Health Care for the Poor and Uninsured After a Public Hospital's

HealthHealth CareCare forfor thethe PoorPoor andand UninsuredUninsured afterafter aa PublicPublic Hospital’sHospital’s ClosureClosure oror ConversionConversion

RandallRandall R.R. BovbjergBovbjerg JillJill A.A. MarstellerMarsteller FrankFrank C.C. UllmanUllman

Occasional Paper Number 39

Assessing the New Federalism An Urban Institute Program to Assess Changing Social Policies

Health Care for the Poor and Uninsured after a Public Hospital’s Closure or Conversion

Randall R. Bovbjerg Jill A. Marsteller Frank C. Ullman

Occasional Paper Number 39

The Urban Institute Assessing 2100 M Street, N.W. the New Washington, DC 20037 Federalism Phone: 202.833.7200 Fax: 202.429.0687 An Urban Institute Program to Assess E-Mail: [email protected] Changing Social Policies http://www.urban.org Copyright © September 2000. The Urban Institute. All rights reserved. Except for short quotes, no part of this book may be reproduced in any form or utilized in any form by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without written permission from the Urban Institute.

This report is part of the Urban Institute’s Assessing the New Federalism project, a multiyear effort to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being.

The project has received funding from The Annie E. Casey Foundation, the W.K. Kellogg Foundation, The Robert Wood Johnson Foundation, The Henry J. Kaiser Family Foundation, The Ford Foundation, The John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, The David and Lucile Packard Foundation, The McKnight Foundation, The Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, The Fund for New Jersey, The Lynde and Harry Bradley Foundation, the Joyce Foun- dation, and The Rockefeller Foundation.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public con- sideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

The authors thank the many people in the study communities who gave so generously of their time and insights. They also thank Stuart Guterman, John Holahan, Barbara Ormond, Alan Weil, and Joshua Wiener, whose comments sharpened our thinking and improved this report. About the Series

ssessing the New Federalism is a multiyear Urban Institute project designed to analyze the devolution of responsibility for social programs from the federal government to the states, focusing primarily on health care, income security, employment and training programs,A and social services. Researchers monitor program changes and fiscal developments. In collaboration with Child Trends, the project studies changes in family well-being. The project aims to provide timely, nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively.

Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute’s Web site. This paper is one in a series of occasional papers analyzing information from these and other sources.

Contents

Introduction 1 The Health Care Safety Net and Public Hospitals 1 Why Has Survival of Public Hospitals Prompted Policy Debate? 2 Studying Five Localities That Ceased Running Public Hospitals 3 Summary of Findings 5 Background: Local Populations and Health Care Markets 6 Closure or Conversion of Public Hospitals: Motivations and Methods 9 Milwaukee, Boston, and Tampa-Hillsborough County in the 1990s 9 San Diego and Philadelphia in the 1960s and 1970s 10 Transition to New Systems 11 The 1990s: Milwaukee, Boston, Tampa-Hillsborough County 11 Early Changes in San Diego and Philadelphia 13 Safety Nets after Privatization—Innovative Designs 13 Milwaukee’s GAMP: Indigent Care Managed by Competing Clinics 16 Boston’s Waiver Model: Managed Indigent Care by Successor Hospital’s Network 9 Hillsborough County’s HCHCP: Management by Geographically Based Integrated Networks 17 San Diego and Philadelphia: Nonintegrated Clinics and Hospitals 18 New Safety Nets in Operation 19 New Safety Nets in Operation—Public Funding 21 New Safety Nets in Operation—Comparative Efficiency 24 New Safety Nets in Operation—Access for the Poor 26 Overall Qualitative Assessment: So Far, So Good, but Fears for the Future 34 Concluding Discussion and Policy Implications 37 Key Patterns in Privatization 37 Implications for Policy 42 Appendix A: State-Local Relations and the Medically Indigent 45 Appendix B: People Interviewed for This Project Listed by Site 49 Notes 53 References 61 About the Authors 69

Health Care for the Poor and Uninsured after a Public Hospital’s Closure or Conversion

Introduction The Health Care Safety Net and Public Hospitals Local public hospitals have long served as medical providers of last resort for the uninsured poor, anchoring the safety net that provides access for the disadvantaged, especially in large urban areas (Lipson and Naierman 1996), like the five examined in this study. Such public hospitals provide not only emergency services but also urgent care and even primary care, through emergency rooms and outpatient clinics. After Medicare and Medicaid began in the mid-1960s, public hospitals became major providers of insured care as well, and many sought to broaden their appeal to the paying public. They frequently serve as teaching hospitals for nearby medical schools, offering broad patient populations for teaching and research. Public hospitals also commonly lead in specialties like trauma and burns, care that can be underprovided in the private sector for fear of attracting less well-insured patients (Kassirer 1995).

In the enthusiasm for expanding the insurance safety net in the mid-1960s, many observers thought the provider safety net of public hospitals would no longer be needed (Friedman 1987a). Such optimism proved unfounded. Medicaid quickly dropped its initial aspirations to fund mainstream access for all the poor, and the extent of insurance coverage has been dropping nationwide since the early 1980s, although the rate of uninsurance varies greatly by state and locality. Nationally, the number of uninsured has risen to 44 million people, about two- thirds of them poor or near poor, so demand for uncompensated safety net care has also risen.1 During the 1990s, fiscal pressures on public hospitals began to intensify (Igle- hart 1997; IOM 2000; Norton and Lipson 1998a). Since then, revenues have suf- fered because public programs and managed care have cut payment levels and because managed care and heightened competition have reduced admissions. Medicaid managed care has shifted patients to lower-priced settings, and other hospitals have competed more vigorously for Medicaid patients because cutbacks under private managed care have made Medicaid clients more attractive. Expenses are high because of the growth in the numbers of uninsured patients just noted. Public facilities also often have high costs as a result of caring for a low-income clientele with low health status, generally high staff-patient ratios, and often aging capital plants. Public hospitals also often have trouble respond- ing to such challenges as nimbly as private competitors, as management flexibility and access to capital are harder to achieve under public ownership (Friedman 1987c; Siegel 1996). At the same time, localities are hard pressed to raise taxes (GAO 1986; Norton and Lipson 1998a).

For such reasons, since 1979, the numbers of public hospitals and public beds have declined markedly—faster than the corresponding figures for all hospitals (table 1; see also Needleman et al. 1997). More than one-third of public hospital beds have been lost, versus one-seventh of total beds; public hospitals’ share of beds has dropped from more than one-fifth to Table 1 The Decline in Public Hospitals, Numbers and Beds, about one-sixth. (These 1979–1998 declines reflect both closures and shifts from % public to private sta- 1979 1998 Change tus.) Typically, public Hospitals facilities in smaller, Public 211 139 –32% rural areas have been Total community 5,842 5,015 –14% most at risk (Ormond Public share of total 31% 24% 2000). Historically, it Hospital beds (thousands) was unusual for large Public 1,785 1,218 –34% urban public hospitals Total community 5,842 5,015 –15% to cease operations Public share of total 21% 17% (Friedman 1987b), but Source: Calculated from American Hospital Association data in Health Forum they too are struggling. (2000), table 1.

Why Has Survival of Public Hospitals Prompted Policy Debate? Access for low-income uninsured patients is the main reason for public concern because paying patients are amply served by a dozen or more private hospitals in large urban areas like the five localities studied here. Supporters of public hospitals argue that only public operations can maintain the truly “open door” that guarantees good-quality care to all patients regardless of ability to pay (Friedman 1987a; Kassirer 1995; Gage 1999). Private hospitals, they assert, do not want to serve many of the uninsured and in any case simply cannot match the public sense of mission in doing so. Nor can they develop public providers’ Assessing the New

Federalism 2 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

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involved new safety net programs run on managed care principles. care managed on run programs net safety new involved

kee this was limited to a two-year transition. The three recent privatizations all privatizations recent three The transition. two-year a to limited was this kee

successors all had some mandate to continue serving the needy, but in Milwau- in but needy, the serving continue to mandate some had all successors

case an academic medical center already associated with the public hospital. The hospital. public the with associated already center medical academic an case

of the five, a successor hospital remained in business at the same location, in each in location, same the at business in remained hospital successor a five, the of

Only two of the five public hospitals actually had their buildings closed. In four In closed. buildings their had actually hospitals public five the of two Only

with some expansion at the city’s public clinics. Table 2 summarizes the changes: the summarizes 2 Table clinics. public city’s the at expansion some with

replaced it with a new city nursing home now run under private contract and contract private under run now home nursing city new a with it replaced

General Hospital was closed in 1977; the city partially city the 1977; in closed was Hospital General 1981. in Philadelphia

Diego County General Hospital in the late 1960s and sold the hospital to UCSD to hospital the sold and 1960s late the in Hospital General County Diego

University of California-San Diego (UCSD) to assume operational control of San of control operational assume to (UCSD) Diego California-San of University

where the county allowed the allowed county the where was change earliest the with site The San Diego, San

remained the teaching hospital of the University of South Florida Medical School. Medical Florida South of University the of hospital teaching the remained

pital (TGH) to convert to private nonprofit governance in October 1997; TGH 1997; October in governance nonprofit private to convert to (TGH) pital

Florida, agreed to allow Tampa General Hos- General Tampa allow to agreed Florida, staff. shared Hillsborough County, Hillsborough

a July 1996 merger with the neighboring university hospital with which it already it which with hospital university neighboring the with merger 1996 July a

City Hospital was privatized by privatized was Hospital City door. next located center medical demic Boston

December 1995, selling its assets and services to its sister institution, a private aca- private a institution, sister its to services and assets its selling 1995, December

Wisconsin, the county closed John L. Doyne Hospital in Hospital Doyne L. John closed county the Wisconsin, In Milwaukee,

safety net, and what happened to care for the poor after privatization. after poor the for care to happened what and net, safety

the reasons for change, the nature of the transition, the design of the resulting the of design the transition, the of nature the change, for reasons the

supporting and managing indigent care. In each locality, the case studies assessed studies case the locality, each In care. indigent managing and supporting

spective. The recent changes all explicitly created new, alternative programs for programs alternative new, created explicitly all changes recent The spective.

zations occurred decades before, providing some long-term comparative per- comparative long-term some providing before, decades occurred zations

1995–97, reflecting the current competitive dynamics in health care. Two privati- Two care. health in dynamics competitive current the reflecting 1995–97,

tals. In three of the sites studied, the loss of the public hospital occurred in occurred hospital public the of loss the studied, sites the of three In tals.

in-depth case studies of five localities that stopped operating their public hospi- public their operating stopped that localities five of studies case in-depth

To see what happens in practice rather than in theory, this project conducted project this theory, in than rather practice in happens what see To

Studying Five Localities That Ceased Running Public Hospitals Public Running Ceased That Localities Five Studying

integrated delivery of care would be preferable. be would care of delivery integrated

ambulatory treatment can avoid the need for so many hospital services; more services; hospital many so for need the avoid can treatment ambulatory

public hospital, they say, creates a medically inefficient safety net because timely because net safety inefficient medically a creates say, they hospital, public

cratic, more efficient, and of higher quality, they assert. Moreover, reliance on a on reliance Moreover, assert. they quality, higher of and efficient, more cratic,

public hospitals’ funding. Private hospital operations are typically less bureau- less typically are operations hospital Private funding. hospitals’ public

more uninsured care would be forthcoming if private facilities were given the given were facilities private if forthcoming be would care uninsured more

teaching hospitals and others also have safety net missions and suggest that even that suggest and missions net safety have also others and hospitals teaching

improve access while saving money (Tradewell 1998). They note that nonprofit that note They 1998). (Tradewell money saving while access improve

Proponents of privatizing the safety net counter that private operations private that counter net safety the privatizing of Proponents

to care exist, including inconvenient location of most private facilities. private most of location inconvenient including exist, care to

care for the uninsured poor, some advocates contend, because other impediments other because contend, advocates some poor, uninsured the for care

disadvantaged. Not even an insurance card is enough to ensure good access to access good ensure to enough is card insurance an even Not disadvantaged. understanding for sociocultural factors that influence the medical needs of the of needs medical the influence that factors sociocultural for understanding a somewhat — no successor no successor — — Philadelphia General Hospital (PGH) n/a n/a Partly increased funding for existing clinics PGH closed; buildings demolished County Philadelphia vendor payment ded. San Diego — San Diego County General Hospital Central city of Cal.-San Diego Univ. Central city (UCSD) first obtained operating rights to County Hospital for its new medical school; later bought facility outright UCSD Medical Center–Hill- crest safety net ser- Promised vices under county operating agreement (now in 4th iteration) Partly program for clinics, later others Hillsborough county-managed County (Tampa) — Tampa General Hospital Tampa (TGH) Tampa TGH converted to private nonprofit status, through county lease of facility to new governing entity General Hospital Tampa (TGH) same level of Promised safety net care under county lease, weak oversight Yes indigent care through geographic networks integrated delivery — Boston City Hospital (BCH) Central cityBCH merged with neigh- Island just off downtown boring university hospital, Medical Ctr. Boston Univ. Hosp. (BUMCH) (BMC) Statutory safety net mission, community-influenced governance, formal oversight Yes system managed by successor hospital County Boston Milwaukee county-managed — John L. Doyne Hospital (Doyne) County park in suburb just west of city December 1995 July 1996Froedtert “open door”Promised for November 1997two-year transition; no change in governance Boston Medical Center 1960s; 1981 Late 1977 Milwaukee County City of Boston Hillsborough County San Diego County City of Philadelphia Yes integrated system based on gatekeeper clinics 1997 1997 1992 1971 1977 Doyne sold to neighboring academic hospital, Memorial Froedtert Hospital; Doyne Lutheran structures taken out of service b Overview of Public Hospitals and Safety Net Changes Authors’ compilation from numerous sources cited in text. Location zation tization Hospital Program? Program Begun Mission and Governance Locality Hospital Date of Privati- Nature of Priva- Successor New Safety Net Date Safety Net Public Hospital Public Successor’s Table 2 Table Source: a. The city of Philadelphia also has county responsibilities. compiles new government programs only; continuing safety net of uncompensated care from medical providers is not inclu b. Table n/a = not applicable.

Assessing the New

Federalism 4 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

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tems of care; funding for hospitals is either low (San Diego) or absent or Diego) (San low either is hospitals for funding care; of tems

by the successor hospital in Boston. Neither comparison site developed sys- developed site comparison Neither Boston. in hospital successor the by

by a bidding process for four geographic areas in Hillsborough County, and County, Hillsborough in areas geographic four for process bidding a by

formed by numerous gatekeeper clinics selected by enrollees in Milwaukee, in enrollees by selected clinics gatekeeper numerous by formed

improve both efficiency and quality. New, integrated provider networks were networks provider integrated New, quality. and efficiency both improve

achieve this in different ways, but all seek to shift care to clinics, so as to as so clinics, to care shift to seek all but ways, different in this achieve

The three The • Integration of services is a key feature of all the new managed care plans. care managed new the all of feature key a is services of Integration

The case studies’ main findings: main studies’ case The

net mission was handed over to a successor private hospital. private successor a to over handed was mission net

well. Moreover, in four of the five cases, at least some of the public hospital’s safety hospital’s public the of some least at cases, five the of four in Moreover, well.

Over time, the two sites with earlier privatization came to rely heavily on clinics as clinics on heavily rely to came privatization earlier with sites two the time, Over

at the former public hospital to routine and preventive care at community clinics. community at care preventive and routine to hospital public former the at

care plans for the indigent uninsured. These plans shift support from episodic care episodic from support shift plans These uninsured. indigent the for plans care

abandoning the safety net. The three 1990s privatizations created new managed new created privatizations 1990s three The net. safety the abandoning

Privatization did not usually mean closing the hospital and never meant wholly meant never and hospital the closing mean usually not did Privatization

were involved in planning and implementing change. implementing and planning in involved were

more or less success, depending on the era and the extent to which stakeholders which to extent the and era the on depending success, less or more

ferent political motivations. Transitions to private operations were managed with managed were operations private to Transitions motivations. political ferent

lier privatizations in the comparison sites of San Diego and Philadelphia had dif- had Philadelphia and Diego San of sites comparison the in privatizations lier

ations made it hard to survive in increasingly competitive markets. The two ear- two The markets. competitive increasingly in survive to hard it made ations

public hospitals were too costly; hospital administrators worried that public oper- public that worried administrators hospital costly; too were hospitals public

Milwaukee County, Boston, and Hillsborough County. Localities worried that worried Localities County. Hillsborough and Boston, County, Milwaukee

ing their safety nets. Fiscal motivations drove the three 1990s privatizations in privatizations 1990s three the drove motivations Fiscal nets. safety their ing

These five localities all ceased operating public hospitals, effectively privatiz- effectively hospitals, public operating ceased all localities five These

Summary of Findings of Summary

reform, and suggest the problems of maintaining local funding over time. over funding local maintaining of problems the suggest and reform,

problems public hospitals face, illustrate one variety of innovative safety net safety innovative of variety one illustrate face, hospitals public problems

but do represent the types of types the represent do but vices thereafter. They do not mirror the nation, the mirror not do They thereafter. vices

approaches to managing the transition and maintaining access to safety net ser- net safety to access maintaining and transition the managing to approaches

ferent motivations for ceasing to run a public hospital, and illustrate varying illustrate and hospital, public a run to ceasing for motivations ferent

The sites are geographically and politically diverse, represent somewhat dif- somewhat represent diverse, politically and geographically are sites The

observers.

associations, advocates for the poor or uninsured, and academic or other outside other or academic and uninsured, or poor the for advocates associations,

leaders of community health centers (CHCs), the local hospital and primary care primary and hospital local the (CHCs), centers health community of leaders

officers of any closed hospital, officials at other hospitals in the study markets, study the in hospitals other at officials hospital, closed any of officers

Interviewees included county or city health department heads, politicians, heads, department health city or county included Interviewees ject.

sites; the authors had previously visited Milwaukee and Boston for a related pro- related a for Boston and Milwaukee visited previously had authors the sites;

1999, in person for San Diego and Tampa and by telephone for the other three other the for telephone by and Tampa and Diego San for person in 1999,

came from interviews and literature searches. Interviews were conducted in mid- in conducted were Interviews searches. literature and interviews from came Information on the privatizations and their impacts on providers and the poor the and providers on impacts their and privatizations the on Information (Philadelphia), and services are integrated only through informal cooperation among providers.

• The new plans have improved efficiency of services for the indigent uninsured, as intended. Enrollees in the programs have better access through clinics and referral providers than they had at the prior public hospital alone. Quality is said to be as good as before or better, and the localities have all achieved budgetary savings. The successor hospitals are said to have become more efficient in their operations as well.

• Overall access for the uninsured in the three new sites remains as good as before—not ideal, just no worse than previously, in the early years after privatization. This success is attributable not just to the new managed care programs—which fall well short of reaching all the uninsured—but also to continued private hospital charity. Access remains concentrated at traditional core safety net providers, notably including the successor hospitals. Being so reliant on a few providers seems to make the safety nets vulnerable to further fiscal shocks. Clinics and hospitals report increasing difficulty in continuing to supply existing levels of charity care.

• Good performance has not drawn increases in local support, and program successes have prompted little expansion. Local funding is strictly limited under the new plans, which draw on state or federal support as well. Over a longer period in the comparison sites, local funding dwindled.

• State and federal funding has become more important in guaranteeing continued access, given limited local funding and enrollment under the new programs.

