthy communities like Beverly Hills," Juan Carlos Davila said in the report.

This frame of mind pints toward safety-net hospitals as the more efficient option, but Bruce Siegel, MD, president of America's Essential Hospitals — formerly the National Association of Public Hospitals and Health Systems — said this isn't exactly the case. Insurers have told AEH's member hospitals that they are not preferred providers because their patients are sicker and have complicated conditions, and Dr. Siegel said some health plans will "cover only selected services at our hospitals, like trauma care, or they offer rock-bottom rates," according to the New York Times report.

Along with uncertainty around their patient volumes and reimbursement levels from health exchange products, safety-nets in states that did not expand Medicaid — such as Grady — are facing another budget pressure: cuts to the Medicaid Disproportionate Share Hospital program.

Safety-net hospitals were expected to need less money from the Medicaid DSH program under PPACA since the law was expected to dramatically expand insurance coverage. To lessen the cost of Medicaid expansions, the PPACA reduced Medicaid DSH funding by $18.1 billion between fiscal years 2014 and 2020. To allow time for coverage expansion to take effect, the cuts are back-loaded. They start at $500 million, or 4 percent of current national DSH spending, in 2014 and will reach $5.6 billion, 49 percent of current spending, in 2019.

Grady expects to lose about $45 million in DSH funding by 2018, which would have been offset by the Medicaid expansion had the state taken a different route. Mr. Haupert has previously said he doesn't see the loss as a death knell, but it will affect the profit Grady has managed to turn.  

What does the jump from safety-net to provider of choice look like?
Mr. Haupert has a rich background in safety-net healthcare. Before he came to Grady in October 2011, he served as COO with Parkland Health and Hospital System in Dallas, which provided roughly $600 million in uncompensated care in fiscal year 2010. Mr. Haupert says he's seeing safety-nets subtly take on a different mission today compared to years past.

"Twenty years ago, a safety-net was almost entirely focusing its energy and efforts on how to provide the most care to the most people that fit the definition of 'poor,'" he says. "I think every safety-net now is looking at how it continues to fund that mission."

Mr. Belokrinitsky from Booz & Company says many safety-nets may have to expand their reach to new neighborhoods and strengthen their capabilities for certain specialties and services. Grady is doing just that. The system has created clinical service lines, such as a stroke center, burn care and a cardiac clinic, that help differentiate it from other providers in its market. "We become one of the providers of choice for those things, so we attract stronger payer mix," says Mr. Haupert. "But we're clear: The goal is not to abandon the mission but fund the mission."

The system has also intensified its focus on primary care and patient access. It has six neighborhood health centers in the two-county area it serves, all of which have been designated as level three patient-centered medical homes. On its main campus, Grady has specialty clinics to which the neighborhood clinics refer.

Mr. Haupert sees PCMHs and primary care as wise investments, but in light of the narrow financial margins typically shared by safety-nets, Grady is also trying to increase patient access and capacity through internal improvements. It identified improvements to its physician training model, for example, that would create opportunity for more than 100,000 additional appointments per year at its neighborhood clinics with existing resources.

Still, despite these new clinical offerings and sites of care, Grady and other safety-nets may be faced with some hard decisions in the years ahead about cutting clinical programs. Depending on the market, this may not be the worst outcome, according to Mr. Belokrinitsky. Some safety-nets, as well as many community hospitals, were founded to be "one-stop shops" where patients could go for all types of care, particularly in communities with no other healthcare providers.

"For most communities, this is no longer the case," says Mr. Belokrinitsky. "Now other hospitals have popped up that specialize in cardiology, oncology and other specialties, taking the most profitable business and providing care in better facilities." Safety-nets may have to decide whether they should continue offering everything to everybody, or instead focus its portfolio of service lines and double down on those. It's a matter of how the system will reallocate its resources.

Will safety-nets begin to pose a threat?
In most markets, safety-net hospitals have not posed much of a threat to their competitors. This is particularly true for urban areas with large, academic medical centers. But this may change within the next few years. Mr. Haupert says he's already seeing more health systems in the Atlanta area vie for the newly insured — a patient population not traditionally targeted in hospitals' marketing and communication efforts.

"Our reputation has always been that we're here for everybody," he says. "There are patients that — because they've always been welcomed here and felt safe — won't go anywhere else regardless. We're beginning to see some of the other health systems' marketing campaigns [say things like], 'We're here for everybody.' [They're realizing they] better be open to fact that there are more insured patients in the market."

Shifting public perception takes a lot in terms of strategic planning and capital investment, but also in the demands placed on physicians and staff. It's a new mission, essentially, that may require more competitive attitudes from safety-net providers. "It's a big change in mindset," says Mr. Belokrinitsky with Booz & Company. "Physicians and staff go to work every day not just with the mission of, 'I have to close the breach,' but with the mission of, 'I have to be excellent and competitive with other entities in my market.'"

Mr. Haupert says he's already heard that a couple of competing systems in Atlanta aren't too comfortable with the role Grady is taking on in the community, especially as it reinforces a few select service lines. "That means they're saying, 'We're not used to Grady competing. Grady is just here to take all the underinsured patients,'" says Mr. Haupert. "It's not an outcry, but there's definitely a conversation and undertone of that nature."

More Articles on Safety-Net Hospitals:

Proposed Legislation Would Extend MU Incentives to More Safety-Net Hospitals
Study: Safety-Net Hospitals Hurt Most by Readmission Penalties
Report: Safety-Net Hospitals Face Growing Risks of Failure

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