Marin hospitals see major risks in GOP health bills

July 02--Marin General Hospital and Novato Community Hospital would likely lose millions of dollars in revenue if either of the two replacement plans floated so far by Republicans were to replace the Affordable Care Act.

"Clinics and hospitals will be at very high financial risk with the financial changes that this bill implements. Based on Medicaid alone they're at risk of millions of dollars of losses," Grant Colfax, director of Marin County's Department of Health and Human Services, said at a town hall meeting in March led by Rep. Jared Huffman.

At that time, debate was focused on a replacement plan backed by House Republicans. Colfax estimated then that 50,000 Marin residents, one out of five, would be at serious risk of losing coverage if the plan were implemented. Contacted last week after the Congressional Budget Office released its analysis of the Senate Republican's replacement plan, Colfax said the Marin numbers remain largely unchanged.

Both plans would impose deep cuts to Medicaid funding. The budget office estimated the House plan would make health care unaffordable for 14 million people now receiving care by 2018 and by 2026 would lower the number of Americans with health insurance by 24 million. The budget office has projected the Senate plan would result in 15 million Americans losing coverage by 2018 and 22 million by 2026.

"If the bill passes it will have severe negative effects on our health care system and would gut Medicaid," Colfax said of the Senate plan. "We would likely need to reduce multiple services across the county, including treatment for substance use and mental health."

Medi-Cal surge

Since the advent of the Affordable Care Act, the number of Marin residents enrolled in Medi-Cal, the California version of Medicaid, has grown from 18,406 people to 40,128. The law lowered eligibility requirements for Medi-Cal, which provides health insurance for people with incomes below 138 percent of the federal poverty level.

Marin General Hospital CEO Lee Domanico said, "I don't support the repeal as a health care executive. I believe it's poor public policy when you hurt the poor and the elderly, decrease the insured and reduce tax on the affluent parts of society."

According to data Marin General reported to the Office of Statewide Health Planning and Development, Marin General's overall net revenue for Medi-Cal managed care increased from about $1 million in 2013 to more than $39 million in 2015.

Domanico said since the Affordable Care Act took effect in January 2014, Marin General has received additional revenue for treating about 10,000 new Medi-Cal patients as well as about 5,000 additional patients who purchased coverage from Western Health Advantage through Covered California, the state's health care marketplace.

Marin General provides care for about 19,000 Medi-Cal patients through an agreement with Partnership HealthPlan of California, a managed care organization that contracts with the county of Marin to oversee the medical care of Marin's Medi-Cal population. Partnership pays Marin General a certain amount per member each month.

James McManus, Marin General's chief financial officer, said the net revenue the hospital received for treating this group of Medi-Cal patients alone amounted to $28.7 million in 2016.

Bad debt factor

In addition, Domanico said, since the advent of the Affordable Care Act, Marin General's bad debts fell by over 60 percent as more people became insured. In 2013, the hospital reported $16.7 million in bad debt; by 2015 that number had fallen to $8.4 million.

"So Obamacare has been positive for Marin General, and I believe for the community of Marin," Domanico said.

Novato Community Hospital, which treats far fewer patients than Marin General, has also seen a rise in Medi-Cal managed care revenue and a drop in its bad debts.

Sarah Krevans, president and CEO of Sutter Health, which operates Novato Community Hospital, commented on the Senate Republicans' replacement plan last week.

"As it stands now, proposals like the Better Care Reconciliation Act, will move us in the wrong direction," Krevans said. "We're concerned about the proposed drastic cuts to the country's Medicaid program, which would unfairly target low-income families, seniors and disabled patients."

According to data Novato Community reported to the state, the hospital's Medi-Cal managed care net revenue went from zero in 2013 to more than $4 million in 2015. Novato Community reported 653 patient days for Medi-Cal managed care in 2015. The hospital's bad debts dropped from about $3.9 million in 2013 to $2.1 million in 2015.

Domanico said the Republican plans also would not compensate hospitals for the reduced Medicare reimbursements they agreed to as part of the Affordable Care Act's adoption.

"So they're not honoring the original deal that was made between the industry and the government," Domanico said.

Emergency visits

Not everything, however, has turned out as supporters of the Affordable Care Act had hoped. Many expected that hospitals would also benefit because of fewer people visiting their emergency rooms as more people became insured. The number of people who visited Marin General's emergency room increased from 34,310 in 2013 to 35,899 in 2016. Visits to Novato Community Hospital's emergency room increased from 14,337 in 2013 to 15,024 in 2016.

It was also hoped that the Affordable Care Act's new emphasis on preventative health care might benefit hospitals financially.

Under the Affordable Care Act, groups of doctors, hospitals and other health care providers were encouraged to form accountable care organizations to coordinate their patient care.

The goal was to ensure that patients, especially the chronically ill, received the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. If an accountable care organization was able to reduce costs while meeting quality standards, it shared in the savings it achieved for the Medicare program.

Marin General joined with the Meritage Medical Network to form an accountable care organization and in 2013 assumed responsibility for all the health care needs of 15,000 Medicare patients in the North Bay.

Based on past years, the Centers for Medicare and Medicaid Services calculated what it expected the cost of providing health care to these patients would be. If at the end of each year those costs were lower than projected, the accountable care organization (ACO) would get to keep up to half of the cost savings.

Domanico said, "In this case, the ACO was not able to save money so we all got paid our normal Medicare payment. After the two- or three-year pilot program, it was not renewed."

Meritage CEO Wojtek Nowak said, "That was Meritage's initiative. Marin General participated as one of our partners. We were successful in reducing the costs some. But it didn't result in any meaningful savings that came back to us."

Nowak said its ACO started with a "high bar" because Marin's Medicare population is younger and healthier than the Medicare population in other communities.

"The bigger benefit for us was bringing the community together in an effort to coordinate care better," Nowak said.

Surgical pact

Novato Community Hospital, which is managed by Sutter Health, participated in another Affordable Care Act pilot program. Instead of assuming responsibility for a group of patients, Novato Community, and the private practice orthopedists who work at the hospital, agreed to perform all of their hip- and knee-replacement surgeries for Medicare patients over a three-year period for a set price agreed upon with the Centers for Medicare and Medicaid Services.

Since the hospital and orthopedists were successful in doing the work for less than that amount, they got to share the entire savings. If the work had ended up costing more, Novato Community Hospital would have incurred the loss.

Because of its membership model, Kaiser Permanente Medical Center in San Rafael has not benefited from the Medi-Cal expansion. But Bernard Tyson, Kaiser Permanente's CEO, issued a statement criticizing the Senate Republicans' replacement plan.

"We cannot support the current Senate draft bill," Tyson said, "as it is clear that the changes to Medicaid and the reductions in subsidies for low-income people enrolled in the exchanges will lead to reduced coverage in our country."

___

(c)2017 The Marin Independent Journal (Novato, Calif.)

Visit The Marin Independent Journal (Novato, Calif.) at www.marinij.com

Distributed by Tribune Content Agency, LLC.