Background: Local Populations and Health Care Markets All five sites are parts of populous metropolitan areas (table 3), though only San Diego’s population is growing rapidly (not presented).6 Geographically, the cities of Boston and Philadelphia are compact. Milwaukee County is larger, taking in the city and nearby suburbs with higher incomes and insurance coverage and lower poverty.7 Hillsborough County is much larger than the city of Tampa, including outlying areas with large populations in poverty. San Diego sprawls over 4,000 square miles from Mexico to Orange County, including not just the city of San Diego but also 17 other cities, 18 Indian reservations, and substantial rural poverty. Low income and nonwhite race are predictors of low access to health care. All the sites but Philadelphia have median family income above the national average, but also sizable poverty populations. Philadelphia, Boston, and Milwau- kee County have high percentages of black residents. San Diego and Hillsbor- ough Counties have high proportions of Hispanic residents.

A key factor for any locality’s safety net is the share of the nonelderly population with no insurance coverage. Most of the variation in levels of uninsurance Assessing the New

Federalism 6 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION Table 3 General Background Data on Five Localities

Boston Hilsborough Milwaukee (Suffolk County San Diego Philadelphia National County Countya) (Tampa) County (city/county)b Average

Metropolitan area population estimates (thousands), 1998c,d 1,460 3,289 2,257 2,781 4,947 n/a County population estimates (thousands), 1999c 906 642 940 2,821 1,418 n/a City population estimates (thousands), 1998c 578 555 289 1,221 1,436 n/a County population as a percentage of state total 17.3% 10.4% 6.2% 8.5% 11.8% n/a Land area in square miles, 1990e 241.6 58.7 1,051.0 4,204.5 135.1 n/a Median household income, 1996f $35,127 $32,836 $32,650 $24,965 $26,854 $35,492 Percent of people in poverty, 1996e 16.1% 17.7% 16.5% 15.5% 23.8% 13.7%

Percent white, 1998c 72.7% 64.0% 82.5% 82.0% 52.6% 82.7%

Percent black, 1998c 24.3% 28.2% 15.0% 6.4% 43.6% 12.7% Percent Hispanic (any race), 1998c 6.3% 13.7% 17.5% 25.9% 7.3% 11.0% Number of uninsured in MSA, 1997–99 avg.g 137,000 407,080 394,000 563,000 644,000 n/a Percent uninsured in MSA, 1997–99 avg.g 9.8% 14.6% 20.9% 23.4% 14.4% 18.2%

Notes: Figures represent county-level estimates unless noted otherwise; n/a = not applicable. a. Boston is nearly coterminous with Suffolk County (note populations). b. By state law the city of Philadelphia performs county functions. c. U.S. Census Bureau (2000). d. Metropolitan areas are the metropolitan statistical area (MSA) for San Diego and primary metropolitan statistical areas (PMSAs) for the other sites. e. U.S. Census Bureau (1999b). f. U.S. Census Bureau (1999a). g. Urban Institute estimates derived from the U.S. Census Bureau March Current Population Surveys, 1997–99. Figures exclude the elderly and active military members.

comes from differences in the extent of employer-provided health coverage (Holahan and Kim 2000), but Medicaid and other state programs also play a role (appendix). High levels of insurance allow medical providers to earn high revenues from which to subsidize the low numbers of uninsured. Conversely, high uninsurance not only hurts revenues but also raises expenses for free care. The Milwaukee area has among the nation’s lowest rates of uninsurance, at 9.8 percent about half the national average of 18 percent. The Hillsborough area and San Diego County are high, at 21 and 23 percent. Philadelphia and Boston as metropolitan areas rank low, at 14 and 15 percent; the cities would probably rank higher if survey sample size allowed separate estimation.8 Safety nets are most affected by the uninsured who cannot afford medical care. A rule of thumb based on national averages is that about one-third of the uninsured have incomes below

THE URBAN

INSTITUTE HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION 7 the federal poverty level (FPL), and an additional third have incomes at 100 percent to 200 percent of the FPL (unpublished data from the Urban Institute’s National Survey of America’s Families 1997).

All five areas have ample supplies of hospital beds and physicians, though also pockets of shortage (table 4). Geographically, four of the public hospitals studied were located in or near the center of their cities, reasonably convenient to low-income residents; Milwaukee’s Doyne Hospital, however, was in an inner suburb about five miles from the city center. San Diego has an unusually low ratio of beds (and physicians) to population. It also ranks low in hospital admissions and expense per day as well as Medicare spending per patient. These rankings are usually attributed to its high and long-standing penetration by managed care plans, which has promoted more vigorous price competition than in the other areas. San Diego has also had far more rapid population growth, also reducing provider-population ratios. Even San Diego hospitals expect further downsizing, consolidation, and continuing pressures from buyers to economize.9 In the other areas, respondents expect even stronger pressure, as they anticipate moving much closer toward California’s much lower levels of hospital usage.

Table 4 Health Sector Data for Five Localities

Hilsborough Milwaukee County San Diego National County Boston (Tampa) County Philadelphia Average

Number of hospitals in metropolitan region, 1998a 20 41 33 24 57 n/a

Beds per 1,000, 1995b 3.3 3.4 3.8 2.1 3.8 3.6

Expenses per inpatient daya $1,473 $1,617 $1,125 $1,160 $1,226 n/a

HMO penetration metropolitan area, 1/1/99c 42% 49% 44% 50% 52% 25%

Admissions per 1,000, 1995b 130 135 135 85 151 131

Emergency room visits per 1,000, 1995b 337 451 335 187 353 397

Patient care physicians per 1,000 residentsa 3 8 3 2 4 n/a

Percent of poor residents in medical shortage areasd 68% 49% 33% 49% 20% n/a

Medicare AAPPC ratese $480 $690 $532 $575 $762 n/a Notes: n/a = not applicable; AAPCC = Medicare adjusted average per capita cost (x 95% = HMO rate). a. Health Forum (2000), table 8, Utilization, Personnel and Finances. b. Interstudy Competitive Edge (1997). c. Interstudy Competitive Edge (1999). d. U.S. Health Resources and Services Administration (1999). e. U.S. Department of Health and Human Services (2000b). Assessing the New

Federalism 8 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

Froedtert planned to economize by integrating services into its own newer build- newer own its into services integrating by economize to planned Froedtert

term lease for the underlying land, promising the county a share of net revenues. net of share a county the promising land, underlying the for lease term

quickly agreed to buy the public facilities and services outright and signed a long- a signed and outright services and facilities public the buy to agreed quickly

patients, because Milwaukee had long managed care for Medicaid. Froedtert Medicaid. for care managed long had Milwaukee because patients,

est in the state, making it very hard to compete for patients, including Medicaid including patients, for compete to hard very it making state, the in est

parts of Doyne’s facilities were obsolescent, and per-patient costs were the high- the were costs per-patient and obsolescent, were facilities Doyne’s of parts

port its open door for uninsured indigents along with GA eligibles. Moreover, eligibles. GA with along indigents uninsured for door open its port

capped. Doyne was getting almost all of Milwaukee’s GA-medical funds, to sup- to funds, GA-medical Milwaukee’s of all almost getting was Doyne capped.

that 1995 legislative battle to save state aid, but the level of aid was reduced and reduced was aid of level the but aid, state save to battle legislative 1995 that

county general assistance (GA) programs. Milwaukee and other counties won counties other and Milwaukee programs. (GA) assistance general county

very serious when the governor’s 1995 budget proposed to end state subsidies for subsidies state end to proposed budget 1995 governor’s the when serious very

lems at Doyne led in 1994 to discussions with nonprofit Froedtert, which turned which Froedtert, nonprofit with discussions to 1994 in led Doyne at lems

school staff and some services with Doyne. Continuing deficits and other prob- other and deficits Continuing Doyne. with services some and staff school

Froedtert Memorial Lutheran Hospital opened next door in 1980, sharing medical sharing 1980, in door next opened Hospital Lutheran Memorial Froedtert

ers. The county had long talked of privatizing the public hospital, especially since especially hospital, public the privatizing of talked long had county The ers.

reduced government services and taxes, sentiments fully shared by county lead- county by shared fully sentiments taxes, and services government reduced

ven by state and county fiscal policy and a statewide philosophical shift toward shift philosophical statewide a and policy fiscal county and state by ven

Milwaukee County’s closure of its Doyne hospital at the end of 1995 of end the at hospital Doyne its of closure County’s Milwaukee was dri- was

Milwaukee, Boston, and Tampa-Hillsborough County in the 1990s the in County Tampa-Hillsborough and Boston, Milwaukee,

continuum of patient care. patient of continuum

because it allowed them to reengineer their safety nets to better manage the full the manage better to nets safety their reengineer to them allowed it because

attractive to the localities mainly because it limited their fiscal liability but also but liability fiscal their limited it because mainly localities the to attractive

care rendered earlier in the course of illness. Closure or conversion was thus was conversion or Closure illness. of course the in earlier rendered care

a hospital-based safety net can be medically inefficient compared with outpatient with compared inefficient medically be can net safety hospital-based a

political demands for tax relief were strong. Appreciation was also growing that growing also was Appreciation strong. were relief tax for demands political

but trends were seen as ominous, and ominous, as seen were trends but funding were not exceptionally large, exceptionally not were funding

The public hospital deficits requiring local requiring deficits hospital public The compared with private competitors. private with compared

bility of public operations, given their high costs and low managerial flexibility managerial low and costs high their given operations, public of bility

lic hospital administrators shared concerns about the continuing competitive via- competitive continuing the about concerns shared administrators hospital lic

In the 1990s, local policymakers and pub- and policymakers local 1990s, the In lier shifts were more heavily political. heavily more were shifts lier

10 10

political preferences, and the strategic plans of the affected hospitals. The two ear- two The hospitals. affected the of plans strategic the and preferences, political

The three 1990s changes were all driven by a combination of market forces, market of combination a by driven all were changes 1990s three The

and Methods and

Closure or Conversion of Public Hospitals: Motivations Hospitals: Public of Conversion or Closure

for-profit hospital presence. hospital for-profit

insured patients everywhere, only in Hillsborough County is there a substantial a there is County Hillsborough in only everywhere, patients insured

Although safety net hospitals face substantial competition for Medicaid and other and Medicaid for competition substantial face hospitals net safety Although

1997 and 1998 for the other localities (not presented)—after the privatizations. the presented)—after (not localities other the for 1998 and 1997

Mandatory managed care for Medicaid began in 1984 in Milwaukee, but not until not but Milwaukee, in 1984 in began Medicaid for care managed Mandatory

perspective—can move patients from the traditional safety net to other facilities. other to net safety traditional the from patients move perspective—can

caid managed care. This reduces payment rates and—worse, from the hospitals’ the from and—worse, rates payment reduces This care. managed caid Of even more direct importance to safety net hospitals is the growth of Medi- of growth the is hospitals net safety to importance direct more even Of ing, with downsized staff. Doyne’s old structures were taken out of patient service pending eventual demolition.

Next came Boston. Market pressures and city fiscal stress led Boston City Hos- pital (BCH) to merge in mid-1996 with neighboring Boston University Medical Center Hospital (BUMCH), with which it already shared some staff and services. In the mid-1990s, despite some years of downsizing, BCH remained even more costly per day than the other expensive teaching hospitals in Boston. BCH generated deficits for the city, already under pressure from cuts in state revenue sharing, and the city was nearing the voter-imposed limit on its ability to raise local property taxes. After the state deregulated hospital prices starting in 1992, private competition led to a cascading series of hospital alliances and mergers, and unaffiliated hospitals were all looking for partners. Moreover, as of mid-decade the state Medicaid managed care program planned to foster more competition among hospitals, and heavily Medicaid-dependent BCH had much to lose. For its part, BUMCH had great competition at the high end of the market, and after merger it could benefit from higher rates of indigent-care payment previously available only to BCH. All stakeholders except some unions at BCH saw the need for change. The state pushed for rapid action, too, and BCH federal and state lobbying helped shape a new Medicaid demonstration project that provided new funding for the merged hospital to serve the otherwise uninsured indigent. Both hospitals expected to be able to improve efficiency through integration and private management after they combined into the new entity of Boston Medical Center (BMC).

Tampa General Hospital (TGH) went private in October 1997, at the initiative of hospital administration. Unlike Milwaukee and Boston, local government did not seek privatization because it had already insulated itself from hospital governance and hospital deficits. Hillsborough County ceased to provide any direct funds for hospital operations after the county started an indigent health plan in 1992.14 TGH endured some years of troubled finances and management, then in 1996 hired a new chief executive officer (CEO) from New York, who immediately froze hiring and took other steps to economize and improve TGH management. In early 1997, he unveiled a new vision—privatization with more streamlined, private governance and eventually a move from a flood-prone downtown island into new facilities at the far-north university campus. The hospital had little to gain from remaining public because public support flowed equally to TGH and private facilities under the county health plan. The hospital privatization involved no sale or merger, and no new partner—simply a shifting of TGH’s operational responsibility from the county hospital district to a private, nonprofit entity that leases the facility. Rather than achieving economies of merger or integration, privatization was to improve management of spending and marketing for revenues, joint ventures, and even acquisition of other facilities.

San Diego and Philadelphia in the 1960s and 1970s San Diego County General Hospital began to privatize in the late 1960s when the University of California-San Diego (UCSD) negotiated to run the county hospital for its new medical school, with state legislative support. Neither hospital Assessing the New

Federalism 10 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

the two years, just as Doyne had. But Froedtert was also directed to begin build- begin to directed also was Froedtert But had. Doyne as just years, two the

got almost all of the state-county GA-medical funds, some $30 million a year for year a million $30 some funds, GA-medical state-county the of all almost got

role as provider of last resort for the uninsured. During this transition, Froedtert transition, this During uninsured. the for resort last of provider as role

new safety net. For two years, Froedtert agreed to essentially continue Doyne’s continue essentially to agreed Froedtert years, two For net. safety new

only one in the area, and the county also planned for a phased-in transition to a to transition phased-in a for planned also county the and area, the in one only

Doyne’s services, notably including the high-profile level 1 trauma center, the center, trauma 1 level high-profile the including notably services, Doyne’s

with the county. Even after the sale, Froedtert agreed to maintain almost all of all almost maintain to agreed Froedtert sale, the after Even county. the with

ees stayed on at Froedtert, and almost all others retired or got other jobs, mainly jobs, other got or retired others all almost and Froedtert, at on stayed ees

placement efforts were made for Doyne employees. About a third of the employ- the of third a About employees. Doyne for made were efforts placement

advisory task forces were convened to represent core stakeholders, and great out- great and stakeholders, core represent to convened were forces task advisory

“Philadelphia Story” of neglect, noted one interviewee. Accordingly, multiple Accordingly, interviewee. one noted neglect, of Story” “Philadelphia

first big city hospital to close since Philadelphia, they were determined to avoid a avoid to determined were they Philadelphia, since close to hospital city big first

got high-level attention from county policymakers. Aware that Doyne was the was Doyne that Aware policymakers. county from attention high-level got

Implementation of Milwaukee’s 1995 sale of its Doyne hospital to Froedtert to hospital Doyne its of sale 1995 Milwaukee’s of Implementation

The 1990s: Milwaukee, Boston, Tampa-Hillsborough County Tampa-Hillsborough Boston, Milwaukee, 1990s: The

financing and provision of services. of provision and financing

sured poor—if any—should replace the public hospital, which had combined the combined had which hospital, public the replace any—should poor—if sured

The second was what new system of funding and delivering services to the unin- the to services delivering and funding of system new what was second The

how to manage the transition politically and administratively (Marsteller 1999). (Marsteller administratively and politically transition the manage to how

by closing or converting their public hospitals to private operations. The first was first The operations. private to hospitals public their converting or closing by

All of the jurisdictions faced two main issues in privatizing their safety nets safety their privatizing in issues main two faced jurisdictions the of All

Transition to New Systems New to Transition

down PGH. down

census. In 1977, facing fiscal problems, the city announced final closure and shut and closure final announced city the problems, fiscal facing 1977, In census.

ture, under weak leadership, without funds to modernize—and with a declining a with modernize—and to funds without leadership, weak under ture,

no need for a public hospital. PGH was left to languish with obsolete infrastruc- obsolete with languish to left was PGH hospital. public a for need no

include the hospital’s clientele, and early in his first term he said that the city had city the that said he term first his in early and clientele, hospital’s the include

1971 to be tough on crime and on city spending. His political constituency did not did constituency political His spending. city on and crime on tough be to 1971

came from a newly elected conservative mayor, a former police chief elected in elected chief police former a mayor, conservative elected newly a from came

In sharp contrast, the initiative to close Philadelphia General Hospital (PGH) Hospital General Philadelphia close to initiative the contrast, sharp In

hospital built in La Jolla near the main campus. main the near Jolla La in built hospital

undocumented immigrants, and underutilization at an expensive new UCSD new expensive an at underutilization and immigrants, undocumented

market, political disputes over state and local funding for Hillcrest’s care to care Hillcrest’s for funding local and state over disputes political market,

viability arose only in the 1990s, because of intense competition in the hospital the in competition intense of because 1990s, the in only arose viability

area’s major safety net hospital, as promised at time of sale. Concerns about its about Concerns sale. of time at promised as hospital, net safety major area’s

Hillcrest—has been significantly modernized with state funds and remains the remains and funds state with modernized significantly been Hillcrest—has

academically oriented governance. The old county facility—now UCSD- facility—now county old The governance. oriented academically

although UCSD is a state enterprise, because the hospital has separate, nonlocal, separate, has hospital the because enterprise, state a is UCSD although

In 1981, the hospital was sold outright. UCSD control is de facto privatization, facto de is control UCSD outright. sold was hospital the 1981, In

from rapidly expanding Medicare and Medicaid (called Medi-Cal in California). in Medi-Cal (called Medicaid and Medicare expanding rapidly from nor county finances were a concern; hospital revenue was then readily earned readily then was revenue hospital concern; a were finances county nor ing more relationships with community clinics for the poor, which also got new funding and which were to be the backbone of the county’s new safety net. After the transition period, Froedtert was left a fully private hospital, with no changes in its governance. The county used the transition period to entirely redesign its General Assistance Medical Program (GAMP), which it rolled out just over two years later, as described below.

Boston also saw considerable long-range planning for public hospital reform through an open political process. Two successive blue-ribbon commissions rec- ommended privatization, which was enabled by state statute and effectuated by negotiation between the city and the university hospital, culminating in the mid- 1996 merger into Boston Medical Center (BMC). BMC is private, but with city and community control of its board. As in Milwaukee, an important element of safety net change was new financing arrangements, of two types. Both changes were made by the state, not the city: First, the year after merger, Massachusetts reformed its unusually generous, long-standing uncompensated care pool. Since the mid-1980s, the pool had supported charity in all hospitals by making it reim- bursable from pooled hospital assessments, but reform was necessary because there was a growing shortfall of funding, as hospital assessments were capped, but costs of care were growing (Bovbjerg et al. 2000). Second, the year before the merger, federal authorities approved a large Section 1115 Medicaid research and demonstration waiver containing special support for BMC, which was imple- mented a year after privatization. Under the waiver, BMC runs an integrated delivery system to serve the otherwise uninsured, described more fully below.

