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Still on the Critical List
Like a patient with a mysterious malady, state's health-care delivery system defies simple remedies
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Business New Haven
5/1/2000
By: Michele Beck
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“The health-care industry is still going through a tremendous amount of chaos,” says Ken Warren, owner of 2001 Marketing, a health-care consulting and marketing firm in Orange. “If anything, there are a lot more roadblocks in the path of moving forward.”
The causes of the health-care crisis are not difficult to determine. One is the escalating costs of new drugs, procedures and technology, which somehow must be paid for. The rise in pharmaceutical costs is exacerbated by the fact that new drugs receive governmental protection during the first few years they are on the market - that is, no competing compounds are allowed to reach the market.
In addition, the state's population is aging, which - since seniors consume medical treatment more than any other demographic group - means that more people are demanding access to expensive new drugs and equipment.
Moreover, the cost of health-care personnel has been driven up by the shortage of nurses and other health-care professionals. Finally, cutbacks in Medicare coverage in the wake of the Balanced Budget Act of 1997 have thrown more of the burden of absorbing these rising costs onto the various players in the industry.
The spiraling costs of health care continue to have devastating effects on hospitals, doctors, nursing homes, home health services, and HMOs - to say nothing of patients. Every one of these groups is struggling to find creative solutions to the dilemma, but most are at best small Band-Aids.
Hospitals are financially worse off than they were even just a year ago, according to Kenneth Schwartz, M.D., medical director of Griffin Hospital in Derby. Their costs continue to go up, while they are being reimbursed less.
The aggregate operating margin for all Connecticut hospitals was in the red in 1999 for the first time ever, Schwartz reports. “Hospitals lose money with every patient they treat,” says Deborah Hoyt, the Connecticut Hospital Association's vice president for public affairs and education. Approximately 50 percent of Connecticut's acute-care hospitals are now operating in the red.
One reason for the worsening situation is that the number of uninsured persons in the state continues to rise, due to the increase in the number of self-employed men and women and the skyrocketing cost of health insurance - especially for individuals.
Another exacerbating factor is the fact that this past year the state legislature eliminated the state's contribution to the health care bills of its “dual-eligible” population. Formerly, after Medicare paid its 80 percent of these patients' bills, the state welfare system paid the remaining 20 percent. No longer. The cut affects both hospitals and doctors. Many of the latter will no longer see Title 19 patients as a result.
How are hospitals coping with these pressures? “They are becoming very creative,” says Hoyt. Some are trying to beef up their prevention and wellness programs in order to keep more people out of the hospital. The trend toward greater use of outpatient services, which are less costly than services delivered in a hospital, continues.
Free-standing surgery centers also continue to pop up. Hoyt notes, however, that 1999 legislation imposing on these entities regulations similar to the rules with which hospitals must contend, has leveled the playing field somewhat for the centers.
Some smaller hospitals in rural areas are partnering with larger hospitals in order to avoid going under. Finally, some, such as Griffin, have managed to turn a profit simply by cutting costs.
The federal government last year restored between five and ten percent of the Medicare cuts it had enacted back in 1997. Schwartz points out, however, that the rise in Medicare managed care basically nullifies these.
Unlike traditional Medicare, treatment of HMO Medicare patients is paid on a per-diem basis, with the result that hospitals receive about $2,000 less overall reimbursement per case.
Other governmental initiatives look more promising. State government is currently considering doing away with one of the taxes now imposed on hospitals. “This would be a big help,” says Schwartz. “It would mean $1 million a year to us, and even more to other hospitals.” There is also lobbying going on in Congress for further restoration of the Balanced Budget Act cuts.
Even these measures - provided they pass - will not fully relieve hospitals' financial burden, though. “The Governor's proposal to significantly reduce the tax on hospitals, if adopted by the Connecticut legislature, and the congressional bills to increase Medicare payments [if passed] will help quite a bit,” says Dennis P. May, president of the Connecticut Hospital Association, “but will not solve the problem.”
Doctors are also continuing to feel a great deal of pressure under the current system. “It's getting more and more difficult for us,” says Steven Wolfson, M.D., a local cardiologist. “Insurers ask us to jump through all kinds of hoops before they will approve a prescription or a procedure. They also make it more difficult for us to get paid.”
Wolfson notes that insurance companies are also paying more slowly nowadays, denying a greater number of claims, and are slower to approve claims after going through reams of paperwork.
Although legislators have attempted to help with the payment problem, Wolfson says that thus far insurers have managed to find ways around the new roadblocks. Legislation was passed a few years back, for example, stating that if a “clean” claim arrives at an insurer, it must be paid within 60 days or else interest will accrue. Wolfson notes that insurance companies now are finding all kinds of reasons to say that claims are not clean.
