Hospitals wary of health-care reform

Several local hospitals say health-care reform could help their bottom lines by reducing the number of people who are uninsured. But if reforms drive consumers from private insurance to a low-paying public insurance plan, hospitals predict a potentially crippling loss in operating revenue instead.

A Wednesday compromise in the U.S. House of Representatives seems to address at least one of the biggest concerns of The Medical Center of Central Georgia. It removed a requirement that a public insurance plan pay at the same rate as Medicare. Medicare rates don’t cover the actual cost of hospital care, and that approach could have sent the hospital into the red, said CEO Don Faulk.

Medical Center leaders have been meeting with Georgia congressmen in recent weeks about how health-care reform could affect the region’s only Level 1 trauma center, which already had mass layoffs to save $34 million in operating costs this year.

Georgia representatives and senators also have asked officials with Houston Healthcare for their feedback, said company CEO and President Skip Philips. He voiced concerns about whether public insurance would drive private insurance companies from the market and said the new system is likely to force consumers to be more selective in the health care they receive.

“The current model incentivizes utilization, not necessarily appropriate utilization. And in turn, you get higher costs,” he said.

But ordering fewer unnecessary tests and unproductive treatments would be a good thing, he said.

“People are afraid of rationing, but part of rationing is a rational delivery of services based on making a real difference in the outcome or quality of life,” Philips said.

Faulk and Philips agree the current system encourages profiteering as well as treatments intended to prevent lawsuits rather than to cure.


Reform proposals are evolving daily as Democrats try to meet President Obama’s goals of increasing American health-care access and reducing costs.

Faulk said this week that he wants to see any public insurance plan negotiate rates just like private insurers. Alternately, the government could increase Medicare rates so the payments actually cover costs.

Until Wednesday’s compromise, moderate Blue Dog Democrats — including U.S. Rep. Jim Marshall of Macon — had opposed the House plan partly because it tied payments to Medicare rates. His press secretary Doug Moore said Thursday that Marshall had not had time to fully examine the compromise yet. It’s likely to see a committee vote today but won’t reach the full House until September, according to The Associated Press.

Based on the sparse information available about the new bill, Faulk called it “a positive step and one that we would endorse.”

But a public plan with negotiated rates might not be beneficial for smaller local hospitals, said Philips.

“As a community provider, our negotiating power is less than a large entity,” he said. “Although (a negotiated rate) probably does help some with costs, it may shift people to megacenters that will have more clout at the bargaining table with insurance companies.”

And Houston Healthcare finds that Medicare rates usually cover the hospital’s costs when averaged, Philips said.

But with the number of uninsured people climbing, the current system is not sustainable, Philips said. Because of the economy, Philips said, Houston Healthcare has seen dramatic growth in charity cases and bad debt in the past year: $25.7 million in the first six months of 2009, compared to $18 million during the same period last year.

The Senate health-care reform bill is still being negotiated but has moved away from even offering public health insurance, a key component of Obama’s platform. Instead, it would create a nonprofit cooperative to offer health insurance.

Republican Saxby Chambliss, Georgia’s senior senator in Washington, D.C., said in a prepared statement this week, “I am open to reform, but I will not support any legislation that will raise taxes. Additionally, I will not support legislation that includes a government-run option.”


Under the current system, which Faulk agrees is broken, the 21 percent of Medical Center patients with private insurance pay more than the cost of health care to make up for the remaining patients, who pay less. Faulk calls the result “Robin Hood economics,” basically a tax on the privately insured to pay for the rest.

Faulk emphasized that costs are actually a fraction of what the hospital charges in its bills.

“These days charges are basically meaningless,” he said.

That’s partly because private insurance companies usually agree to pay only a percentage of charges, so medical providers must charge more to break even.

At first blush, it would seem that hospitals would benefit from any plan that requires insurance for everyone. The Medical Center provides both emergency and primary care to the indigent at a higher rate than any other hospital in Middle Georgia. Faulk and CFO Rhonda Perry say that even after federal and state reimbursements, the Medical Center faces about $17 million in unpaid costs for treating poor people with no insurance.

If those patients became paying customers — even at the reduced Medicare reimbursement rate — the hospital’s profits from treating patients would rise from $12 million to $30 million, Faulk said. But this rosy scenario is unlikely, he said.

He predicts many people will shift from private to public insurance, largely because employers will stop offering insurance. If so, Faulk calculates that the hospital will no longer make any profit. Using Medicare reimbursement rates, it would lose $8 million a year if a third of patients shifted, and about $35 million if two-thirds shifted, he said.

Most plans being debated won’t allow people to transfer from employer insurance to a government plan unless their current insurance isn’t “adequate and affordable” based on their income.

Faulk said some local employers have told him they would stop providing insurance if a public plan is created. Some versions of the legislation would charge a tax or fee to businesses that do this.

Jan Beeland, a spokeswoman for Coliseum Medical Centers, said it’s too soon in the health-care reform process for that hospital to comment on how it might be affected.

And at Houston Healthcare, Philips said: “Many of us are anxious that it’s going to be very different from now on. It’s an exciting time, and it’s a scary time.”

To contact writer S. Heather Duncan, call 744-4225.