In Tampa, the final decision to privatize TGH was made quickly and with little public planning. The formal proposal from the hospital administration was followed by only eight weeks of discussion.16 Comparatively little effort was made to achieve community buy-in for the administration’s plans; there was limited public opposition. From the perspective of hospital workers and prospective patients, much less was changing than in the other sites. There was no sale, only a lease. No money changed hands, public funding was not cut, and the hospital’s public mission was ostensibly unchanged because the lease called for the hospital to maintain existing levels of charity. Staff and their pensions had already been privatized, and there were no unions. There was no closure or merger, nor even change in administrative personnel—simply a change in legal control from a public authority board to a private, nonprofit board. The hospital authority, which formerly acted as the hospital’s board, now oversees adherence to terms of the lease agreement. In practice, the authority retains only modest oversight and has no fiscal control over the hospital. Both TGH and the county have sought to revise the agreement in some ways.17

Two prior key changes in Tampa’s safety net facilitated the subsequent TGH privatization. First, St. Joseph’s Hospital, on the other side of downtown from TGH, surpassed TGH to become the largest Medicaid provider and an increasingly large provider of uncompensated care. TGH’s loss of Medicaid childbirths was most notable; its share dropped from about 80 percent to 20 percent after the state raised payment rates, making patients more attractive. Second, in 1992 the Assessing the New

Federalism 12 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

ing comes from state and federal sources as well. as sources federal and state from comes ing

In the absence of a local public hospital, almost all public fund- public all almost hospital, public local a of absence the In and federal law. federal and

ers did not. Private providers’ charitable responsibilities are set mainly by state by mainly set are responsibilities charitable providers’ Private not. did ers

hospitals and clinics. Some localities addressed care for unenrolled indigents; oth- indigents; unenrolled for care addressed localities Some clinics. and hospitals

notably at the successor facility to the former public hospital, but also at other at also but hospital, public former the to facility successor the at notably

local funding, the rest of the privatized safety net consists of provider charity, provider of consists net safety privatized the of rest the funding, local

San Diego likewise came to rely heavily on community clinics (table 5). Beyond 5). (table clinics community on heavily rely to came likewise Diego San

erably in implementation (table 5). In less coordinated fashion, Philadelphia and Philadelphia fashion, coordinated less In 5). (table implementation in erably

control over spending. The three plans shared general goals but differed consid- differed but goals general shared plans three The spending. over control

by shifting care from hospitals to community clinics, while guaranteeing localities guaranteeing while clinics, community to hospitals from care shifting by

planned for new managed health plans that would improve access and efficiency and access improve would that plans health managed new for planned

All three 1990s jurisdictions consciously jurisdictions 1990s three All care for the uninsured indigent. uninsured the for care

zation? One key determinant was what new local programs were created to fund to created were programs local new what was determinant key One zation?

What were the nature and extent of these localities’ safety nets after privati- after nets safety localities’ these of extent and nature the were What

Safety Nets after Privatization—Innovative Designs Privatization—Innovative after Nets Safety

would get hospital care. hospital get would

tematically address concerns of public health advocates about where poor people poor where about advocates health public of concerns address tematically

other hospitals. The old PGH buildings were demolished. The city did not sys- not did city The demolished. were buildings PGH old The hospitals. other

patients were transferred. Remaining teaching programs were transferred to transferred were programs teaching Remaining transferred. were patients

tuberculosis hospital into a public nursing home to which the remaining PGH remaining the which to home nursing public a into hospital tuberculosis

chronic illnesses made outplacement difficult. The city converted a closed public closed a converted city The difficult. outplacement made illnesses chronic

Many of the dwindling number of inpatients did not need hospital care, but their but care, hospital need not did inpatients of number dwindling the of Many

Boston to educate or consult stakeholders, but the ultimate transition was orderly. was transition ultimate the but stakeholders, consult or educate to Boston

patients, then shut the doors. There was nothing like the effort in Milwaukee or Milwaukee in effort the like nothing was There doors. the shut then patients,

city hospital, watched six years of continued decline, with loss of physicians and physicians of loss with decline, continued of years six watched hospital, city

In Philadelphia, a new mayor decided early in his administration to close the close to administration his in early decided mayor new a Philadelphia, In

clinics to deliver care to indigents and the working poor. working the and indigents to care deliver to clinics

of that service. The county also began in 1971 to contract directly with community with directly contract to 1971 in began also county The service. that of

ing indigent care, and the county agreed to make annual payments in recognition in payments annual make to agreed county the and care, indigent ing

without elaborate political process. The university promised to continue provid- continue to promised university The process. political elaborate without

a decade of university management. It built on the then existing arrangement, existing then the on built It management. university of decade a

Diego, the university’s takeover of the county hospital occurred after more than more after occurred hospital county the of takeover university’s the Diego,

For the two early changes, less planning seems to have occurred. In San In occurred. have to seems planning less changes, early two the For

Early Changes in San Diego and Philadelphia and Diego San in Changes Early

promise of funding. of promise

tives, simultaneously giving the hospital new flexibility in operations—but no operations—but in flexibility new hospital the giving simultaneously tives,

tization in 1997 formalized this shift in county responsibility and hospital incen- hospital and responsibility county in shift this formalized 1997 in tization

This was the major practical “privatization.” The legal priva- legal The “privatization.” practical major the was This patient by patient. by patient

County Health Care Plan (HCHCP), making TGH compete for its revenues its for compete TGH making (HCHCP), Plan Care Health County

sidy for TGH, instead funding a county-run managed care plan, the Hillsborough the plan, care managed county-run a funding instead TGH, for sidy county stopped funding care for uninsured indigent residents through direct sub- direct through residents indigent uninsured for care funding stopped county City Clinics Philadelphia Ambulatory care from city clinics, free for qualifying patients N/a—no successor to closed public hospital Eight city clinics throughout city Clinics see all who present in need of care (charge fees on sliding scale by ability to pay) City, mainly using state aid City, and federal grants Primary and some public Primary health services; some clin- other ics specialize in HIV, special needs (CMS) Programs Available for Uninsured Available Programs San Diego County County Medical Services Vendor payment program Vendor for eligible episodic services from participating providers University of California-San Diego Medical Center-Hill- crest (UCSD) is the largest hospital provider Community clinics countywide (23 locations), 350+ specialists, 12 hospitals Ages 18–64 only; proof of legal immigration status required, active need for care; income cap of $600/month for individual (about 88% of federal poverty level) State aid, small county contribution Acute medical care for serious conditions, on an episodic basis Care Plan (HCHCP) Hillsborough County Managed, comprehensive care for indigent uninsured enrollees from geographically based exclusive networks of providers Tampa General Hospital Tampa (TGH) participates in all four plan networks, is main hospital for two Four networks, each exclu- Four sive in its area—in all, 12 clinic sites, 600+ specialists, 5 hospitals, 16 pharmacies Income limit is federal poverty level ($696/month for individual in 2000); periodic reenrollment required County, mainly through County, state-authorized add-on to sales tax Full Medicaid array of cov- Full ered services, except for transplantation Hillsborough County Health Boston ical Center) HealthNet (of Boston Med- Managed, comprehensive care for indigent uninsured enrollees from successor to public hospital, its affiliated clinics and specialists Boston Medical Center (BMC) operates plan, provides or refers for services BMC, 14 affiliated community health clinics, 17 faculty practice groups, 1,000 MDs in all Enrollees may have income up to 400 percent of federal poverty level; theoretically available to all state residents, but clinics exist only in Boston, some suburbs, and one nearby city State, with federal Medicaid match under demonstration project (5 years, fixed dollars) Full Medicaid array of cov- Full ered services New, Integrated Safety Net Programs New, Program (GAMP) Program Milwaukee County Managed, comprehensive care for indigent uninsured enrollees from gatekeeper clinics and their referral networks Froedtert hospital remains a Froedtert major provider of referral services Clinics (27 sites), specialty MDs or groups (240), hospitals (all 13 in county), and pharmacies (25 sites) Enrollees must have active need for care, recertification every 6 months; income limit above federal poverty level (for individual, $800/month) County, with state match up County, to cap Benefits based on Medicaid, but less comprehensive—no mental health, very limited dental General Assistance Medical Design of New Safety Net Programs Basic nature of plan Relation to public hospital’s successor Participating providers Eligibility* Funding source Funding Covered services Assessing 5 Table the New

Federalism 14 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE THE URBAN THE * All theprograms require lowincomeby somestandard, localresidence, noother available insurance,andlimitedassets. Notes: Source: ment levels Provider pay- review Utilization services? Integration of Administration tures tainment fea- Other costcon- n/a =notapplicable Authors’ compilationfrom numerous sources cited intext. some diseasemanagement review foremergencycare, County conductsutilization annual cap payments haveanabsolute Providers sharerisk,astheir referrals determine need,arrange Yes, gatekeeperclinics claims plan; usecontractortopay ment levels,allrulesof County: enrollment,pay- caid rates Set bycounty, belowMedi- General AssistanceMedical Milwaukee County Program (GAMP) New, IntegratedSafetyNetPrograms need andtriage Provider determinations of capitated payment demonstration istomove level ofcare;intentunder refer tolowestappropriate motivated toenrolleligibles, must haveopendoor, sois funds arefixed,butBMC BMC sharesrisk,aswaiver of allneededcare Yes, planisincharge BMC’s payments for5years Medicaid waiversetBMC Medicaid administration; insurance plans,under coordinates withotherstate State: BMCenrollment pensated carepool ments fromstateuncom- waiver allotmentandpay- funds setbyMedicaid Not yetfundedperenrollee; HealthNet (ofBostonMed- ical Center) Boston nurses’ advice runs 24-hourhotlinewith review formanyservices, County conductsutilization capped risk, astotalallocationsare Provider networksshare coordinate allneededcare Yes, eachnetworkisto other socialservices administered jointlywith istration contractedout; of claims;onlyclaimsadmin- rates, allplanrules,payment County: enrollment,payment judgmentally adjusted percentage ofMedicaidbut Set bycounty, typicallya Hillsborough CountyHealth Hillsborough County Care Plan(HCHCP) need andtriage Provider determinations of vices undercap necessary tofitbilledser- are reducedasmuch annual cap;per-service fees clinic) hasanabsolute pools (hospital,specialist, Each ofthreepayment and referrals erate informallyintriage No, thoughproviderscoop- all othertermsforplan ble servicesandrecipients, County: setsrulesforeligi- many servicesarebilled county, feesdependonhow Funding poollimitsset by County MedicalServices San DiegoCounty Programs Available forUninsured (CMS) need andtriage Provider determinations of triage andothermeans meet budgetsthrough Clinics getfixedaid,must basis care oncase-by-case refer forfreehospital-based No, thoughclinicstryto tered byprivatecontractors City: someclinicsadminis- not perserviceorenrollee N/a—support isbudgetary, Philadelphia City Clinics a Milwaukee’s GAMP: Indigent Care Managed by Competing Clinics In revamping GAMP, Milwaukee County’s goals were to provide good services while controlling expenditures. Its means were to “buy” rather than “make” indigent care. The rationale was that the public sector can provide better care through purchase than through direct provision of services. Private providers are thought able to produce higher-quality, more efficient services for the uninsured indigent—just as they do for the well insured. Private providers are also dispersed throughout the community rather than centralized at one public hospital. GAMP operates on an insurance-like model, but with coverage designed and run by the county itself, not by a risk-bearing independent insurer.

GAMP relies on clinic care wherever possible and “mainstreams” inpatient care to the same private referral hospitals the clinics use for their insured patients (table 5). Eligibility, payment levels, and utilization are all limited. GAMP is targeted only to the very poor in active need of care, much like most people who had sought hospital care under the old system; enrollees are certified for only six months of eligibility at a time. Enrollees can choose their clinic, a feature meant to promote quality competition and provide care at convenient locations. County representatives are outstationed in a number of clinics to make eligibility determinations and address other problems as they arise. An intranet allows providers rapid access to eligibility and claims information. Enrollees choose which clinic will serve as their primary care provider and gatekeeper to specialty and hospital services. Provider participation has risen greatly over time. Spending is con- trolled because clinics share risk and county workers oversee utilization. Referral specialists and hospitals are paid separately.

For the uninsured not eligible for GAMP, there is no longer any county-supported safety net, only provider charity. After the two-year transition to GAMP, Froedtert was a private nonprofit hospital like any other. Its takeover of Doyne made no changes to its mission or its governance. Instead, the county explicitly sought to spread around the burden of serving all comers. A condition of participation in GAMP is that the hospital also promises to serve charity patients. After four years, all hospitals were participating, but it is unclear to what extent the county’s new rule expands upon their preexisting federal obligation to provide emergency care.

Boston’s Waiver Model: Indigent Care Managed by Successor Hospital’s Network In Boston, as in Milwaukee, new arrangements show promise of more efficient service for the uninsured. Again, the central mechanism of reform is to replace episodic free care at the hospital with managed care through an integrated provider network, Boston HealthNet, composed of the hospital and its affiliated clinics and specialists, formed in 1995. Eligibility is very generous, the same as for the uncompensated care pool, with income limits far above the federal poverty level.22 Benefits are almost as broad as Medicaid’s, though available only from the network’s providers. Enrollment is coordinated with the state’s expanded Medi- caid program, called MassHealth. When uninsured people seek care, BMC Assessing the New

Federalism 16 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

comprehensive health care from an integrated provider system in each of four of each in system provider integrated an from care health comprehensive

HCHCP contracts for quite for contracts HCHCP poverty level; periodic reenrollment is required. is reenrollment periodic level; poverty

The main eligibility standards are county residence and income below the federal the below income and residence county are standards eligibility main The

from the business community and is run through contracts with private entities. private with contracts through run is and community business the from

siders HCHCP a public-private partnership because it was developed with input with developed was it because partnership public-private a HCHCP siders

indigents in 1992, five years before privatization of TGH (table 5). The county con- county The 5). (table TGH of privatization before years five 1992, in indigents

Hillsborough County Health Care Plan began managing care for uninsured for care managing began Plan Care Health County Hillsborough

Integrated Networks Integrated

Hillsborough County’s HCHCP: Management by Geographically Based Geographically by Management HCHCP: County’s Hillsborough

governance and some oversight by the local public health commission. health public local the by oversight some and governance

safety net mission of its predecessor city hospital, with a degree of community of degree a with hospital, city predecessor its of mission net safety

state-federal support, however, enabled the city and state to give BMC the full the BMC give to state and city the enabled however, support, state-federal

Having the Having design of BMC’s HealthNet was related to the BMC privatization. BMC the to related was HealthNet BMC’s of design

rather than the city sets policy on the uninsured, and neither the timing nor the nor timing the neither and uninsured, the on policy sets city the than rather

from the pool than before and also have to contribute less revenue. The state The revenue. less contribute to have also and before than pool the from

plans. Hospitals other than BMC and Cambridge receive more reimbursement more receive Cambridge and BMC than other Hospitals plans.

shifted much of hospitals’ assessment burden to HMOs and other private health private other and HMOs to burden assessment hospitals’ of much shifted

sated care pool. State reforms in 1997 somewhat increased pool funding and funding pool increased somewhat 1997 in reforms State pool. care sated

pital or community clinic. Such care is well supported by the state uncompen- state the by supported well is care Such clinic. community or pital

gents, whether or not enrolled in HealthNet, can get episodic free care at any hos- any at care free episodic get can HealthNet, in enrolled not or whether gents,

An unusual feature of safety net care in Massachusetts is that uninsured indi- uninsured that is Massachusetts in care net safety of feature unusual An

as a managed care plan. care managed a as

competition drive this model, which is at least as much a hospital-funding plan hospital-funding a much as least at is which model, this drive competition

trols of Milwaukee (above) or Tampa (below). Nor do patient choice or provider or choice patient do Nor (below). Tampa or (above) Milwaukee of trols

it to BMC to design and run its plan; there is nothing like the direct public con- public direct the like nothing is there plan; its run and design to BMC to it

been slightly reduced, also motivating economies. The city and the state have left have state the and city The economies. motivating also reduced, slightly been

hospital treatment stretches the funds. Overall, funding for free care at BMC has BMC at care free for funding Overall, funds. the stretches treatment hospital

serve all comers at the hospital is open-ended, and substituting ambulatory for ambulatory substituting and open-ended, is hospital the at comers all serve

mize through HealthNet because the waiver funding is fixed, yet its obligation to obligation its yet fixed, is funding waiver the because HealthNet through mize

ciaries above 200 percent of the FPL also contribute. BMC is motivated to econo- to motivated is BMC contribute. also FPL the of percent 200 above ciaries

the pool pays the balance of approved costs above the waiver allotment. Benefi- allotment. waiver the above costs approved of balance the pays pool the

clinics also bill the state uncompensated care pool for each service provided, and provided, service each for pool care uncompensated state the bill also clinics

which to pay for plan services wherever needed. The hospital and community and hospital The needed. wherever services plan for pay to which

BMC receives a fixed allotment under the state’s five-year Medicaid waiver, from waiver, Medicaid five-year state’s the under allotment fixed a receives BMC

grated managed care, although the goal is to move to full capitation. For now, For capitation. full to move to is goal the although care, managed grated

Funding is complex; funds do not yet follow the patient as under fully inte- fully under as patient the follow yet not do funds complex; is Funding

also contracts with other health plans.] health other with contracts also

Medicaid health maintenance organizations (HMOs) for enrollees; and HealthNet and enrollees; for (HMOs) organizations maintenance health Medicaid

MassHealth prepaid plan, the BMC HealthNet Plan, which competes with other with competes which Plan, HealthNet BMC the plan, prepaid MassHealth

distinct from the network’s other roles. HealthNet also serves BMC’s own BMC’s serves also HealthNet roles. other network’s the from distinct

HealthNet’s management of free care for the uninsured, which needs to be kept be to needs which uninsured, the for care free of management HealthNet’s

[This study focuses on focuses study [This sured plan and assigned to a primary care provider. care primary a to assigned and plan sured

and if they fail to qualify for insurance, they are enrolled in the HealthNet unin- HealthNet the in enrolled are they insurance, for qualify to fail they if and screens them for eligibility for MassHealth or other insurance. While they wait they While insurance. other or MassHealth for eligibility for them screens geographic areas of roughly equal population. Five of the county’s 14 general hospitals participate. Tampa General is in all four networks and is the main hospital for two; its countywide share of spending has fallen to about one-half. Of the other four hospitals, two are for-profit, two nonprofit; one is in Tampa, three in outlying communities. Also participating are 12 clinics (5 at hospitals) and about 600 private physicians. Clinics have expanded capacity, and provider participation has risen substantially over time.

The county uses a third-party administrator to process claims, but pays providers itself. Payments are made on a fee-for-service basis, as negotiated percentages of Medicare rates—now typically about 80 percent—but each network shares some risk. TGH has always received a higher rate than other hospitals, but the county has sought to reduce the differential over time. Network clinics act as primary care gatekeepers, making referrals to specialists and participating hospitals. County case managers review utilization and, unlike the other two localities, HCHCP is administered in conjunction with other county services for the indigent, including social services and mental health.

For the near poor or others not enrolled in HCHCP, the main safety net remains the former public hospital, TGH, along with the preexisting community clinics. At the time of privatization, hospital administration promised to maintain the hospital’s safety net mission, but public oversight is weak. TGH does report to the county hospital authority, but the latter has little authority. Public statements by the CEO after privatization sparked controversy because they seemed to give higher priority to hospital teaching and research than to safety net care.26 The CEO also planned to move the hospital to a new facility next to the university, at the north end of Tampa, some distance from central-city poverty neigh- borhoods. Hospitals other than TGH also provide free care; HCHCP requires participating providers to serve charity and Medicaid patients in addition to serving the plan’s enrollees.

