District health department faces continued financial losses

Dec. 11--Underneath a stack of papers in Deborah Fillman's office, through pages of graphs, pie charts and financial reports, there is a problem.

It's no one's fault, per se, says the region's public health director, but it's troublesome nonetheless. See, behind all the numbers and complicated fiscal outlooks, there's been a noticeable financial decline in reserves at the Green River District Health Department.

A stop gap for many of the area's health needs, the department is looking back now on more than five years of financial pressure that officials say is putting patients at risk and could culminate with slashed programming or even an effort to lobby fiscal courts for larger financial contributions. The district now expects a deficit this year of almost $2 million, while Medicaid reimbursements and state and federal allocations continue to slide.

And outreach services, what Fillman calls the cornerstone of public health, could suffer.

"We're spending dollars in so many different areas that are drawing attention away from significant public health issues," she said. "We're being held back. We could do so much more."

It's a problem, she says, that district and county health departments all across Kentucky are sharing, and it has its roots in policy that once reshaped medical care for the commonwealth's most impoverished. But as Medicaid continues to fluctuate, and its future here remains uncertain, officials say they still don't know from where much-needed funding will come.

There have been two principal administrative models for Medicaid, a jointly funded federal-state health insurance program for the poor, since it was founded through the Social Security Amendments Act of 1965.

Fee-for-service put the responsibility of case managing each Medicaid enrollee directly in the hands of individual state governments. According to a federal report on Kentucky's implementation of Medicaid dated in the early spring of 2014, services were unbundled and paid for separately in the commonwealth. Patients would go to providers, who would essentially bill the government for their services. But the model, the report states, became unpopular by the mid 1980s because it incentivized providers based on quantity, not quality of care.

So in 1986, Kentucky implemented the Patient Access and Care Program, which enrolled low-income adults and children on a mandatory basis and coordinated their care through the providers themselves. By 1997, the program, which initially provided mainly primary care services, had evolved into a health partnership with insurance companies in the greater Louisville region and 16 surrounding counties. It was successful, because regional care providers called Passport Health Plans covered acute, primary and most specialty care for Medicaid enrollees. So, in 2011, the state terminated the KenPAC agreement and expanded Medicaid managed care statewide, according to the report.

They call them MCOs, or Managed Care Organizations -- national, for-profit companies that coordinate patients' care through state and federal subsidies. Aetna Better Health of Kentucky, Anthem, Humana CareSource, Passport Health Plan and WellCare of Kentucky are the five different options enrollees have to choose for their coverage now.

But while the switch in 2011 opened up a new world of options for the commonwealth's low-income health care, it also put a new strain on providers, Fillman said. Many health departments like the GRDHD, which covers a seven-county region in far western Kentucky, offer clinical service programs that act as a first line of defense for Medicaid populations. But instead of regulating care through just one entity -- the government -- health departments are billing five companies, cooperating with five sets of rules and, too often, reciprocating five denials.

"It's so frustrating," said Finance Administrator Laurie Heddleson. "To collect what we bill, we have to put in triple the amount of time it used to take. That's more people and more time, which costs more money."

Not only does it burden the department on time, but sometimes the money it's owed is never actually reimbursed, she said. It comes down to pay schedules. Different companies have different prior authorization axioms, which don't transfer, so if a patient is being treated through the department's Home Health program and switches providers, care might be stopped to reauthorize treatment that had already been approved. If not, the company won't pay out, she said.

The number of hoops providers have to jump through, she said, is unreasonable, and if billing schedules expire before cases can be resolved, clinical services or contracted providers have to swallow the costs themselves.

"You work here because you want to help the community," Heddleson said. "But there comes a point where we're losing so much money from MCOs that it's hard to staff people, because you can't pay enough to support a family."

Since managed care was expanded in Kentucky in 2011, the GRDHD has lost $1.7 million through MCO transactions.

Angel Thompson, administrative services manager at the department, is responsible for coordinating billing services to every company. She said she's attended conferences where state officials have acknowledged the problem and discussed ways to streamline the billing process between all five companies, but nothing has ever come of it.

"It would benefit everyone if they would standardize it across the board.," she said. "We're tasked with trying to make our communities healthier, but the money we need to do that is slipping away."

And that's not only from the MCOs, she said. State and federal allocations, which support specific clinical and outreach programs at the department have been reduced, too. Officials say they lost $2.4 million since fiscal year 2011, and reached into untapped reserves by almost $5 million since then to cover the rising costs. Last fiscal year's audit shows the number of days until expenditures in the department's unreserved fund balance are depleted, has dipped from 150 in 2007 to just 87 this year. Over the two-year period before and after managed care organizations were introduced, it fell steadily by almost 50 days.

In 2010, the audit shows, unrestricted and undesignated funds had just topped $6 million. Today, they're about $3.9 million. But auditors say it's not the fault of the department. Revenue is drying up and service fees have barely risen for more than a decade. In fact, tax support hasn't changed in almost 30 years.

"You worry that you'll have to close a program." Thompson said. "We do things here that people in our communities depend on. And if we don't do them, who will?"

Reserves still make up about 84 percent of the department's total balance sheet, and with a $16 million annual budget, 2016 reports showed substantial gains in community access to care, maternal and child health as well as Women Infants and Children programming. Fillman said the department is making do with what it has, but with a cold winter approaching and the threat of disease outbreak or natural disasters around every corner, she said public health could be at risk.

The district board of health has handed the problem down to a finance committee for recommendations. Those could come as early as January, but Fillman said there aren't many options the board will have.

"We either have to increase revenue or cut spending," she said. "Those are the only two choices you have.

Fiscal courts in the seven-county region set local tax rates to support health centers in their respective counties and contributive rates that go to the department. As mentioned, those rates at 2.5 percent haven't changed, and in August, the board reviewed a proposal that could increase contributions by 1 percent. Nothing has been approved, but the increase may be the only option the department has in its arsenal, if costs continue to rise. Threats to the Medicaid expansion are concerning, too, officials say. Both Gov. Matt Bevin and President-elect Donald Trump have made statements that suggest the possibility of stripping the 2013 expansion population of benefits altogether. If that happens, Fillman said patients who need care would still come to the department, and uncovered costs would just complicate current and future deficits.

State officials had little to say about MCOs' roles in depleting health department funds. Doug Hogan, executive director of public affairs for the Kentucky Cabinet for Health and Family Services, submitted a written response blaming the problem, too, on President Barack Obama's Affordable Care Act, which he called "Obamacare."

"Local health departments have faced significant financial challenges over the past six years due to a multitude of factors, including the implementation of Obamacare and the loss of revenues relative to the establishment of Managed Care Organizations," he said. "The decision to enact all parts of Obamacare in Kentucky has cost local health departments approximately $18 million in funding. Apparently, the thought process was that local health departments would earn back some of the lost funding by providing services to newly insured clients. However, those clients were assigned "medical homes" within MCOs -- where they are expected to have their care managed -- and that led to an even further decline in demand for services at local health departments."

It's created a 31 percent work force reduction at health departments, which amounted to more than 1,000 employees, he said. Still, departments have remained resilient, he said, and the cabinet "applauds the great work being done."

But he offered no solutions.

Austin Ramsey, 270-691-7302, [email protected], Twitter: @austinrramsey

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