PAR report falters in analyzing state hospital transformation

News flash from the Louisiana media: the privatization of operations of, with one exception, Louisiana’s former charity hospitals may put the state at risk of paying more than anticipated a few years from now. Or, maybe it won’t. That was the astoundingly definitive conclusion of a report from the Public Affairs Research Council on the process, which is long on explaining what’s happening with it but very short in reaching any bankable conclusions of what will happen.

The explanatory part, similar to that of its analysis of the Medicaid expansion aspect of the Patient Protection and Affordable Care Act (“Obamacare”) of some months ago, is helpful to understand the complex financing process involved. But the report as a whole also suffers from the same drawback: less than realistically it considers the actual likely direction of future policy, and in fact appears to have somewhat of a dated quality already.

As a whole, the report notes all that has been going on and determines “there is good reason to be optimistic that care and access to services will improve” as a result of the transformation. Had it come out a few days later, perhaps it could have noted, to back up its relaying of state officials’ testimony in this regard of service expansion and access, the example of a pediatric unit reopening at University Medical Center in Lafayette by that new private operator that had to be closed by the state a year ago. This appears as one instance of how operating efficiencies are taking even a reduced amount of money than would have been required under state operation and yet still providing if not expanding services, to the benefit of clients and taxpayers.

But the report warns that the situation could change that could make the state, instead of saving money, paying out more than might have been. A number of aspects to the revenue and expense streams for the state could affect this, but the report judges these likely would have a small impact. However, there is one that it opines possibly could cause state costs to escalate significantly, a reduction in uncompensated care reimbursements from the federal government that the state then might have to make up.

Essentially, Louisiana’s reimbursements from the federal government historically had a much higher mix of these dollars relative to other sources, because the charity system handled so much of that business. That should continue even as the Bayou Health managed capitation program for Medicaid recipients over its implementation of the past couple of years has done some steering away from charity hospitals being used as primary care facilities. The threat comes as Obamacare is supposed to reduce UCC payments over the next few years to basically half of what they are today, and while under that model all states would see that reduction, with Louisiana’s disproportionately high utilization of that money the downsizing may cut into what the state could expect in reimbursement, forcing it to use its own resources to fill the gap.

One response, the report argues, would be to go for Medicaid expansion because it pays for the 25-133 percent of poverty line income range for uninsured now but with expansion eligible recipients that can go to charity hospitals (currently, the state allows the uninsured up to the 200 percent level to get free care). That’s not surprising as a suggestion, as PAR betrayed this preference in that previous report but for a number of ill-considered reasons, among them the fact that under the current rules the state would end up paying more with expansion, by 2023 an extra $92.5 million a year with this and by then this growing at 15 percent a year.

And that figure is one that buys into assumptions about Obamacare as a whole that, as time has passed, have proven less and less credible; otherwise, the state could have savings much higher. Most relevantly to the current PAR report, that UCC would be cut never has appeared very certain because Obamacare’s impact would cause a simultaneous demand swell and supply contraction of services by non-hospital providers from government-insured individuals as Medicaid expands, Medicare remains unreformed, individuals are compelled to get insurance, and the workplace-insured population drops because employers balk at higher expenses, with the same dynamic at work among individuals who find Obamacare has priced them out of the insurance market. Instead of using hospitals as primary care vehicles less, the opposite likely will happen, and cutting UCC will become politically impossible just as the same has happened to the Medicare “doc fix.”

If anything, the developments during the Obamacare rollout gives credence to the fact that the program is unsustainable in current form, as extra-constitutional exemption after exemption has been declared by fiat from the White House, to the point now that Pres. Barack Obama repeals Obamacare as a tactical political concession. Just so: because Obama and liberal political elites knew they couldn’t presently get a single-payer system into law, they figured they could create a system with so many internal contradictions that would serve to increase costs while reducing quality that the stink of it all, they gamble, would be to create enough political demand precisely to get a single-payer system into law.

Unfortunately, the report authors appear detached from the real political world and thereby miss the dynamics that indicate UCC payments are unlikely to decrease as much as now appear in law. Absent the threat of reduced dollars here, the next most significant one is whether concerns the case mix methodology for reimbursement (particularly the fact that some providers prepaid voluntarily on their leases) and whether those that have yet to gain final federal government approval will.

Yet given the entirely fluid landscape of Obamacare – one that with a partial or entire repeal would likely face changes that would redound to the state’s favor in several ways that, rather than demand for a single-payer system, is becoming more likely as each day passes – the best the report can do is give a guide to what’s happening and give sage advice for governing the transition (such as to keep good records and to monitor trends). As an evaluation that renders an initial judgment on the worth of the idea and its implementation, it tells us little.