San Diego and Philadelphia: Nonintegrated Clinics and Hospitals San Diego County maintained safety net services after privatization through an operating agreement with the university. UCSD promised to continue serving the medically indigent at the same location, and the county promised to make annual payments—but did not promise to maintain its level of support. Shortly afterward, the county began to contract with community clinics as well. State developments seem to have overshadowed local policymaking, including the state’s takeover of the traditional county responsibility for medically indigent adults (MIAs), poor people not eligible for MediCal. The state returned the MIA program to counties in 1983, and the county now addresses its responsibilities by buying services through a County Medical Services (CMS) program.27 Both the county and providers consider this a public-private partnership. CMS has very tight eligibility requirements (table 5), covers episodic acute care (except for some chronic conditions), and pays low rates to participating providers—lowest for hospitals, better for specialists, best for clinics—up to a county-set annual cap for each type of care. Clinics are well dispersed throughout the county, and about half Assessing the New

Federalism 18 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

The rest of this section provides more detail. more provides section this of rest The

observations on safety net operations in terms of funding, efficiency, and access. and efficiency, funding, of terms in operations net safety on observations

Table 6 summarizes 6 Table zation affects access to care for the poor and uninsured. and poor the for care to access affects zation

systems meet needs, compared with the public hospital. The third is how privati- how is third The hospital. public the with compared needs, meet systems

funding after privatization. The second is how efficiently the new clinic-based new the efficiently how is second The privatization. after funding

study. The first is the extent to which localities continue to provide safety net safety provide to continue localities which to extent the is first The study.

Three aspects of safety net performance are important for purposes of this of purposes for important are performance net safety of aspects Three

New Safety Nets in Operation in Nets Safety New

to maintain preexisting levels of charity. of levels preexisting maintain to

in late 1998 by acquiring a failed nonprofit chain, public pressure led it to pledge to it led pressure public chain, nonprofit failed a acquiring by 1998 late in

When national for-profit chain Tenet Healthcare entered the region the entered Healthcare Tenet chain for-profit national When Philadelphia.

area’s largest, but also Temple University Hospital, located in high-poverty North high-poverty in located Hospital, University Temple also but largest, area’s

take up the slack, especially the nearby University of Pennsylvania Hospital, the Hospital, Pennsylvania of University nearby the especially slack, the up take

school hospitals. When closing PGH, the city mainly relied on private facilities to facilities private on relied mainly city the PGH, closing When hospitals. school

profit hospitals have a long tradition of charity care, particularly the medical the particularly care, charity of tradition long a have hospitals profit

community health clinics, plus charity from private hospitals. Philadelphia’s non- Philadelphia’s hospitals. private from charity plus clinics, health community

Uninsured care outside the city clinics comes from private, federally qualified federally private, from comes clinics city the outside care Uninsured

grant received for county public health services, and third-party payments. third-party and services, health public county for received grant

Clinic funding comes from city discretionary funds, including a share of the state the of share a including funds, discretionary city from comes funding Clinic

simply show up at the emergency room with no outpatient support or workup. or support outpatient no with room emergency the at up show simply

motivation to contract with the clinics for backup is to avoid having clinic clients clinic having avoid to is backup for clinics the with contract to motivation

nostic services, but most hospital care must be sought as charity. Hospitals’ main Hospitals’ charity. as sought be must care hospital most but services, nostic

clinics refer patients to hospitals; the city pays for some uninsured specialty diag- specialty uninsured some for pays city the hospitals; to patients refer clinics

family planning and some public health services. For more specialized care the care specialized more For services. health public some and planning family

clinics provide primary care, including prenatal and dental services, as well as well as services, dental and prenatal including care, primary provide clinics

ing to bring payments up to the level of clinics’ federally defined costs. Today, the Today, costs. defined federally clinics’ of level the to up payments bring to ing

eligible for some federal grant support as well as “wraparound” Medicaid fund- Medicaid “wraparound” as well as support grant federal some for eligible

faction. But the clinics remained public and in 1993 became federally qualified and qualified federally became 1993 in and public remained clinics the But faction.

to privatize the clinics in the late 1980s, a period of low staffing and high dissatis- high and staffing low of period a 1980s, late the in clinics the privatize to

obligations to provide charity care (which have since expired). There was a push a was There expired). since have (which care charity provide to obligations

health clinics into primary care clinics and gave them PGH’s federal Hill-Burton federal PGH’s them gave and clinics care primary into clinics health

during the 1980s. In closing PGH, the city converted some of its existing public existing its of some converted city the PGH, closing In 1980s. the during

ments to private hospitals for inpatient care, but dropped these in a budget crunch budget a in these dropped but care, inpatient for hospitals private to ments

ance-like coverage. For some years after PGH closed, the city also made some pay- some made also city the closed, PGH after years some For coverage. ance-like

city’s main safety net consists of eight city clinics (table 5). There is no new, insur- new, no is There 5). (table clinics city eight of consists net safety main city’s

In Philadelphia, over 20 years after the closure of Philadelphia General, the General, Philadelphia of closure the after years 20 over Philadelphia, In

status as a key to collaborative efforts. collaborative to key a as status

report informal cooperation among clinics and hospitals, citing their nonprofit their citing hospitals, and clinics among cooperation informal report

in the 1980s. There is no formal integration of services by the county; interviewees county; the by services of integration formal no is There 1980s. the in

expanded their capacities in order to compete for MediCal managed care patients care managed MediCal for compete to order in capacities their expanded

centrated its limited support on the community health clinics, which meanwhile which clinics, health community the on support limited its centrated of the county’s hospitals participate. Over time, the county has increasingly con- increasingly has county the time, Over participate. hospitals county’s the of n/a no successor hospital Modest city funding for clinics, mainly from state aid and other grants City clinics given expanded primary care responsibilities; no hospital coverage Clinics have steady fund- but rising demand ing, Some claims that clinic use cuts hospital use n/a comparisons with 1970s not possible Broadly spread burdens of hospital uncompensated care; comparisons with 1970s not possible Small number of clinics for sizable uninsured population; no inpatient coverage Programs Available for Uninsured Available Programs UCSD recently in surplus, part- still seeking long-term may move ner, Local funding for CMS dwin- Local dled over time, now almost all state; local funds for UCSD almost all withdrawn; significant state subsidies for UCSD Clinic costs per visit seen as very low; county pays even less n/a comparisons with 1960s not possible two other hospital UCSD, systems provide almost all charity care; comparisons with 1960s not possible CMS has stringent eligibility limits; coverage is episodic, payment levels very low County planning major expansion (if it can leverage state-federal support) County vendor payment program County Medical Ser- vices (CMS) pays for urgent episodic services at participating providers; uninte- grated Almost all county funding county early goes to HCHCP; savings were large; huge program surplus accumulated, was used to reduce tax rate Declining emergency room use; decrease in per capita costs TGH charity rose after privatization Little change in extent of charity at other hospitals, which remains very concentrated at a few facilities HCHCP funding secure, not increasing Broad benefits, full range of providers available; in practice, eligibility limited; most enrolled for under 12 months TGH deficits threaten foreclo- sure by bond insurers; CEO has left, deprivatization possible Hillsborough County Health Care Plan (HCHCP) contracts with integrated provider systems in each of four areas; county manages utilization, prices BMC s own integrated system of care covers otherwise uninsured with Medicaid demonstration waiver funds; state also increased funding for hospital indigent care statewide Declining demand for hospital free care More than before, at least initially State pool for hospital free care said to create some competition for indigent patients, now has small surplus funding fixed, guaran- Waiver teed five years better than other Boston hospitals City makes only fixed annual contribution to BMC, achieved minor savings; new BMC safety net is Medicaid funded, as yet limited to five-year federal waiver Very broad benefits, full range Very of care, providers only BMC and affiliated clinics and doctors; enrollment lower than expected Clinics and hospitals in all five sites express strong concern for sustainability of current levels effort. New, Integrated Safety Net Programs New, Milwaukee County Boston Hillsborough County San Diego Philadelphia Froedtert fiscally strongFroedtert BMC nearly breaking even, County now funds only GAMP, at County now funds only GAMP, level no more than needed to get maximum state-federal match; large county savings from closure; no increase over time Declining emergency room use; decrease in costs per claim Rise in uncompensated care at other two main safety net hospitals GAMP funding secure, not increasing Good benefits, broad provider participation, but eligibility very limited (only those in active need of care) Total uncompensated care down Total at Doyne-Froedtert combined County General Assistance (GAMP) gives Medical Program enrollees choice of gatekeeper clinics, each with own referral network; county uses utilization, payment controls New Safety Net Systems in Operation Authors’ compilation from numerous sources cited in text. sources numerous Authors’ compilation from n/a = not applicable Table 6 Table General description experience Funding Comparative efficiency Access for the Poor Under new programs uninsured, at For successor hospital uninsured, from For other providers Expectations for Future Successor hospital New safety net program Other safety net providers

Assessing Source: Note: the New

Federalism 20 ▲ HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITALS CLOSURE OR CONVERSION

HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

**County hospital closed December 31, 1995. 31, December closed hospital **County

*In millions of nominal dollars. nominal of millions *In

Milwaukee County personal communication. personal County Milwaukee Source:

9619 981999 1998 1997 1996 1995 1994 1993

** 0 5

Millions ofDollars

20.7

21.4 21.5

22.5

26.0 26.3

27.6

Milwaukee County Tax Levy Expenditures Levy Tax County Milwaukee for GAMP, 1993–1999 GAMP, for Figure 1 Figure

cal benefits. cal

increases. Selling Doyne also brought in some cash, along with some indirect fis- indirect some with along cash, some in brought also Doyne Selling increases.

for significant cuts is considered success, and there is no thought of winning of thought no is there and success, considered is cuts significant for

passionate program within the current level of support. Just fighting off pressures off fighting Just support. of level current the within program passionate

officials supportive of GAMP see their goal as running a cost-effective, yet com- yet cost-effective, a running as goal their see GAMP of supportive officials

needed to draw down the maximum available state match and no more. County more. no and match state available maximum the down draw to needed

The county spends the amount the spends county The ing flows will reduce the county share further. share county the reduce will flows ing

if figures were adjusted for inflation (figure 1). A recent DSH-related shift in fund- in shift DSH-related recent A 1). (figure inflation for adjusted were figures if

drop of about $5 million a year from the Doyne era, a drop that would be greater be would that drop a era, Doyne the from year a million $5 about of drop

a year, all for GAMP, of which county funds are just over $20 million. This is a is This million. $20 over just are funds county which of GAMP, for all year, a

and $8 million for the deficit. Since then, total support has been about $36 million $36 about been has support total then, Since deficit. the for million $8 and

all-time high, about $44 million for general assistance (almost half state dollars) state half (almost assistance general for million $44 about high, all-time

very small one. In Doyne’s last year, 1995, spending on indigent care rose to an to rose care indigent on spending 1995, year, last Doyne’s In one. small very

in operating deficits each year; the hospital had only one surplus in the 1990s, a 1990s, the in surplus one only had hospital the year; each deficits operating in

medical coverage that nearly all went to Doyne but also faced millions of dollars of millions faced also but Doyne to went all nearly that coverage medical

the sale, the county not only paid its share of state-mandated general assistance general state-mandated of share its paid only not county the sale, the

Local savings were the centerpiece of Milwaukee County’s changes. Before changes. County’s Milwaukee of centerpiece the were savings Local

Milwaukee: Large, Immediate County Savings County Immediate Large, Milwaukee:

safety net. All the localities intended to save money by privatizing, and all did. all and privatizing, by money save to intended localities the All net. safety

obviously good for localities’ bond ratings, but may or may not be good for the for good be not may or may but ratings, bond localities’ for good obviously

This shift is shift This closed-ended commitment to fund a more manageable alternative. manageable more a fund to commitment closed-ended

hospital obligations was a fiscal reason for privatization, which created instead a instead created which privatization, for reason fiscal a was obligations hospital

Precisely this open-endedness of open-endedness this Precisely meant to help with indigent care (appendix). care indigent with help to meant

pays much more, including disproportionate share hospital (DSH) payments (DSH) hospital share disproportionate including more, much pays

the hospitals’ ability to serve all patients in need, even though in total Medicaid total in though even need, in patients all serve to ability hospitals’ the

Localities’ funding for their public hospitals is important because it backstops it because important is hospitals public their for funding Localities’ New Safety Nets in Operation—Public Funding Operation—Public in Nets Safety New Boston: Minor City Savings, Major State Support Boston’s fiscal payoff was less than Milwaukee’s because its hospital deficits had been less persistent and it got no cash from its merger.35 Boston promised to continue regular subsidy payments for five years, but these payments are modest and were agreed to in advance.36 At the same time, the city and its residents have benefited from major state funding for uninsured indigent care. The hospital pool covers nearly $200 million a year for costs of charity at Boston hospitals, including about $50 million a year earmarked for successor BMC under the Boston managed care Medicaid waiver. Thus, uniquely among the five sites, Boston saw major continuation of support for the formerly public hospital, but from state rather than local sources. The state pool’s support for hospital and some CHC care is large in dollar terms and serves a broad population of patients; the pool pays for hospital services for people with incomes of up to 400 percent of the federal poverty level, on a sliding-scale basis.

Tampa-Hillsborough County: Large Savings before Privatization, Recent Reconsideration

Tampa’s 1997 privatization did not change local funding for the hospital. The hospital had already lost open-ended local support, first by the creation of a hospital authority in 1980, even more by the implementation of the HCHCP indigent health plan in 1992. Before HCHCP, the county paid Tampa General’s bills for indigents after the fact. Spending was mainly financed by local property taxes, was rising at a 17 to 20 percent annual rate, and was projected to reach nearly $150 million by 1997–98. Fiscally, HCHCP surpassed expectations; 1997–98 spending was held to little more than half the projected level. County health officials have long planned for expansions in HCHCP, but the county built up a huge cumula- tive surplus instead—over a year’s worth of funding. The surplus prompted the state legislature to reduce the allowable sales tax surcharge, requiring the county to spend down the surplus without expanding coverage.

After HCHCP, the county mainly supported Tampa General indirectly, through coverage for enrollees: Initially, most plan spending still occurred at TGH, which had most of the patients and was paid at higher rates than other providers. Over time, patients shifted elsewhere, and rate differentials were reduced. The county also made an intergovernmental transfer of funds to the state to draw down additional federal matching funds, which the state promised to return mainly to TGH as part of a large Medicaid DSH allotment. The CEO who took TGH private complained that TGH essentially remained a public hospital with no public funding. Despite significant staff cuts and other efficiencies, TGH averaged losses of about $1 million a month for the 27 months of privatization through calendar year 1999; the highest losses came in the last three months of 1999. Many politicians and the local newspaper complained that the CEO was shirking public accountability. In March 2000, the CEO separated from the hospital, and in May the state responded to TGH pleas for a bailout by creating new subsidies under Medicaid and forcing the county to increase support as well (Testerman 2000). Even the option of “going public” is now under discussion for TGH (Shepherd 1999, 2000). Assessing the New

Federalism 22 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

Includes County Medical Services, UCSD support, funding of clinics. of funding support, UCSD Services, Medical County Includes Note:

San Diego County Health and Human Service Agency, cited in Jacob (1999). Jacob in cited Agency, Service Human and Health County Diego San Source:

949 1995–96 1994–95 1996–97 1993–94 1992–93 1991–92 1990–91

4.2

7.5

Millions ofDollars

11.5 11.4

14.4

17.1

25.2

San Diego Local Funding for Uninsured Indigent Uninsured for Funding Local Diego San Figure 2 Figure

tobacco liability settlement and seek about 10 times that amount in additional state additional in amount that times 10 about seek and settlement liability tobacco

sources. The county would put up $15 million a year from its windfall share of the of share windfall its from year a million $15 up put would county The sources.

currently uninsured people. Funding, as usual, would come from nonlocal from come would usual, as Funding, people. uninsured currently

federal poverty level through a single provider consortium, covering up to 200,000 to up covering consortium, provider single a through level poverty federal

to arrange coverage for all legal residents with incomes up to 200 percent of the of percent 200 to up incomes with residents legal all for coverage arrange to

bles, as well as higher CMS payment levels for providers. Then, the county hopes county the Then, providers. for levels payment CMS higher as well as bles,

ing higher income standards for CMS and more outreach to enroll MediCal eligi- MediCal enroll to outreach more and CMS for standards income higher ing

Reform is to start with increased enrollment in existing public programs, includ- programs, public existing in enrollment increased with start to is Reform

supervisors in December 1999 approved an ambitious plan to expand coverage. expand to plan ambitious an approved 1999 December in supervisors

ing civil grand jury about the county’s failure to care for the indigent, the board of board the indigent, the for care to failure county’s the about jury grand civil ing

of study, an outside consultant’s study, and a scathing report from an investigat- an from report scathing a and study, consultant’s outside an study, of

San Diego may be about to increase spending greatly, however. After two years two After however. greatly, spending increase to about be may Diego San

and also a zero-tolerance policy for spending on illegal aliens. illegal on spending for policy zero-tolerance a also and

that political support for indigent care is weak because there is no public hospital public no is there because weak is care indigent for support political that

unsustainable. County sources agree that funding is too low; all interviewees note interviewees all low; too is funding that agree sources County unsustainable.

are higher than the MediCal rates and that the current level of cross-subsidy is cross-subsidy of level current the that and rates MediCal the than higher are

touting these low rates as prudent purchasing. Providers protest that their costs their that protest Providers purchasing. prudent as rates low these touting

nia 1999). CMS pays providers an average of about 40 percent of MediCal levels, MediCal of percent 40 about of average an providers pays CMS 1999). nia

DSH and other state subsidies paid directly to the hospital (University of Califor- of (University hospital the to directly paid subsidies state other and DSH

Most safety net support for UCSD-Hillcrest comes from comes UCSD-Hillcrest for support net safety Most ing for illegal aliens. illegal for ing

UCSD from about $10 million to about $2 million, citing its discontent with pay- with discontent its citing million, $2 about to million $10 about from UCSD

The county also cut its contribution to contribution its cut also county The spending now comes from state aid. state from comes now spending

county spending because of drops in county funding (figure 2). Almost all CMS all Almost 2). (figure funding county in drops of because spending county

1990s from more than $50 million a year to about $30 million in combined state- combined in million $30 about to year a million $50 than more from 1990s

The main program, County Medical Services (CMS), declined during the during declined (CMS), Services Medical County program, main The time.

37 37

San Diego County’s support for the safety net has dropped sharply over sharply dropped has net safety the for support County’s Diego San San Diego: Dwindling Local Funding, but Major New Effort Planned Effort New Major but Funding, Local Dwindling Diego: San and federal dollars (Duerksen 1999). It is unclear from press reports to what extent new coverage would involve the existing clinic infrastructure.

Philadelphia: Very Low Local Funding after Many Years of Privatization

In Philadelphia, the current level of support for the city clinics is $29 million a year. Somewhat more than one-third comes from city funds, somewhat less than one-third each from state funds and clinic fees. A small additional amount is spent for specialists’ services at hospitals. Additional DSH and other state funds go to safety net hospitals. Compared with its low level of support for primary health care, the city has put more resources into mental health and substance abuse services. This support includes not just money but also executive time; the health commissioner has won acclaim for her leadership in those areas (Kirk 1999).

New Safety Nets in Operation—Comparative Efficiency The three new systems sought to improve access to primary care and management of utilization to avoid unnecessary emergency room visits and pre- ventable hospitalizations, thus improving system efficiency.40 The shift to decen- tralized clinics and doctors’ offices was also meant to give enrollees more convenient access and reduce their waiting time.41 Managers in Milwaukee, Boston, and Tampa claim improvements of these types. Milwaukee and Hillsborough County are proud of winning good-government awards for their programs.

In Milwaukee, emergency room use has declined, and most GAMP intake no longer occurs after a patient seeks emergency room care. The numbers of enrollees served and claims paid have risen, but overall costs are steady, and cost per claim has dropped.42 Administrative costs are about 5 percent of the total budget. The county’s own benchmarking against national quality standards finds good care, as do field visits to clinics, and surveying shows patient satisfaction. Officials acknowledge that a comprehensive evaluation is needed. Asthma and diabetes patients are also conceded to need better care to reduce high rates of hospitalization, but the same often holds true for insured patients, and GAMP is starting to plan for disease management. Officials and clinics alike worry about patients’ having no alternative to an emergency room for after-hours access; plans for the clinics to set up a shared urgent care center have stalled. Initial problems in claims administration led to a change in fiscal agent. Whereas once GAMP paid low and slow, its chief administrator notes, now it is just low.