Doctors must also maintain larger business offices and staffs in order to handle all the paperwork that comes with dealing with HMOs. Wolfson says that he decided one week to keep a count of the calls that came into his office. In that week he reports that 90 calls were devoted just to questioning the medications his patients had been prescribed.
Primary-care physicians are the hardest hit. Wolfson says he knows internists and pediatricians who have left town or retired. Many others are struggling.
But doctors have begun to fight back. While they are not banding together in large physicians groups as much as they did a few years back, Warren notes that they are coming together on certain issues. A group was recently formed in Fairfield County, called Project Patient Care, devoted to working for excellence in patient care. About one-third of the members are local physicians. Trends noticed elsewhere in the country, such as doctors deciding to take cash customers only, or doctors unionizing, have not caught on yet here in Connecticut. But the spirit of resistance is growing.
Nursing homes are feeling many of the same pressures as hospitals - the paucity of licensed or certified nursing staff, and the limitations on Medicare reimbursement. Ray Watt, administrator for Regency House, a Wallingford facility specializing in Alzheimer's and dementia care, notes that governmental activity at the state level has been ineffective, and that federal initiatives in the nursing-home arena have actually aggravated the situation.
Gov. John G. Rowland recently pledged money for wage enhancement for nurses, but according to Watt, it didn't produce the hoped-for results in the areas of retention or recruitment. What is needed, Watt says, is for the state to get involved in recruitment of nurses, to study programs and incentives that work.
At the federal level, the Clinton administration is focusing on fraud and abuse in nursing homes. “He has put nursing homes under the microscope unfairly,” says Watt. “The initiative makes us look like the bad guy.”
Home health agencies are similarly challenged, reports Warren. He notes that between 20 and 25 Connecticut agencies either went out of business entirely or were subsumed into a larger agency this past year. New federal regulations will take effect this fall that will place new pressures on the already strapped deliverers of home health care.
A relatively new approach to meeting the health care needs of wealthier seniors has done wildly well. Assisted living facilities have proliferated in this area, says Warren. This movement may have peaked, however, as there is a finite market of consumers who can afford them.
And while they may provide a sensible health care solution for some, most seniors must still contend with the existing system of home health providers, nursing homes, HMOs and Medicare.
The villains in this drama, it would seem, are the HMOs. However, they are faring no better than the other players in the industry.
“They are wobbling under the weight of public and private scrutiny,” notes Warren. Their stock prices have declined precipitously. From more than 15 carriers just a few years ago, the number doing business in Connecticut has shrunk to just nine. And because there are so few companies, says Steve Glick of the Chamber Insurance Trust, the spotlight on each of them shines that much brighter.
Glick notes that increasingly consumers won't sign up with an HMO that did not make the “100 Best” list published in U.S. News & World Report or similar rankings.
Those HMOs that have survived are employing a number of strategies in order to make ends meet. Everyone has raised rates up into the double digits. Some are slowing down their payments because they don't have the cash flow, reports Glick. Others, such as ConnectiCare, have switched status from non-profit to for-profit (which Warren points out may make them more attractive to be acquired). A few have developed new programs that both benefit consumers and help cut costs. One example are new programs for the active management of common chronic illnesses such as asthma and diabetes. Another are three-tiered prescription drug programs, which give patients a choice between generic (cheapest), something called “formulary” (medications selected by a group of local doctors as safe and effective for a particular illness or condition), and brand-name drugs (most expensive). Everyone, however, continues to struggle with the conflicts between service and cost.
All this is of course affecting health care consumers - both employers and employees. Many companies, Glick reports, are restructuring their benefit design so that employees must pay more. Instead of a $10 co-payment for an office visit, co-payments of $20 or $25 have become commonplace.
Indemnity plans may now have a higher deductible. Another common solution is for employers to offer their workers two or three health-care options, each at a different level of employee cost-sharing. “There is a shift back toward the original concept of health insurance as coverage for catastrophic illness,” says Glick.
Still, all these creative arrangements are little more than temporary Band-Aids. Ultimately something far more all-encompassing is needed.
“Health care is extraordinarily complex and extraordinarily expensive,” says Wolfson. “There are more things we can do for patients, but that costs money. I wish we would simply face that fact.”
He suggests that as a nation Americans discuss frankly what percentage of the GNP they should spend on health care to balance economic well-being with quality of life.
“We know we need a whole new financial system,” says Hoyt. “Only people aren't ready for the government to take it over.” BNH
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