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Health reform: cost/benefit diagnosis for public clinics, hospitals.

The Clinton health care proposal wields great challenges as well as great promises for municipal health care institutions.

The basic promise of the administration's proposal is payment from all individuals who present themselves for treatment, with the notable exception of undocumented individuals. This proposed payment for virtually all those receiving care is a big change from the current situation in which health care institutions - such as municipal hospitals and clinics - provide a great deal of uncompensated care. They are in their current situation because great numbers of people are uninsured and because public health programs like Medicare and the federal-state Medicaid programs pay at rates below the cost of care.

Municipal health institutions will have to balance the promise of this more reliable and universal payment stream against the current pressure to contain costs, which will exert downward pressure on reimbursement rates across the board. This will have greater relevance given that the administration projects slower cost escalation under their plan in future years for the Medicare and Medicaid programs. The measure of cost containment is a part of their basis for financing their reform plan.

Who Is The

Care Provider?

In many cities and towns health care is not directly provided by the municipality but rather by the county government, a special hospital district or not-for-profit institutions. In a number of communities, however, municipalities are providers as a result of operating of hospitals, health clinics, medical outreach programs, public health or emergency medical transportation and care.

Because of the variety of municipal roles, local governments need to examine several issues which might help them to position their public health and medical institutions for whatever heath care reform emerges from Capitol Hill. Following are some examples.

* What is the current mix: of patients, cost of care and revenue between Medicare, Medicaid, private insurance, direct patient and public subsidy or tax support?

A good feel for the current mix will put your community in a position to better and more realistically evaluate various proposals as they emerge from national and state level health discussions. As well as having a snapshot of the current situation a understanding of past and current demographic trends in your community will help you plan better for the changing needs of your community. Some simple financial models might be constructed on a computer spreadsheet program to quickly evaluate general impacts.

* Do billing rates for public health services approximate market rates?

The reform proposal now contemplates a broad range of services being included in the core benefits package which will have to be provided for "all comers." These services include a number of services which are probably now being provided "free" or "below cost" as public services these would include such things as ambulance transportation, immunizations (particularly for infants and youths), health screening and tests such as pap smears, mammograms and cholesterol testing. To the extent that municipal and public health institutions can establish costs/and or billing rates for these services the institutions will be able to better make their case with health plans for reimbursement. Since health plans will be required to pay the providers of these services new funding streams may be created to relieve some current taxpayer-financed costs.

* Should our hospital or public health clinic consider seeking designation as an "Essential Community Provider"?

The plan proposes that medical service providers, both public and private, that provide services to a disproportionate number of poor people will be federal designated as essential community providers during a multi-year transition period. Such essential providers will be guaranteed reimbursement by all health plans to ensure that a continuity of services is provided to poor and underserved communities.

* What physical or program improvements will our public health or hospitals have to make to be competitive in a new environment in which some low income individuals will have a greater choice of health care providers?

Even essential community providers will have to position themselves after a transition period to compete for patients if the plan works as intended to create more health care alternatives. The plan proposes a number of public health grants to assist with facility creation and improvement in underserved areas. Does your community have service and facility plans and needs surveys to document these needs.

* Will the rates of reimbursement to medical providers offered under the plan be sufficient to overcome racial and economic barriers and induce additional medical providers to locate in medically underserved central city and rural areas? Will these new providers in a worse position market and leave the traditional public providers in a worse position then they are now?

How will the market react will your state and local medical regulatory agencies be equipped to monitor new providers?

* What would the level of payment or lump-sum payment have to be to keep your health care institution viable particularly if the current disproportionate share payments received from the federal government are eliminated?

This is really an outgrowth of question number one which is intended to encourage financial projections, even if they are rough, about the impact of changes proposed. Under the Clinton Proposal Disproportionate share payments which are made to hospitals with large shares of low income patients are to be ended. Nationally such payments are projected at $2.5 billion in 1993 with one quarter of the total payments going to 150 large urban hospitals, 75 percent going to other urban hospitals with more than 100 beds and the balance distributed the rest of the 1,500 hospitals receiving such payments. Depending on the patient mix in your local hospital the loss of this special payment stream may outweigh the universal payer system highlighted in the opening of this article.

* Can your public health institutions join HMOs, health plans and networks to participate fully in the new system of health plans that will be submitting bids to the regional health alliance set up in your geographic area?

How is the medical/health provider market changing in your community? Who are the major players? Are they changing? Are mergers and network formations taking place? What networks would be most beneficial for your municipal institutions to join? Are there current legal barriers to such affiliations? Do you need to establish new legal structures for your public health care institutions? Are changes in state law required?
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Author:Peterson, Doug
Publication:Nation's Cities Weekly
Date:Oct 18, 1993
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