In Hillsborough County, emergency room use has also dropped, by 27 percent, and HCHCP has cut the average length of hospital stay in half, to about five days.43 As a result, spending per member per month dropped by two-thirds, even as enrollees increased. Officials say cost savings come from better preventive care and better management, not from suppression of medical need. They report that admitting diagnoses for hospitalizations are no longer dominated by complications of untreated chronic conditions; instead, patterns are similar to those of other insured populations. Also, clinic and specialist services have risen and now get a much higher share of spending than when HCHCP first started. Prices paid Assessing the New

Federalism 24 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

what services a public hospital formerly provided, to what populations, for what for populations, what to provided, formerly hospital public a services what

to care for the poor and uninsured. Conceptually, one would like to know just know to like would one Conceptually, uninsured. and poor the for care to

The key criterion for judging privatization is whether it helped or hurt access hurt or helped it whether is privatization judging for criterion key The

New Safety Nets in Operation—Access for the Poor the for Operation—Access in Nets Safety New

judgments about hospital efficiency. hospital about judgments

care or serving the poor. Far better information is needed to make more informed more make to needed is information better Far poor. the serving or care

favoring bottom-line performance with little regard for concerns about quality of quality about concerns for regard little with performance bottom-line favoring

insufficient attention to severity of illness, quasi-health needs, and other factors, other and needs, quasi-health illness, of severity to attention insufficient

centers complain that management benchmarking measures like HCIA’s give HCIA’s like measures benchmarking management that complain centers

Academic medical Academic prestigious institutions that also serve safety net patients. net safety serve also that institutions prestigious

regardless of ownership status. Nonetheless, scores were higher for other big and big other for higher were scores Nonetheless, status. ownership of regardless

geographic location; few hospitals in these localities were ranked in the top half, top the in ranked were localities these in hospitals few location; geographic

of national efficiency rankings (appendix, table A1). One reason for this is their is this for reason One A1). table (appendix, rankings efficiency national of

Every one of the hospitals was in the bottom 10 or 20 or 10 bottom the in was hospitals the of one Every ainfr HI 1997). (HCIA firm mation

hospitals in their cities, using the efficiency index compiled by a health care infor- care health a by compiled index efficiency the using cities, their in hospitals

between the five public hospitals (or their successors) as of 1995 and the other the and 1995 of as successors) their (or hospitals public five the between

deepened after privatization. As a heuristic exercise, comparisons were drawn were comparisons exercise, heuristic a As privatization. after deepened

waukee, Boston, and San Diego, but not in Tampa, where fiscal problems only problems fiscal where Tampa, in not but Diego, San and Boston, waukee,

ing. As measured by their bottom lines, successor hospitals are doing well in Mil- in well doing are hospitals successor lines, bottom their by measured As ing.

sizings or reductions of lengths of stay as evidence, but solid information is lack- is information solid but evidence, as stay of lengths of reductions or sizings

had become more efficient under private operation. They often cited staff down- staff cited often They operation. private under efficient more become had

A final point is that many observers said that the four former public hospitals public former four the that said observers many that is point final A

ally qualified health centers nationwide (RHAC 1998). (RHAC nationwide centers health qualified ally

cost per visit only 40 percent of the average at hospital and county-owned, feder- county-owned, and hospital at average the of percent 40 only visit per cost

The clinics report low costs; their normal office visit fee is $60 to $65, and their and $65, to $60 is fee visit office normal their costs; low report clinics The

because they wanted to become more competitive for MediCal managed care. managed MediCal for competitive more become to wanted they because

cient they became in the early 1990s, both because of low county payment and payment county low of because both 1990s, early the in became they cient

the passage of time. San Diego clinics, however, emphasize how much more effi- more much how emphasize however, clinics, Diego San time. of passage the

Before-and-after information is lacking for the 1970s privatizations, owing to owing privatizations, 1970s the for lacking is information Before-and-after

public hospital). public

demonstration project at BMC (and its twin across the river at the Cambridge the at river the across twin its (and BMC at project demonstration

more uninsured indigents having access to primary care through the waiver the through care primary to access having indigents uninsured more

and a larger one was expected for 1999. Interviewees attributed this surplus to surplus this attributed Interviewees 1999. for expected was one larger a and

to cut back payment allocations. For 1998, the hospital pool ran a small surplus, small a ran pool hospital the 1998, For allocations. payment back cut to

hospital pool had more claims than it could pay from its fixed revenues and had and revenues fixed its from pay could it than claims more had pool hospital

care pool. Already, however, demand for free care has dropped; through 1997, the 1997, through dropped; has care free for demand however, Already, pool. care

and affiliated clinics to continue fee-for-service billing to the Massachusetts free Massachusetts the to billing fee-for-service continue to clinics affiliated and

no outside management, and the payment system allows the successor hospital successor the allows system payment the and management, outside no

ciencies would be slower to come than in Milwaukee or Tampa because there is there because Tampa or Milwaukee in than come to slower be would ciencies

information on results (Boston Medical Center 1999). One might expect that effi- that expect might One 1999). Center Medical (Boston results on information

Boston Medical Center’s integration of care is newer, and its descriptions lack descriptions its and newer, is care of integration Center’s Medical Boston

tive costs are about 4 percent of the budget. the of percent 4 about are costs tive for pharmaceuticals were also reduced, at least through mid-decade. Administra- mid-decade. through least at reduced, also were pharmaceuticals for types of conditions. Against this baseline, one would then compare the type and location of services after privatization. Ultimately, one would like to adjust for quality as measured by changes in morbidity and mortality. Initially, the ques- tions are to what extent does safety net care stay at the successor hospital—as against being partly shifted to other hospitals, suppressed altogether, or substi- tuted for by nonhospital services?47 Advocates for public hospitals typically worried that a lot of needed care would just be suppressed. Advocates for a redesigned safety net argued that hospital care should decline, with appropriate substitution of clinic and other care better tailored to beneficiaries’ medical needs. Interviews and hospital data provide a preliminary assessment that access has been maintained (table 6, above).

Access for Beneficiaries of New Payment Programs

Within the new programs, better integration of care seems to improve access. Enrollees still have an identified location to seek care, and services can be deliv- ered earlier in the course of an illness, at less time cost to enrollees and resource cost to providers, and normally closer to where beneficiaries live or work. The number of participating providers has also risen in all three areas—especially rapidly in Milwaukee—despite low payment rates. Clinic interviewees reported no problems in enrollee access to hospital care, though all the hospitals complained about being underpaid.

The new programs’ principal shortcoming in access appears to be enrollee turnover, which undercuts managed care’s promise to improve continuity of care. Turnover occurs in Medicaid programs too, however, and access via a public hospital emergency room creates even less continuity of care. Turnover can be caused by eligibility restrictions. In Milwaukee, GAMP eligibility requires active need for care, and one-third of enrollees receive services for only one six-month period of eligibility. Turnover has other causes as well. Hillsborough County’s health plan has no limitation to active illness, but more than 70 percent of recipients are enrolled for under a year. According to the county, many are unused to regular care or are noncompliant, and up to a quarter are mentally ill or socially dys- functional (Hillsborough County 2000). The county reports efforts to increase enrollment, but some clinic interviewees said that outreach was very weak. Most enrollees are signed up when they present for care. For the newest plan, in Boston, turnover is also said to be a problem, though the successor hospital itself actively promotes reenrollment. Continuity of care is even less well established in the two older privatizations, which made no attempt to integrate care.48

More important, the new programs seem small relative to the estimated uninsured populations in the localities (table 3). Milwaukee’s GAMP enrolled almost 20,000 people in 1999, up 11 percent since its expansion beyond successor hospital Froedtert—but still probably no more than one-fifth of uninsured people in Milwaukee County.49 Hillsborough County’s plan covered about 27,000 people in 1999, up from some 15,000 initially—also probably no more than one-fifth of the county’s uninsured. Moreover, because of turnover among enrollees, the number covered at any point in time is less. Boston’s state Medicaid waiver demonstra- Assessing the New

Federalism 26 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

pensated care was large relative to local programs for the uninsured. Uncompen- uninsured. the for programs local to relative large was care pensated

the long lapses of time since privatization. There too, however, hospital uncom- hospital however, too, There privatization. since time of lapses long the

For the comparison sites, before-and-after comparisons are not possible given possible not are comparisons before-and-after sites, comparison the For

Boston and Tampa-Hillsborough County. Tampa-Hillsborough and Boston

Uncompensated hospital care also exceeds program support in support program exceeds also care hospital Uncompensated combined).

pared with about $36 million in the GAMP program (county, state, and federal and state, (county, program GAMP the in million $36 about with pared

hospitals other than Froedtert, the successor to the public hospital (table 7)—com- (table hospital public the to successor the Froedtert, than other hospitals

recently reported year, totaled almost $100 million, of which $80 million was at was million $80 which of million, $100 almost totaled year, reported recently

hospital bills. In Milwaukee, for example, uncompensated care for 1998, the most the 1998, for care uncompensated example, for Milwaukee, In bills. hospital

near poor who do not qualify for the new programs but who still cannot pay full pay cannot still who but programs new the for qualify not do who poor near

the new managed indigent care programs. Uncompensated care also reaches the reaches also care Uncompensated programs. care indigent managed new the

zation, it contributes at least as much in-kind support to the local safety net as do as net safety local the to support in-kind much as least at contributes it zation,

Because such hospital uncompensated care remains large even after privati- after even large remains care uncompensated hospital such Because

programs.

covers safety net services beyond those under the new managed indigent care indigent managed new the under those beyond services net safety covers

This level of hospitals’ uncompensated care uncompensated hospitals’ of level This County (5 percent versus 4 percent). 4 versus percent (5 County

for all care), faster in Boston (6 percent versus 2 percent) and Hillsborough and percent) 2 versus percent (6 Boston in faster care), all for

grew slowly in Milwaukee (3 percent a year for all local hospitals versus 6 percent 6 versus hospitals local all for year a percent (3 Milwaukee in slowly grew

Uncompensated care Uncompensated localities, which differ in reporting of uncompensated care. uncompensated of reporting in differ which localities,

comparable across time within each location, but not precisely comparable across comparable precisely not but location, each within time across comparable

The data are data The stated as annual growth rates to keep them comparable across sites. across comparable them keep to rates growth annual as stated

location. Elapsed time varies by each location’s circumstances, so changes are changes so circumstances, location’s each by varies time Elapsed location.

compares a baseline period against the first full year after privatization in each in privatization after year full first the against period baseline a compares

continued to grow after the 1990s privatizations in all three sites (table 7). Table 7 Table 7). (table sites three all in privatizations 1990s the after grow to continued

Uncompensated hospital care hospital Uncompensated Locality-Wide Provision of Uncompensated Care. Uncompensated of Provision Locality-Wide

less so in Milwaukee than in Boston and Hillsborough County. Hillsborough and Boston in than Milwaukee in so less

act like safety net hospitals, providing large amounts of uncompensated care— uncompensated of amounts large providing hospitals, net safety like act

in these three sites. The main reason is that the successor hospitals continued to continued hospitals successor the that is reason main The sites. three these in

initially, access to hospital uncompensated care appears to have been maintained been have to appears care uncompensated hospital to access initially,

because they are not enrolled in the new public indigent care programs. At least At programs. care indigent public new the in enrolled not are they because

receive free or reduced-fee care even after the public hospital ceases to be public be to ceases hospital public the after even care reduced-fee or free receive

Access for most of the uninsured depends on their ability to continue to continue to ability their on depends uninsured the of most for Access

Access for the Wholly Uninsured—at Successor and Other Hospitals Other and Successor Uninsured—at Wholly the for Access

not poor. not

clinics are thought to serve about 85,000 clients a year, including some who are who some including year, a clients 85,000 about serve to thought are clinics

clinics; the clinics serve far more clients with other funding. Philadelphia’s city Philadelphia’s funding. other with clients more far serve clinics the clinics;

Medical Services pays for episodic care of about 20,000 people a year, mainly at mainly year, a people 20,000 about of care episodic for pays Services Medical

comparable because they do not offer complete coverage: San Diego’s County Diego’s San coverage: complete offer not do they because comparable

Center 1999; Felland and Lesser 2000). The comparison sites are not directly not are sites comparison The 2000). Lesser and Felland 1999; Center

not clear how many of them are truly enrolled for all their care (Boston Medical (Boston care their all for enrolled truly are them of many how clear not

by the successor hospital network covers as many as 50,000 people, although it is it although people, 50,000 as many as covers network hospital successor the by tion is far more ambitious and much better supported. Its uninsured system run system uninsured Its supported. better much and ambitious more far is tion average—1998 Average Annual Average and charity; dollars are measured in charges. Boston uncompensated in charges. measured and charity; dollars are compensated care is hospital-reported bad debt and charity; dollars are mea- bad debt and charity; dollars are is hospital-reported compensated care itation, psychiatric, and other specialty hospitals. Uncompensated Care 19921990 1997 1998 1992–1997 1990–1998 1993–95 1998 1993–95 Before Change After Change Rate of Growth (%) ($ millions) at Each Hospital ($ millions) at Each Hospital Care Costs Each Hospital Share of Total Each Hospital Share of Total Uncompensated Hospital Total Hospital Uncompensated Care before and after Privatizations before Hospital Uncompensated Care Hospital reporting data from each state. data from Hospital reporting hospital (after)uncompensated care1993–1995, 11 in 1998) 17 11 89 2 5 4 39 $19 99 4 4% 3 –22% 24 3 0% 9 6 hospital (after)uncompensated care10 in 1997) 41of uncompensated care 6 54 4 4 18 4 7 39 135 50 4 29 27 3 6 –1 13 1 6 –2 5 1 7 Years are hospital fiscal years. All dollars are nominal $ millions. Milwaukee uncompensated care is hospital-reported bad debt is hospital-reported nominal $ millions. Milwaukee uncompensated care All dollars are hospital fiscal years. are Years Public hospitalPublic Merger partner (before); successor $40 15% — — — — Next two hospitals by amount of All other hospitalsAll hospitals in locality (12 21 2 41 3 19 6 Public hospitalPublic Merger partner (before); successor hospital = successorPublic 67Next two hospitals by amount 35 35 15 — 46 — 16 — 3 — 3 Next two hospitals by amount of All other hospitals (12 in 1992, All hospitals in locality All other hospitals (7)All hospitals in locality 168 6 12 65 5 9 225 7 18 91 5 6 8 2 7 5 6 4 Milwaukee County Milwaukee Table 7 Table Boston Hillsborough County (Tampa) care is state-audited charity plus emergency bad debt; dollars are in charges reduced to estimated cost. Hillsborough County un to estimated cost. Hillsborough reduced in charges bad debt; dollars are is state-audited charity plus emergency care facilities, excluding rehabil and children’s general medical surgical to estimated cost. Hospitals are reduced as charges sured Sources: Notes: Assessing the New

Federalism 28 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

two hospitals (which rose from 19 to 40 percent between them) and the other the and them) between percent 40 to 19 from rose (which hospitals two

merger share dropped to only 19 percent. Uncompensated care shifted to the next the to shifted care Uncompensated percent. 19 only to dropped share merger

county’s uncompensated hospital care (45 and 13 percent), but Froedtert’s post- Froedtert’s but percent), 13 and (45 care hospital uncompensated county’s

Milwaukee, Doyne and Froedtert between them provided well over half of the of half over well provided them between Froedtert and Doyne Milwaukee,

areawide totals by category (successor hospital, next two largest, and all other). In other). all and largest, two next hospital, (successor category by totals areawide

tions. Table 8 shows concentration of uncompensated care as hospital shares of shares hospital as care uncompensated of concentration shows 8 Table tions.

highly concentrated at a few hospitals both before and after the 1990s privatiza- 1990s the after and before both hospitals few a at concentrated highly

Uncompensated hospital care was care hospital Uncompensated The Concentration of Uncompensated Care. Uncompensated of Concentration The

care and total costs rose at similar rates, both faster than at TGH. at than faster both rates, similar at rose costs total and care

share of total care (only 5 or 6 percent). At these other hospitals, uncompensated hospitals, other these At percent). 6 or 5 (only care total of share

HCHCP in 1992. At other hospitals, uncompensated care averaged much less as a as less much averaged care uncompensated hospitals, other At 1992. in HCHCP

pensated care, compared with 15 percent before the initial privatization of privatization initial the before percent 15 with compared care, pensated

costs and left the newly private facility with 16 percent of its total costs as uncom- as costs total its of percent 16 with facility private newly the left and costs

small rise in uncompensated care (3 percent a year). This matched its rise in total in rise its matched This year). a percent (3 care uncompensated in rise small

In Hillsborough County, Tampa General Hospital after its privatization had a had privatization its after Hospital General Tampa County, Hillsborough In

pensated care costs and small increases in total costs. total in increases small and costs care pensated

rest of the city. Other Boston hospitals as a group had small declines in uncom- in declines small had group a as hospitals Boston Other city. the of rest

was and remains about the average level of uncompensated care throughout the throughout care uncompensated of level average the about remains and was

cent) and far higher than that of the university hospital’s former 4 percent, which percent, 4 former hospital’s university the of that than higher far and cent)

cent of its costs. This share is almost as high as at Boston City Hospital (35 per- (35 Hospital City Boston at as high as almost is share This costs. its of cent

a result, BMC’s uncompensated care after the merger amounted to fully 29 per- 29 fully to amounted merger the after care uncompensated BMC’s result, a

1992 to $135 million in 1997 (table 7), double the rate of increase in total costs. As costs. total in increase of rate the double 7), (table 1997 in million $135 to 1992

remarkable 13 percent per year compared with prior levels—from $73 million in million $73 levels—from prior with compared year per percent 13 remarkable

In sharp contrast, uncompensated care at Boston Medical Center rose a rose Center Medical Boston at care uncompensated contrast, sharp In

care (3 or 4 percent). 4 or (3 care

ward, all categories of Milwaukee hospitals had similar shares of uncompensated of shares similar had hospitals Milwaukee of categories all ward,

care than did other area hospitals (15 and 5 percent versus only 2 percent). After- percent). 2 only versus percent 5 and (15 hospitals area other did than care

ing, Froedtert and Doyne both had much higher percentages of uncompensated of percentages higher much had both Doyne and Froedtert ing,

pitals in amount of uncompensated care and with all other facilities. Before merg- Before facilities. other all with and care uncompensated of amount in pitals

Table 7 compares the successor facility in each locality with the next two hos- two next the with locality each in facility successor the compares 7 Table 7).

combination of Froedtert and Doyne, while total care remained constant (table constant remained care total while Doyne, and Froedtert of combination

drop in uncompensated care (22 percent a year) compared with the premerger the with compared year) a percent (22 care uncompensated in drop

uncompensated care continued to grow, as just noted. Froedtert had a very large very a had Froedtert noted. just as grow, to continued care uncompensated

Milwaukee indeed saw a shift in hospital burden, though the areawide total of total areawide the though burden, hospital in shift a saw indeed Milwaukee

would cut back, shifting burdens to other safety net facilities or reducing care. reducing or facilities net safety other to burdens shifting back, cut would

poor were accustomed to seek care. Advocates feared that privatized institutions privatized that feared Advocates care. seek to accustomed were poor

is the level of uncompensated care at successor hospitals, locations where the where locations hospitals, successor at care uncompensated of level the is

A key safety net concern net safety key A Relative Contributions of Successor Hospitals and Others. and Hospitals Successor of Contributions Relative

safety nets. safety

away from hospital funding, hospital contributions remain a vital portion of local of portion vital a remain contributions hospital funding, hospital from away

In all the localities observed, even after localities shifted safety net dollars net safety shifted localities after even observed, localities the all In

$200 million in Philadelphia for 1996. for Philadelphia in million $200 sated hospital care totaled about $79 million in San Diego in 1995–96 and over and 1995–96 in Diego San in million $79 about totaled care hospital sated Table 8 Concentration of Uncompensated Care before and after Privatizations

Each Hospital’s Share of Area’s Total Uncompensated Care (%) Before After Site Hospital Change Change Milwaukee Dates of observation 1993–95 1997 County Public hospital 45 — Successor to public hospital (two merged) 13 19 Next two hospitals by amount of uncompensated care 19 40 Other 8 hospitals in locality 23 41 All hospitals (12 before, 11 after) 100 100

Boston Dates of observation 1992 1997 Public hospital 40 — Successor to public hospital (two merged) 4 60 Next two hospitals by amount of uncompensated care 24 17 All other hospitals (12 before, 10 after) 32 22 All hospitals in locality 100 100

Hillsborough Dates of observation 1990 1998 County Public hospital/successor (same facility) 54 51 (Tampa) Next two hospitals by amount of uncompensated care 27 30 All other hospitals (7 in both periods) 18 20 All hospitals in locality 100 100

Sources: Hospital reporting data from each state. Notes: Years are hospital fiscal years. All dollars are nominal $ millions. Milwaukee uncompensated care is hospital-reported bad debt and charity; dollars are measured in charges. Boston uncompensated care is state-audited charity plus emergency bad debt; dollars are measured in charges reduced to estimated cost. Hillsborough County uncompensated care is hospital-reported bad debt and charity; dollars are measured as charges reduced to estimated cost. Hospitals are general medical surgical and children’s facilities, excluding rehabilitation, psychiatric, and other specialty hospitals. eight hospitals in the locality (from 23 to 41 percent). With about 60 percent of uncompensated care at only three hospitals, concentration remains high, but lower than before; these three hospitals’ share of uncompensated care is not much above their share of total care.

In Boston, before merging, the city hospital and its neighboring university facility together provided 44 percent of Boston’s uncompensated care. Afterward, their share rose to fully 60 percent, more than triple the share of the next two hospitals, which declined. In Hillsborough County, Tampa General’s share of uncompensated share was little changed—54 percent at baseline, 51 percent after privatization.56 In both Boston and Hillsborough County, the top three facilities account for about 80 percent of uncompensated care.

High concentration of uncompensated care in relatively few hospitals is not uncommon; indeed, having a very disproportionate share of such care is much of Assessing the New

Federalism 30 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

door, accepting not just local residents but also in-migrants for care. Since 1997, Since care. for in-migrants also but residents local just not accepting door,

more than one interviewee said that BMC, like BCH before it, has a truly open truly a has it, before BCH like BMC, that said interviewee one than more

arguably the most public of the privatized institutions surveyed. Qualitatively, surveyed. institutions privatized the of public most the arguably

oversight relationship with public health authorities—all contribute to making it making to contribute authorities—all health public with relationship oversight

another university hospital.” BMC’s statutory mission, its self-promotion, its new its self-promotion, its mission, statutory BMC’s hospital.” university another

poverty advocates’ concern going into the merger that BMC would become “just become would BMC that merger the into going concern advocates’ poverty

In Boston, the merged BMC has vigorously filled the safety net role, despite role, net safety the filled vigorously has BMC merged the Boston, In

however.

by the hospital. Indigent care does seem to have shifted to other hospitals, other to shifted have to seem does care Indigent hospital. the by

efforts to move much indigent care to affiliated clinics, some heavily subsidized heavily some clinics, affiliated to care indigent much move to efforts

GAMP, its continued running of the area’s only level 1 trauma center, and its and center, trauma 1 level only area’s the of running continued its GAMP,

tal correctly proclaims its safety net commitment, citing its large participation in participation large its citing commitment, net safety its proclaims correctly tal

also farther than its competitors from the urban poor and uninsured. The hospi- The uninsured. and poor urban the from competitors its than farther also

out” not to rely on Froedtert; because the hospital is located outside the city, it is it city, the outside located is hospital the because Froedtert; on rely to not out”

emergency room use. One interviewee, a poverty advocate, said that “the word is word “the that said advocate, poverty a interviewee, One use. room emergency

noticeably, but there appears to be no consistent reporting or official tracking of tracking official or reporting consistent no be to appears there but noticeably,

there were news reports that emergency room use in Milwaukee had dropped had Milwaukee in use room emergency that reports news were there

date was no different from any other hospital’s. Immediately after the closure, the after Immediately hospital’s. other any from different no was date

rolled out its new GAMP program two years later. Thereafter, Froedtert’s man- Froedtert’s Thereafter, later. years two program GAMP new its out rolled

remain the primary safety net hospital—but only temporarily, until the county the until temporarily, only hospital—but net safety primary the remain

campus was intended by county policymakers. They negotiated for Froedtert to Froedtert for negotiated They policymakers. county by intended was campus

In Milwaukee, the decline in uncompensated care at the Doyne-Froedtert the at care uncompensated in decline the Milwaukee, In

and continuity in operations. in continuity and

care include any mandate assumed by the successor hospital, hospital location, hospital hospital, successor the by assumed mandate any include care

Other factors that plausibly affect differences in provision of uncompensated of provision in differences affect plausibly that factors Other

newly available funds from the state-federal demonstration waiver. demonstration state-federal the from funds available newly

facility by Medicaid and the state uncompensated care pool and also got access to access got also and pool care uncompensated state the and Medicaid by facility

university facility benefited from the higher payment rates given to the public the to given rates payment higher the from benefited facility university

pital. In contrast, when Boston University hospital merged with Boston City, the City, Boston with merged hospital University Boston when contrast, In pital.

ing only by competing for GAMP managed care enrollees just like any other hos- other any like just enrollees care managed GAMP for competing by only ing

uncompensated care. Instead, past the transition period, it could get local fund- local get could it period, transition the past Instead, care. uncompensated

did not take over Doyne’s ability to receive county funds to defray costs of costs defray to funds county receive to ability Doyne’s over take not did

likely the difference in payment incentives. When Froedtert took over Doyne, it Doyne, over took Froedtert When incentives. payment in difference the likely

more like the public one that it merged with. The key reason for this difference is difference this for reason key The with. merged it that one public the like more

where the public-private merger led the private hospital after merger to become to merger after hospital private the led merger public-private the where

more like other private facilities. This is the reverse of what happened in Boston, in happened what of reverse the is This facilities. private other like more

absorbing the public hospital, Milwaukee’s successor private facility became facility private successor Milwaukee’s hospital, public the absorbing

After Understanding Patterns in Hospital Provision of Uncompensated Care. Uncompensated of Provision Hospital in Patterns Understanding

numerous academic centers, nonprofit orientation, and Quaker heritage. Quaker and orientation, nonprofit centers, academic numerous

(table 8). Philadelphia’s dispersion of uncompensated care may result from its from result may care uncompensated of dispersion Philadelphia’s 8). (table

care; the top three, 36 percent (not presented)—much less than at the other sites other the at than less presented)—much (not percent 36 three, top the care;

not. Philadelphia’s top hospital has 16 percent of countywide uncompensated countywide of percent 16 has hospital top Philadelphia’s not.

but Philadelphia does Philadelphia but Diego also has highly concentrated uncompensated care, uncompensated concentrated highly has also Diego

57 what defines a safety net hospital (IOM 2000). Of the two comparison sites, San sites, comparison two the Of 2000). (IOM hospital net safety a defines what according to BMC, it has cut free care, but in part that reflects success in enrolling recipients in new coverage, and free care remains very high as a share of hospital spending. The combined hospital has no plans to move. It is building in that location, even as it establishes relations with clinics statewide in order to cover Medi- caid patients as well as two hospitals to the south of the city. The long-standing expectation is that the university hospital will ultimately move into the newer, formerly city facility. This situation is quite different from Milwaukee, Tampa, or San Diego, where the medical schools are far from the center of town. Overall, interviewees from outside the hospital report that it is doing better fiscally than most other hospitals, because of the state’s commitment to the uninsured. Two of the three other academic hospital systems in Boston—both more prestigious—are seen as being in worse financial condition.

In Hillsborough County, Tampa General Hospital promised to maintain its safety net mission. TGH’s continuing mandate was less formally assured than was its counterpart’s in Boston, but its promises of continued priority for uninsured care were prominent in the press. Interviewees suggested no difference in avail- ability of care for the poor after privatization. There were many complaints that the privatized hospital was too secretive and some fears that the hospital would suc- ceed in transforming itself into a primarily academic institution at the medical school. But the hospital is still firmly at its old location, striving to hold on to staff physicians and even to attract new collaborations there, including a new cancer clinic run in conjunction with the Moffitt Cancer Center at the university. For uncompensated care, the private TGH of 1998 looks very similar to the public hospital of 1990, before HCHCP and privatization (tables 7 and 8). Perhaps more remarkably, between 1997 and 1998, uncompensated care rose even as the hospital was losing about $1 million per month after privatization (not presented).

Tampa General is clearly still the safety net hospital in Tampa. It still operates the area’s only level 1 trauma center and shares serious emergency cases in the county with St. Joseph’s, about three miles to its northwest. The interstate high- way between the two is said to create a boundary line used by ambulance deliv- eries. TGH also operates two free clinics, one off the hospital grounds near a high- poverty neighborhood, which provides about 100,000 visits a year, half of them unfunded. However, local perceptions about Tampa General’s devotion to the poor were heavily influenced by its administration’s announced plan to relocate far north in a new, downsized, modern facility. That plan quickly went on indef- inite hold because the hospital not only lacks the requisite capital but also is losing money on operations. Further, TGH administration has had increasingly bit- ter legal and political battles over public access to its plans and performance data, as well as some very negative press coverage.58 Recent press reports focus on the departure of the CEO, the main architect of privatization, and the hospital’s future appears uncertain.59

In San Diego, UCSD formally assumed the county facility’s safety net role by agreement with the county, by 1999 their fourth agreement. UCSD committed substantial capital to improvements at Hillcrest, the county hospital site, which continues to serve as the leading provider of uncompensated care in the region. Yet the Assessing the New

Federalism 32 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

clinic respondents. Under the Balanced Budget Act of 1997, however, this wrap- this however, 1997, of Act Budget Balanced the Under respondents. clinic

available are drugs at the Veterans Administration rate, a big help, noted some noted help, big a rate, Administration Veterans the at drugs are available

quite important for CHCs to get federally qualified to access this “benefit.” Also “benefit.” this access to qualified federally get to CHCs for important quite

costs, even if Medicaid managed care firms pay less. During the 1990s it became it 1990s the During less. pay firms care managed Medicaid if even costs,

caid payments to federally approved centers for their full federally approved federally full their for centers approved federally to payments caid

been the federal requirement that states make “wraparound” supplemental Medi- supplemental “wraparound” make states that requirement federal the been

more numerous, and a very important source of clinic funding in recent years has years recent in funding clinic of source important very a and numerous, more

ment also often choose to go to private physician offices. Medicaid patients are patients Medicaid offices. physician private to go to choose often also ment

is much lower than the clinics’ rates. Patients with access to other forms of pay- of forms other to access with Patients rates. clinics’ the than lower much is

patients, and their payments are often limited to a physician or lab fee level that level fee lab or physician a to limited often are payments their and patients,

In all locations, clinics report that they have relatively few privately insured privately few relatively have they that report clinics locations, all In

appears to be common. be to appears

mixes of insured and uninsured patients, but a rate of 20 to 40 percent uninsured percent 40 to 20 of rate a but patients, uninsured and insured of mixes

ics provide over a million medical visits a year. Different clinics have different have clinics Different year. a visits medical million a over provide ics

as many as 300,000 patients—far more than under the county plan. Boston’s clin- Boston’s plan. county the under than more patients—far 300,000 as many as

Diego clinics report providing upwards of a million patient visits a year, serving year, a visits patient million a of upwards providing report clinics Diego

clients are uninsured, and about a quarter of their care is uncompensated. San uncompensated. is care their of quarter a about and uninsured, are clients

ity to do so. The clinics in San Diego, for example, say that 60 percent of their of percent 60 that say example, for Diego, San in clinics The so. do to ity

sources reported great effort to cross-subsidize indigent care but very limited abil- limited very but care indigent cross-subsidize to effort great reported sources

cannot be tracked in the same way as that of hospitals. In interviews, clinic interviews, In hospitals. of that as way same the in tracked be cannot

integrated new managed care plans for the enrolled indigent. Their contribution Their indigent. enrolled the for plans care managed new integrated

Community clinics are another part of the safety net, just as they are under the under are they as just net, safety the of part another are clinics Community

Access for the Wholly Uninsured—Clinics Wholly the for Access

centrated pattern of uncompensated care there. care uncompensated of pattern centrated

tions apply to all of its nonprofits equally, which may help explain the less con- less the explain help may which equally, nonprofits its of all to apply tions

Philadelphia created no successor to its public hospital, and social expecta- social and hospital, public its to successor no created Philadelphia

conditions, as it is obligated to do under federal law. federal under do to obligated is it as conditions,

that it provides substantial free care to illegal aliens presenting with emergency with presenting aliens illegal to care free substantial provides it that

program in this way, as it is permitted to under California law. The hospital reports hospital The law. California under to permitted is it as way, this in program

vices to legal residents of the county. The county limits its County Medical Services Medical County its limits county The county. the of residents legal to vices

million, in reaction to the hospital’s failure to meet the county’s desire to limit ser- limit to desire county’s the meet to failure hospital’s the to reaction in million,

county authorities drastically cut the payment, from about $10 million to about $2 about to million $10 about from payment, the cut drastically authorities county

crest, but it did not agree to maintain its traditional level of effort. In the mid-1990s, the In effort. of level traditional its maintain to agree not did it but crest,

its part, the county committed to provide funding for private operations at Hill- at operations private for funding provide to committed county the part, its

general, but UCSD’s plans did raise concerns about its long-term commitment. For commitment. long-term its about concerns raise did plans UCSD’s but general,

Columbia acquisition never occurred because of opposition from the state attorney state the from opposition of because occurred never acquisition Columbia

the safety net site in favor of consolidating teaching functions elsewhere. The elsewhere. functions teaching consolidating of favor in site net safety the

an acquisition of the Sharp hospital system. At that time, one option was to close to was option one time, that At system. hospital Sharp the of acquisition an

with others, including Columbia-HCA, then expected to be entering the area via area the entering be to expected then Columbia-HCA, including others, with

approval from the University of California system trustees to negotiate a merger a negotiate to trustees system California of University the from approval

good insurance coverage. In its fiscal difficulties of the mid-1990s, UCSD also got also UCSD mid-1990s, the of difficulties fiscal its In coverage. insurance good

campus, generally believed to target that area’s higher-income residents, who have who residents, higher-income area’s that target to believed generally campus, university also built a brand new, though smaller, facility in La Jolla near the main the near Jolla La in facility smaller, though new, brand a built also university around subsidy is to be phased out over five years through 2003. Clinics say this loss will severely impair their ability to subsidize indigent access to care.

The extent of physician charity is unknown, in the five localities as elsewhere. Survey evidence and anecdotes from interviewees both support the working hypothesis that physicians, too, reduce charity care as managed care increases (Cunningham et al. 1999). In Milwaukee, Boston, and Tampa, however, interviewees reported a countervailing phenomenon. They said that the new managed care programs for indigents were actually improving indigent access to physician care by signing up physicians who previously gave little charity care. Both phe- nomena are plausible and have some qualitative support. Further effort is needed to understand the full effects and extent of change in access caused by the mix of privately and publicly managed care.

Overall Qualitative Assessment: So Far, So Good, but Fears for the Future The View from 1999 Overall access to health services after the 1990s privatizations appeared to interviewees to be as good under private operations as it had been under public management. Respondents in Milwaukee, Boston, and Tampa-Hillsborough County seemed generally pleased with their new safety nets despite limited funding, at least in the early years of private operations. There were some complaints about access problems, more in Tampa than in Milwaukee or Boston, but almost no one complained that the poor were worse off than before privatization.60 A number of sources in Milwaukee and Boston argued forcefully that indigent access to care was exceptionally good in their areas. One even said that care for Boston’s uninsured was the best in the country, probably in the world. Such per- spectives are bolstered by Boston’s strong showing in uncompensated care (table 7, above). In Tampa, respondents were more comfortable noting that resources are limited; that “significant gaps” inevitably exist, as one physician said, especially for the working poor; that people need to make do; and that it is really important that the safety net be efficiently run.

Qualitative impressions about before-and-after access seem unreliable for San Diego County and Philadelphia, because their privatizations occurred so long ago. Interviewees in San Diego complained that access has dwindled over time because of reduced funding. UCSD-Hillcrest continues to serve as a provider of last resort, but there is a lot of triage at hospitals and clinics, and many patients stay away, they said. Quite a few respondents in San Diego noted that residents— and not just illegal aliens—often visit physicians in Mexico as an economy move. Philadelphia interviewees, in contrast, mostly argued that access remains very good, despite the lack of a public hospital and the low level of local or state subsidy, apparently because of decent clinic funding and nonprofit hospitals’ ability to cross-subsidize what most observers perceive as a reasonable level of uncompensated care. They said that “economic transfers” from hospitals were unknown Assessing the New

Federalism 34 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

that “true emergencies” are treated, but there is no objective definition of what of definition objective no is there but treated, are emergencies” “true that

ational definitions of medical need. Thus, interviewees everywhere typically say typically everywhere interviewees Thus, need. medical of definitions ational

social and medical culture allow for quite divergent, yet equally legitimate, oper- legitimate, equally yet divergent, quite for allow culture medical and social

color judgments about what poor people need. Finally, it should be noted that noted be should it Finally, need. people poor what about judgments color

entrepreneurial and service orientations. Cultural attitudes about poverty also poverty about attitudes Cultural orientations. service and entrepreneurial

and the structure of the medical system, including the hospital sector’s blend of blend sector’s hospital the including system, medical the of structure the and

is the broader environment, especially the sheer size of the uninsured population uninsured the of size sheer the especially environment, broader the is

system will perform better. But other things are not equal. Another key influence key Another equal. not are things other But better. perform will system

design. Other things being equal, a more carefully designed and better funded better and designed carefully more a equal, being things Other design.

of factors. One key, and the focus of this report, is public policy and program and policy public is report, this of focus the and key, One factors. of

The judgments expressed about system performance likely reflect a number a reflect likely performance system about expressed judgments The

very experienced clinic source. clinic experienced very

tor oriented. In Boston, however, the “best in the world” comment came from a from came comment world” the in “best the however, Boston, In oriented. tor

and drop out than hospitals do, or they may be philosophically more public sec- public more philosophically be may they or do, hospitals than out drop and

ators or advocates. The latter may experience more patients who get discouraged get who patients more experience may latter The advocates. or ators

generally expressed a higher opinion of system performance than did clinic oper- clinic did than performance system of opinion higher a expressed generally

One interesting sidelight is that hospital-oriented and systemwide observers systemwide and hospital-oriented that is sidelight interesting One

ber 1999 to change direction and plan to expand insurance, as discussed above. discussed as insurance, expand to plan and direction change to 1999 ber

port for funding. Such advocates persuaded San Diego County officials in Decem- in officials County Diego San persuaded advocates Such funding. for port

nia. He, like others, was nonetheless very frustrated with the lack of political sup- political of lack the with frustrated very nonetheless was others, like He, nia.

very experienced patient advocate familiar with safety nets throughout Califor- throughout nets safety with familiar advocate patient experienced very

Diego “system” was better, just underfunded, was expressed most forcefully by a by forcefully most expressed was underfunded, just better, was “system” Diego

This view that the San the that view This spent more money but wasted a lot of resources and time. and resources of lot a wasted but money more spent

with triage to the right level of care were better than a public hospital system that system hospital public a than better were care of level right the to triage with

passionate in their belief that their private operations and informal cooperation informal and operations private their that belief their in passionate

interviewees in Hillsborough County. Still, San Diego interviewees were quite were interviewees Diego San Still, County. Hillsborough in interviewees

culture that exalts private initiative, in part an acceptance of limits akin to that of that to akin limits of acceptance an part in initiative, private exalts that culture

private operations seemed at its highest. In part, this preference may reflect a local a reflect may preference this part, In highest. its at seemed operations private

In San Diego, where access problems seemed at their worst, the preference for preference the worst, their at seemed problems access where Diego, San In

soured (below). soured

tives in Tampa might be different in 2000 than in 1999, as TGH’s finances have finances TGH’s as 1999, in than 2000 in different be might Tampa in tives

public hospital than did hospital interviewees, but still a small minority. Perspec- minority. small a still but interviewees, hospital did than hospital public

More clinic respondents expressed second thoughts about the privatization of the of privatization the about thoughts second expressed respondents clinic More

with public hospital operations or specific superiorities of new arrangements. new of superiorities specific or operations hospital public with

of reverting to some form of public management. Usually, they cited problems cited they Usually, management. public of form some to reverting of

making a virtue of necessity, as respondents were urged to assume the feasibility the assume to urged were respondents as necessity, of virtue a making

petitive era. These opinions seemed to be sincere expressions of beliefs, not just not beliefs, of expressions sincere be to seemed opinions These era. petitive

tem. Almost all saw public hospitals as inefficient or unable to thrive in a com- a in thrive to unable or inefficient as hospitals public saw all Almost tem.

Very few respondents anywhere wanted to go back to the public hospital sys- hospital public the to back go to wanted anywhere respondents few Very

Clinics also complain about the difficulty of hospital access. hospital of difficulty the about complain also Clinics

three weeks—but a press account says that long waits are common (Shaffer 1999). (Shaffer common are waits long that says account press a weeks—but three

example, giving 78 percent of patients nonurgent physical examinations within examinations physical nonurgent patients of percent 78 giving example,

vice. Philadelphia city clinics report that they deliver primary care promptly—for care primary deliver they that report clinics city Philadelphia vice. and that hospital officials felt closely watched by local press for any denial of ser- of denial any for press local by watched closely felt officials hospital that and constitutes a true emergency, as against merely “urgent” care. Nor is the boundary clear between urgent and elective services. A reasonable hypothesis is that adjustment in these definitions is how providers cope with differences in avail- ability of resources across regions and over time.62

Looking Ahead

Most interviewees thought that the near future looked less favorable for the safety net than the recent past. A diminution in access over time would be quite plausible—and consistent with research evidence that access for the uninsured is generally worse where there are no public hospitals (Long and Marquis 1999; Thorpe and Brecher 1987). A major open policy question is whether governments might expand the new, nonhospital safety nets or take other new initiatives. A major open research question is whether localities with the new managed indigent care programs achieve better population health than those relying on public hospitals.

In all five localities, interviewees at safety net and other hospitals expressed doubts about their ability to continue to cross-subsidize free care for the indigent at accustomed levels. They have all had to economize just to cope with fiscal pressure from managed care and public payers, with staff cuts the most often men- tioned initial strategy. It is unclear whether they have kept pace with other private-sector competitors in right-sizing; in improving management capabilities, notably for information systems; and in developing long-term business plans to maintain revenues and contain expenditures. As for the bottom line, most respondents expected small or negative hospital margins in 1999. All hospital interviewees were especially concerned about federal cutbacks in Medicare and Medi- caid under the Balanced Budget Act of 1997. Most expected no letup in hospital competition and further hospital closures or consolidations in their markets.

The former public hospitals have often lost money, despite downsizing and other changes in operations after privatization. In Milwaukee and Boston, expected losses were small; but not in Tampa. TGH lost over $10 million in its second year of private operations, ending September 1999; fiscal results have been worse than they were under public management, although public operations ceased before the latest round of Medicare/Medicaid cutbacks (Holewa 2000a, b). TGH’s losses rose in early 2000, its bond rating was cut, and insurers of the bonds began demanding action (Shepherd 2000). The crisis prompted some $20 million in additional state and local subsidy in May (Testerman 2000). Many Philadelphia hospitals had losses in 1998 and 1999, notably including the successor teaching facilities (Stark 2000).

UCSD-Hillcrest was an exception to the pattern of recent losses. It has run $20 to $30 million annual surpluses since large losses in 1995–96 forced major layoffs and restructuring (University of California 1999). In that era, UCSD seriously planned for privatization through merger with either a nonprofit or a for-profit partner, potentially involving closure of the old public facility.

Assessing the New

Federalism 36 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

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THE URBAN THE

ventures in the mid-1990s. the in ventures

tus would have been—as seen when San Diego and Tampa considered for-profit considered Tampa and Diego San when seen been—as have would tus

teaching hospitals (all sites) is less contentious than conversions to for-profit sta- for-profit to conversions than contentious less is sites) (all hospitals teaching

with affected interests (Philadelphia, Tampa). And privatization to nonprofit to privatization And Tampa). (Philadelphia, interests affected with

kee) than where things happen more suddenly or with much less consultation less much with or suddenly more happen things where than kee)

for change is spread out over time and involves stakeholders (Boston, Milwau- (Boston, stakeholders involves and time over out spread is change for

the same location (all others). Smoother implementation occurs where planning where occurs implementation Smoother others). (all location same the

successor institution carries on much or most of the public hospital’s mission at mission hospital’s public the of most or much on carries institution successor

contentious where there is no private replacement (Philadelphia) than where a where than (Philadelphia) replacement private no is there where contentious

Diego) than in times of retrenchment (all others). Hospital closure seems more seems closure Hospital others). (all retrenchment of times in than Diego)

easier to privatize in an era of expanding coverage and easy reimbursement (San reimbursement easy and coverage expanding of era an in privatize to easier

Some privatizations were easier than others, for several reasons: Politically, it was it Politically, reasons: several for others, than easier were privatizations Some

vices—even Philadelphia, which expanded clinics and started a nursing home. nursing a started and clinics expanded which Philadelphia, vices—even

early years. One reason was that all had a strategy for some replacement ser- replacement some for strategy a had all that was reason One years. early

In all these locations, privatization was a political success, especially in its in especially success, political a was privatization locations, these all In

motivated.

potent to leave decisions to health experts. The earlier shifts were less fiscally less were shifts earlier The experts. health to decisions leave to potent

number of public employees, and sobering predictions of red ink were simply too simply were ink red of predictions sobering and employees, public of number

among competing priorities. The weight of hospital budgets in city accounts, the accounts, city in budgets hospital of weight The priorities. competing among

sionmaking was mainly a matter of local public finance and political tradeoffs political and finance public local of matter a mainly was sionmaking

policy for these jurisdictions. Particularly in the more recent privatizations, deci- privatizations, recent more the in Particularly jurisdictions. these for policy

The decision to privatize a public hospital was only partly a matter of health of matter a partly only was hospital public a privatize to decision The

success.

Decisions to privatize were political, and privatization was a political a was privatization and political, were privatize to Decisions

is problematic. is the but maintained, durability of the new safety nets safety new the of durability

increasing reliance on state and federal funding. funding. federal and state on reliance increasing has thus far been far thus has Access to care to Access

and to to and although curb local support, local curb vital, remains charity hospital services, tient

their buying, the localities opted to to opted localities the buying, their de-emphasize hospital services in favor of outpa- of favor in services hospital de-emphasize

services in order to save local tax dollars and improve services. In services. improve and dollars tax local save to order in services than “make” than

hospital privatization. Change started with a very political choice to to choice political very a with started Change privatization. hospital “buy” rather “buy”

Seven main observations appear from these safety net case studies of 1990s of studies case net safety these from appear observations main Seven

Key Patterns in Privatization in Patterns Key

Concluding Discussion and Policy Implications Policy and Discussion Concluding

real.

CHCs in that area. Elsewhere, the words were not as strong, but the fears were fears the but strong, as not were words the Elsewhere, area. that in CHCs

cutbacks. One Tampa respondent said that the Balanced Budget Act will “kill” will Act Budget Balanced the that said respondent Tampa One cutbacks. Clinics, too, described great fiscal pressure. Again, most focused on federal on focused most Again, pressure. fiscal great described too, Clinics, Managing relations with public hospital unions was particularly important for achieving a smooth transition, except in nonunionized Tampa, and the five sites seemed to have varying degrees of success. Good press relations also facilitate change (Boston, Milwaukee), and media hostility can complicate change and ongoing operations of the new institutions (Tampa).

The “make versus buy” decision was always to buy, through newly integrated systems.

By design, the case studies did not observe sites where localities opted to continue making their own safety net services at public hospitals.63 For the communities involved, a key point is that characterizing the issue as make or buy seemed to facilitate getting out of the hospital business. Being able to present a reasonable alternative—”buying”—eased the shift in priorities away from running a hospital. The opportunity to think as buyers also freed policymakers to be innovative about what type of system might best meet the needs of different types of uninsured people. The 1990s privatizers all created reasonable, if limited, new systems of care, recapturing and reallocating some of the funds that formerly went to the public hospital. Unlike states that help the uninsured by expanding Medicaid or other insured plans, the localities sought to develop a new, noninsured form of public indigent health care plan, based on private, integrated systems of care funded with public monies.

The new systems differ. Milwaukee and Tampa-Hillsborough County created clinic-centered operations; in Boston, the model was successor-hospital-based networking with clinics. In all cases, specialist physicians are covered after referral by a gatekeeping primary doctor, but independent primary physicians are not. Counties exercise tight control in Milwaukee and Tampa—designing their own systems, overseeing enrollment and claims payment alike, and also conducting case management reviews. Boston’s new system owes more to state, federal, and hospital design, and there is much more delegation to the hospital to run its network services; the intent is ultimately to move to capitation as a method of control, but that remains in the future.

The older “systems” evolved more than they were created, but both rely primarily on clinics, either private (San Diego) or public (Philadelphia). Integration of services occurs only through voluntary private coordinating, without a shared administrative structure and with little (San Diego) or no (Philadelphia) money for hospital referrals.

Every new system emphasizes clinics and outpatient care, in search of efficiency.

All the sites sought to emphasize timely provision of outpatient care to replace episodic use of the public hospital, especially the emergency room. In the three new 1990s managed indigent care plans, the outpatient emphasis was inten- tionally designed into the system; it evolved after the older privatizations.

Assessing the New

Federalism 38 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

more true where uninsurance is high (San Diego and Tampa). Much or most pub- most or Much Tampa). and Diego (San high is uninsurance where true more

surance is low (Milwaukee) or moderate (Boston and Philadelphia) and all the all and Philadelphia) and (Boston moderate or (Milwaukee) low is surance

access to nonlocal funds. For the five sites, this was true where the rate of unin- of rate the where true was this sites, five the For funds. nonlocal to access

Public support for indigent care after privatization thus depends mainly on mainly depends thus privatization after care indigent for support Public

rather than seeking more, a trend confirmed by the long-term sites in this study. this in sites long-term the by confirmed trend a more, seeking than rather

performing as intended, and administrators fight to keep the funds they have they funds the keep to fight administrators and intended, as performing

setts’s generous program for Boston. The new systems seem to go unrewarded for unrewarded go to seem systems new The Boston. for program generous setts’s

funding commitments are relatively fixed in dollar terms, even in Massachu- in even terms, dollar in fixed relatively are commitments funding

time—or at least fails to keep pace with medical inflation or needs. The 1990s The needs. or inflation medical with pace keep to fails least at time—or

Even beyond initial savings, it seems that financial support also declines over declines also support financial that seems it savings, initial beyond Even

public workers, particularly in the face of voter preferences for tax relief. tax for preferences voter of face the in particularly workers, public

out the budgetary inertia of a public hospital line item and the political clout of clout political the and item line hospital public a of inertia budgetary the out

priorities. Political support for safety net funding seems harder to mobilize with- mobilize to harder seems funding net safety for support Political priorities.

Savings were not plowed back into medical care, however; they went to other to went they however; care, medical into back plowed not were Savings

efficient private facility than at the public hospital. public the at than facility private efficient

they believed that safety net services would be more apt to survive within a more a within survive to apt more be would services net safety that believed they

meeting budgetary targets. Many hospital advocates also sought savings because savings sought also advocates hospital Many targets. budgetary meeting

obligation to subsidize a public hospital into a closed-end mechanism capable of capable mechanism closed-end a into hospital public a subsidize to obligation

That was one goal of privatization, to economize by converting an open-ended an converting by economize to privatization, of goal one was That

These localities all saved money by privatizing their public hospital safety net. safety hospital public their privatizing by money saved all localities These

federal dollars. federal

Local funding has declined, so safety nets depend heavily on state and state on heavily depend nets safety so declined, has funding Local

grams do. grams

pensated care typically provides more local safety net dollars than the new pro- new the than dollars net safety local more provides typically care pensated

sight of general hospital charity (by state authorities). Overall, hospital uncom- hospital Overall, authorities). state (by charity hospital general of sight

to accept charity patients as well. Only in Boston was there formal public over- public formal there was Boston in Only well. as patients charity accept to

kee and Hillsborough counties sought to get hospitals taking county plan patients plan county taking hospitals get to sought counties Hillsborough and kee

though the localities differed. Other private hospitals contribute as well. Milwau- well. as contribute hospitals private Other differed. localities the though

strong, often embodied in formal agreements to maintain the charitable mission, charitable the maintain to agreements formal in embodied often strong,

outside the new systems. Reliance on the successor hospital was especially was hospital successor the on Reliance systems. new the outside

private hospital charity to fill in for the majority of the uninsured, who remained who uninsured, the of majority the for in fill to charity hospital private

Notwithstanding the new programs, all the 1990s privatizers relied heavily on heavily relied privatizers 1990s the all programs, new the Notwithstanding

Hospital charity remains important, especially at successor hospitals. successor at especially important, remains charity Hospital

within the successor hospitals. successor the within

Respondents also described efficiencies achieved under private management private under achieved efficiencies described also Respondents

ment incentives to providers of care; and sometimes also managing utilization. managing also sometimes and care; of providers to incentives ment

the course of injury or illness, especially for chronic conditions; offering new pay- new offering conditions; chronic for especially illness, or injury of course the

combination of moving care from a high- to a low-cost site; intervening earlier in earlier intervening site; low-cost a to high- a from care moving of combination

tional one-public-hospital-fits-all approach. Efficiencies seem to derive from a from derive to seem Efficiencies approach. one-public-hospital-fits-all tional

backstopped by private hospitals can deliver care more efficiently than the tradi- the than efficiently more care deliver can hospitals private by backstopped The interviews strongly suggest that a community-clinic-based safety net safety community-clinic-based a that suggest strongly interviews The lic spending on uninsured indigent care in these localities is not local but state or federal—through grants-in-aid to localities, DSH funding, and other mechanisms. Even before privatization, local public hospitals were funded mainly by Medicaid and other third-party payments, from which cross-subsidies allowed localities to support safety net care at relatively low local cost. The arrival of managed care and less generous payment from Medicaid and Medicare changed that funding balance but not the need for nonlocal funds.

Access to care can be maintained, but may not be.

The recent privatizations all succeeded in managing change while creating reasonable new safety net programs as a replacement. In the short run, none has seemed to face “horror stories” of life-threatening denial or delay of access. In fact, access to care has probably improved for the fraction of the uninsured poor who are enrolled in the new managed care programs. Rather than relying mainly on a single public hospital and emergency room, enrollees have access to integrated systems of care with outpatient appointment scheduling and organized referral networks.

Problems nonetheless remain for nighttime access and urgent rather than emergency care—problems not unknown to the well-insured middle class. Worse, enrollment in these new indigent managed care programs is not high, and there appears to be considerable turnover. This is a particular problem in programs like these that seek to manage long-term, chronic illness. Moreover, either by design or as a result of implementation decisions, the new programs serve only a fraction of the uninsured in each location. Publicly funded services in San Diego and Philadelphia do even less, providing limited access to care for a very limited number of episodic beneficiaries.

Access for indigents and the working poor not enrolled in the new programs is harder to gauge. Access depends on charity from the same providers as before, especially from the successor to the former public hospital in most of the sites. Early after the 1990s privatizations, hospital-reported uncompensated care remained at least as high as before. Uncompensated care levels, available hospital funding, and apparent hospital effort to provide uncompensated care differed considerably by institution. And everywhere there is some level of blunt hospital triage of indigent patients to clinics or doctors’ offices, whether or not they will be covered by a funding source there. In three of four locations where a successor institution took over for a public hospital, it remained clearly the major safety net institution in its area. Milwaukee’s successor hospital was the exception; there, county policy explicitly sought to reduce concentration of uncompensated care, no continuing public mandate was imposed, and its suburban location was natu- rally less accessible to the largely urban poor.

Overall, to date, virtually no one among the interviewees for this study thought indigent care was worse after privatization. Very few wanted to return to a fully public hospital, although many wanted to expand public funding.64 Assessing the New

Federalism 40 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

care being made from higher levels of government. However, the effort needed to needed effort the However, government. of levels higher from made being care

without running a hospital. It is hard to imagine such changes in local delivery of delivery local in changes such imagine to hard is It hospital. a running without

promising development shows that localities can continue to play a vital role vital a play to continue can localities that shows development promising

grams, establishing health plans to supplant their public hospitals. This very This hospitals. public their supplant to plans health establishing grams,

The case study localities created innovative and efficient new safety net pro- net safety new efficient and innovative created localities study case The

Localities can innovatively restructure safety net care. net safety restructure innovatively can Localities

and higher levels of government. of levels higher and

These findings suggest that safety net policy needs to be made at both local both at made be to needs policy net safety that suggest findings These

Implications for Policy for Implications

called a “doughnut” approach to hospital location. hospital to approach “doughnut” a called

vate hospitals to relocate further away, in what one Boston hospital executive hospital Boston one what in away, further relocate to hospitals vate

funding could falter and a central-city safety net failure could prompt other pri- other prompt could failure net safety central-city a and falter could funding

federal program reimbursement, for example. In the worst-case scenario, public scenario, worst-case the In example. for reimbursement, program federal

recession, increased competition in the local hospital sector, or further changes in changes further or sector, hospital local the in competition increased recession,

safety nets seem vulnerable to unanticipated reversals of many sorts—the next sorts—the many of reversals unanticipated to vulnerable seem nets safety

For all these reasons, absent more secure public guarantees of funding, the funding, of guarantees public secure more absent reasons, these all For

same seems true in Tampa in 2000. in Tampa in true seems same

tressed to contemplate “their” hospital’s potential failure in the mid-1990s. The mid-1990s. the in failure potential hospital’s “their” contemplate to tressed

Despite long-standing privatization, public officials in San Diego were very dis- very were Diego San in officials public privatization, long-standing Despite

ferent, not least for other nearby hospitals that expect demands for charity to rise. to charity for demands expect that hospitals nearby other for least not ferent,

losing a community hospital or two. Losing a flagship safety net institution is dif- is institution net safety flagship a Losing two. or hospital community a losing

community with 10 or 20 hospitals, like those examined here, can countenance can here, examined those like hospitals, 20 or 10 with community

the remaining uninsured, but also to participate in the new indigent care plans. A plans. care indigent new the in participate to also but uninsured, remaining the

phia’s) remain very dependent on only one or two hospitals—not merely to serve to merely hospitals—not two or one only on dependent very remain phia’s)

the safety nets fragile. As a practical matter, all the safety nets (except Philadel- (except nets safety the all matter, practical a As fragile. nets safety the

Finally, continued reliance on a few hospitals as dominant providers makes providers dominant as hospitals few a on reliance continued Finally,

to support indigent hospital care. hospital indigent support to

ers. Interviewees described no willingness among payers to voluntarily pay extra pay voluntarily to payers among willingness no described Interviewees ers.

along with continuing demands to economize from both private and public buy- public and private both from economize to demands continuing with along

among hospitals, often including actual or threatened for-profit competition, for-profit threatened or actual including often hospitals, among

problems as well. The dominant expectation is for continued price competition price continued for is expectation dominant The well. as problems

cially affected are safety net and teaching hospitals, but community clinics face clinics community but hospitals, teaching and net safety are affected cially

indigent plans is at risk, given federal cutbacks in Medicare and Medicaid. Espe- Medicaid. and Medicare in cutbacks federal given risk, at is plans indigent

Moreover, private hospitals’ care for the uninsured not eligible for the new the for eligible not uninsured the for care hospitals’ private Moreover,

annual appropriations or even specifically time limited. time specifically even or appropriations annual

hospital. Commitment to funding over time is not guaranteed, but subject to subject but guaranteed, not is time over funding to Commitment hospital.

cut funds for an indigent plan than it was to lay off employees at the old public old the at employees off lay to was it than plan indigent an for funds cut

ities have already cut back. Further, in any future fiscal crunch, it will be easier to easier be will it crunch, fiscal future any in Further, back. cut already have ities

either the financing side or the delivery side. The systems are still new, and local- and new, still are systems The side. delivery the or side financing the either

There are reasons for concern about how well the 1990s systems will last—on will systems 1990s the well how about concern for reasons are There The durability of these new safety nets remains to be tested. be to remains nets safety new these of durability The reorganize local delivery of indigent care was substantial, the programs remain relatively small, and continued local funding is problematic. How many other localities can emulate these is unknown. Casual empiricism suggests that not many have.

The need for a facility-based safety net persists despite coverage expansions.

In the observed sites, many people remained uncovered despite the new programs. For the foreseeable future, the need for a facility-based safety net for the uninsured will not go away. No expansion of managed care or other coverage will reach everyone—short of mandatory, universal health insurance, which remains politically unattainable. Localities certainly cannot insure the millions of people not insured by their employers or their states. For the uninsured, American law and social expectations focus on hospitals in dictating that some level of service be provided. Because need varies by location, so does the safety net burden. How best to organize the safety net and how generously to fund it are, for now, typically local issues because of localities’ traditional and sometimes state-mandated role in running public hospitals. The localities observed here stopped running their public hospitals, but private hospital charity remained a very large part of their local safety nets.

A robust local safety net needs nonlocal funding.

A durable local safety net calls for more durable funding than was observed in these sites. The case studies do raise hopes that politically feasible models may evolve, combining some of the secure funding seen in Boston with some of the delivery innovations seen in more parsimonious areas. Feasibility in the case of the safety net seems likely to depend on support from higher levels of government, as well as maintenance of local effort. This should not be surprising, as the poor and the uninsured are geographically concentrated but the tax base is not. Similar circumstances in education also have led to large state and federal transfers to localities. “Local” schools are in fact more than half funded by nonlocal sources.65 Likewise, federal support outweighs state spending for Medicaid and the new children’s insurance programs.

State or federal help could be added to local funding and maintained through Medicaid and Medicare, including DSH payments. Current federal policy, however, is moving in the opposite direction; such allowances that help safety net facilities are scheduled to decline under the Balanced Budget Act of 1997. Support could also come through reorganization of the entire complex of state and federal funding flows in order to fund alternative forms of coverage, as is now done in Massachusetts and is being planned for San Diego.

The traditional mechanism for tapping broader revenue bases was hospital cross-subsidy from paying patients. Under some market conditions, such private support might still be feasible, at least for a while. For example, a hospital chain operating regionally might earn sufficient revenues in less competitive or better Assessing the New

Federalism 42 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

subsidize the former public hospital. public former the subsidize

the newfound willingness of Hillsborough County (and the state of Florida) to Florida) of state the (and County Hillsborough of willingness newfound the

nets. One is San Diego’s declared intent to greatly expand coverage. The other is other The coverage. expand greatly to intent declared Diego’s San is One nets.

As of early 2000, the study sites offer two encouraging signs for their safety their for signs encouraging two offer sites study the 2000, early of As

themselves.

all hospitals to provide funding for indigent care if they do not provide the care the provide not do they if care indigent for funding provide to hospitals all

may be required, akin to Massachusetts’s free care pool that essentially requires essentially that pool care free Massachusetts’s to akin required, be may

tarily. In larger communities with multiple hospitals, mandatory arrangements mandatory hospitals, multiple with communities larger In tarily.

payers and taxpayers alike may be more willing to support the hospital volun- hospital the support to willing more be may alike taxpayers and payers

indigents rely on the same community hospital. In small communities, health communities, small In hospital. community same the on rely indigents

in smaller communities, unlike those observed, where both paying patients and patients paying both where observed, those unlike communities, smaller in

safety net care, as may occur in Philadelphia. Cross-subsidy may be maintainable be may Cross-subsidy Philadelphia. in occur may as care, net safety

can still charge a premium price, from which they can afford to subsidize some subsidize to afford can they which from price, premium a charge still can

institutions may constitute “must have” hospitals for managed care, so that they that so care, managed for hospitals have” “must constitute may institutions

may be happening in central Milwaukee. Alternatively, prestigious academic prestigious Alternatively, Milwaukee. central in happening be may insured areas to subsidize its charitable mission in a high-poverty location, as location, high-poverty a in mission charitable its subsidize to areas insured

Appendix A

State-Local Relations and the Medically Indigent

A major reason that localities run public hospitals or other programs to assist the medically indigent is that their states directly require or encourage them to do so, through mandates or funding assistance.66 Another major influence on local safety nets is indirect—that is, the extent of state efforts to provide insurance coverage statewide, mainly through Medicaid but also through other, smaller programs (Krebs-Carter and Holahan 2000). Medicaid is by far the biggest influence on indigent access to care in any location. More generous Medicaid and other coverage not only buys access for the covered beneficiaries, it also helps keep hospitals and clinics solvent and able to provide free and reduced-price care to poor people who remain uninsured.

The states of which these five localities are part vary substantially along these two dimensions of state support—for the safety net and for insurance coverage (table A2). With regard to safety net support, Massachusetts and Florida impose no general legal requirements and provide no general aid for local services. Hills- borough County reads several different state enactments as requiring it to provide for indigents, but many Florida counties do not. The other three states all take moderate steps to encourage local efforts, mainly through grants for general assistance programs or health services at the local level. None of the localities in this study has a strong state mandate to pay for indigent care (Wisconsin formerly did), nor very generous state funding for indigent care funneled through local government, as opposed to medical providers directly. Univ. of Penn. Univ. of Penn. Mt. Sinai Presbyterian St. Agnes Thomas Jefferson Univ. John L. Doyne Froedtert Memorial Froedtert Boston City Boston Univ. New England Baptist Tampa General UCSD New England St. Elizabeth’s Mass. General St. Francis St. Luke’s St. Michael usted expense per equivalent discharge from the acute care unit the acute care from usted expense per equivalent discharge amely discharges) to approximate a commensurate amount of out- to approximate amely discharges) . Calculated as the ratio of gross patient revenue to inpatient revenue, patient revenue . Calculated as the ratio of gross Roxborough Univ. Temple Medical College Israel Women’s County Univ.Community Carrollwood UCH- Samaritan Carney Beth Faulkner Brigham & Memorial St. Joseph’s Neumann Pennsylvania Hospital of the Memorial Mercer Hill System Parkview Northeastern Kennedy John F. Jeanes Germantown Nazareth Allegheny General St. Joseph’s Sinai St. Mary’s Lakeview Hospital Efficiency in 1995, by Decile Ranking Data compiled from HCIAData compiled from (1997). Only includes hospitals with sufficient data to generate an efficiency rating. Efficiency is measured by case mix- and wage-adj is measured rating. Efficiency data to generate an efficiency Only includes hospitals with sufficient Table A1 Table CityMilwaukee Northwest 1Boston 2 3Tampa 4San Diego 5Philadelphia 6 Kensington 7 Chestnut Kaiser Graduate Health St. Joseph’s Sharp Episcopal 8 & Town Frankford Alvarado 9 The Graduate Albert Einstein 10 Villa View Harborview Sharp Cabrillo of each hospital. Equivalent discharges are computed as total hospital discharges multiplied by an outpatient adjustment factor computed as total hospital discharges are of each hospital. Equivalent discharges a method of using inpatient units volume (n the adjustment factor provides and other nonacute revenue, excluding subprovider patient volume. Source: Source: Notes:

Assessing the New

Federalism 46 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

mental health facilities. health mental

Amounts exclude payments to inpatient to payments exclude Amounts Note:

appear to repay intergovernmental transfers intergovernmental repay to appear

Services. 2000a. Services.

Diego, where about half of the funds to UCSD to funds the of half about where Diego, U.S. Department of Health and Human and Health of Department U.S. Source:

new funding for these hospitals, except in San in except hospitals, these for funding new hldlha35 Philadelphia

in table A3). The DSH funds appear to represent to appear funds DSH The A3). table in a ig 87 Diego San

Financing Administration Web page referenced page Web Administration Financing ap 23 Tampa

successors (not presented; see Health Care Health see presented; (not successors otn196 Boston

DSH funds are heavily concentrated to those to concentrated heavily are funds DSH iwue 7 Milwaukee

gle successor to its former public hospital, the hospital, public former its to successor gle

iyPayments City

funds. Except in Philadelphia, which has no sin- no has which Philadelphia, in Except funds.

Local Hospital Local

lic system gets the lion’s share of state DSH state of share lion’s the gets system lic

public hospital. Los Angeles County’s huge pub- huge County’s Angeles Los hospital. public ($ millions), FFY 1998 FFY millions), ($

DSH Allotments Allotments DSH Table A3 Table state’s DSH funds—owing to its lack of a local a of lack its to funds—owing DSH state’s

nia’s population but gets only 4 percent of the of percent 4 only gets but population nia’s

percent of the state’s DSH dollars. San Diego, in contrast, has 9 percent of Califor- of percent 9 has contrast, in Diego, San dollars. DSH state’s the of percent

Milwaukee, for example, has about 17 percent of the state’s population but gets 85 gets but population state’s the of percent 17 about has example, for Milwaukee,

different shares of state DSH dollars relative to their populations (table 3, above). 3, (table populations their to relative dollars DSH state of shares different

far smaller impact in Milwaukee than in Boston and also that the localities get very get localities the that also and Boston in than Milwaukee in impact smaller far

lars going to nonpsychiatric facilities (table A3). Table A3 confirms that DSH has a has DSH that confirms A3 Table A3). (table facilities nonpsychiatric to going lars

More specifically, the observed localities varied greatly in 1998 Medicaid dol- Medicaid 1998 in greatly varied localities observed the specifically, More

health spending—or to prevent otherwise likely reductions. likely otherwise prevent to spending—or health

incentives is similar. Generally, most federal DSH funds flow through to increase to through flow funds DSH federal most Generally, similar. is incentives

Tampa General. This is not a county program per se, but the effect on hospital on effect the but se, per program county a not is This General. Tampa

ing dollars; almost double the local contribution was promised to be returned to returned be to promised was contribution local the double almost dollars; ing

for some years contributed local funds to help the state draw down federal match- federal down draw state the help to funds local contributed years some for

matching funds. In Tampa, HCHCP is not eligible for DSH funding; the county has county the funding; DSH for eligible not is HCHCP Tampa, In funds. matching

erwise due. In Boston, the state’s generous free care pool draws down federal DSH federal down draws pool care free generous state’s the Boston, In due. erwise

of DSH funding also go to hospitals, but are offset against county payments oth- payments county against offset are but hospitals, to go also funding DSH of

entirely eligible for federal match, about two-thirds through DSH; small amounts small DSH; through two-thirds about match, federal for eligible entirely

consin, the state contribution for Milwaukee County’s indigent care coverage is coverage care indigent County’s Milwaukee for contribution state the consin,

tially as grants, as add-ons to the Medicaid hospital payment rates, or both. In Wis- In both. or rates, payment hospital Medicaid the to add-ons as grants, as tially

other Medicaid federal matching. DSH-related funds may flow in blocks, essen- blocks, in flow may funds DSH-related matching. federal Medicaid other

fers by making indigent care programs, hospitals, or clinics eligible for DSH or DSH for eligible clinics or hospitals, programs, care indigent making by fers

States may also provide local assistance with a contribution from federal cof- federal from contribution a with assistance local provide also may States

al. (1999). al.

Authors’ rankings based on: a. NHeLP (1997); b. Coughlin and Liska (1997); c. Spillman (2000), table 1; d. Ullman et Ullman d. 1; table (2000), Spillman c. (1997); Liska and Coughlin b. (1997); NHeLP a. on: based rankings Authors’ Sources:

enyvnaMdrt oeaeCmrhnieComprehensive Comprehensive Moderate Moderate Pennsylvania

aionaMdrt oeaeMdrt Comprehensive Moderate Moderate Moderate California

lrd iie oeaeLmtdModerate Limited Moderate Limited Florida

ascuet iie opeesv opeesv Moderate Comprehensive Comprehensive Limited Massachusetts

icni oeaeLmtdMdrt Moderate Moderate Limited Moderate Wisconsin

Program Eligibility Program Adults federal) (and Effort Local for

c b a d

Incentives DSH Support State Effort New Children’s New Effort State Support DSH Incentives

State State Level of Extent of Extent of Level State State

For Safety Net For Insurance Coverage Insurance For Net Safety For

States’ Efforts to Boost the Safety Net and Reduce the Uninsured the Reduce and Net Safety the Boost to Efforts States’ Table A2 Table required of the hospital by the state in order to draw down extra federal dollars. However, disentangling DSH funding flows is complex (Ku and Coughlin 1995); making a more precise assessment of net benefits by hospital would require substantially more information.

The second half of table A2 categorizes states’ efforts to provide insurance coverage. For Medicaid and other traditional programs, the study locations range from limited (Florida) to quite comprehensive (Massachu- setts and Pennsylvania). These rankings are based on state eligibility rules for Medicaid, including generosity of income limits, design of any medically needy option, and estimated adult eligibility, as well as caseload of state-only programs, all mainly for adults (Spillman 2000). Boston and Philadelphia thus get a lot of indirect help from their states. They also benefit from high rates of private insurance coverage, almost all from employment groups. State and private coverage together create these cities’ low levels of uninsurance (table 3, above). Florida and California, in contrast, have relatively low levels of private employer insurance; Wisconsin has a very high level.

Also presented in table A2 is a ranking of state efforts on children’s health insurance programs (CHIP)—expansions of insurance coverage for children not eligible for Medicaid (Ullman et al. 1999). Here, states vary in the share of the population targeted, based on the generosity of their income eligibility limits. Wisconsin, for example, is covering children up to 185 percent of the federal poverty level, whereas Pennsylvania’s target is 235 percent—an especially strong state effort. As yet, however, because the state children’s programs are so new, none is large enough to have much impact on localities’ incentives to help the indigent or on the level of burden that localities face. Table A2 includes these programs mainly because they will become larger factors in the future.

Assessing the New

Federalism 48 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION Appendix B

People Interviewed for This Project Listed by Site*

Boston, Massachusetts Neil Cronin Massachusetts Law Reform Institute James Hooley Neighborhood Health Plan James W. Hunt, Jr. Massachusetts League of Community Health Centers Joe Kirkpatrick Massachusetts Hospital Association Katherine London Massachusetts Division of Health Care Finance and Policy Pat McGovern CareGroup, Inc./Beth Israel-Deaconess Hospital John E. McDonough Heller School, Brandeis University Diane McKenzie Massachusetts Division of Health Care Finance and Policy James J. Mongan, M.D. Massachusetts General Hospital Alan Sager Boston University School of Public Health Thomas P. Traylor Boston Medical Center

Hillsborough County/Tampa, Florida Krishan K. Batra, M.D. Hillsborough County Health Plan Patricia G. Bean Hillsborough County Office of the Administrator Charles R. Bottoms Tampa Community Health Center, Inc. Roy Burgess University Community Hospital Michael Cole Chamberline Funding Group, formerly Advisory Committee, Hillsborough County Health Care Plan Madeline Courtney Hillsborough County Hospital Authority John S. Curran, M.D. Univ. of South Florida College of Medicine Gloria Elliott Tampa Community Health Center, Inc. Vincent Ferlita Hillsborough County Department of Health and Social Services Debbie Hegerty Florida Hospital Association Patricia L. Heiser Hillsborough County Department of Health and Social Services David A. Higginson Hillsborough County Department of Health and Social Services Victor J. Martinez, M.D. Hillsborough County Department of Health and Social Services Burt Parmer Suncoast Community Health Centers, Inc. Dennis Penzel, D.O. Suncoast Community Health Centers, Inc. David P. Rogoff Health Care Consulting Bruce Siegel, M.D. Tampa General Hospital Kim Streit Florida Hospital Association

Milwaukee County, Wisconsin John J. Bartkowski, M.D. Sixteenth Street Community Health Center, Inc. Bill Bazan Wisconsin Health and Hospital Association Joseph Cooper Milwaukee County GAMP program Pat Kaldor St. Joseph’s Hospital Richard P. Lofgren, M.D. Medical College of Wisconsin Paula Lucey Milwaukee County Division of Health-Related Programs Pat McManus Black Health Coalition of Wisconsin Karen M. Ordinans Milwaukee County Board of Supervisors Mike Panosh Aurora Health Care/Sinai Samaritan Medical Center Tom Reilly St. Luke’s Medical Center Peggy A. Rosenzweig State Senator Barbara A. Rudolph Wisconsin Bureau of Health Information Louise G. Trubek Center for Public Representation Earnestine Willis, M.D. Center for the Advancement of Urban Children, Medical College of Wisconsin

Philadelphia, Pennsylvania Tracy Christie-McLain Abbottsword Community Health Center Patricia Dietch Fairmount Health Center Thomas E. Getzen School of Business and Management, Temple University Natalie Levkovich Health Federation of Philadelphia Michael G. Lucas Philadelphia Health Department Doug Maier North Philadelphia Health System Art Piper Katz Consulting Group, Inc. Estelle B. Richman Philadelphia Health Department Ann S. Torregrossa Pennsylvania Health Law Project Donna Torresi Abbottsford Community Health Center Ken Villwalk Pennsylvania Health Care Cost Containment Commission Andrew B. Wigglesworth Delaware Valley Healthcare Council of the Hospital & Health- system Association of Pennsylvania

San Diego County, California Alesha Andrews Healthcare Association of San Diego and Imperial Counties Clyde H. “Bud” Becker, ScrippsHealth Hospital System Jr. M.D. Michael Ann “Mickie” Beyer Council of Community Clinics Mary Jo Grubbs Community Health Group Sumiyo E. Kastelic University of California-San Diego Medical Center Randy Meecam County of San Diego Department of Health Services Robert K. Ross, M.D. County of San Diego Department of Health Services Barbara Ryan Children’s Hospital and Health Center Jan Spencley The Mithras Group, LLC Lucien Wulsin, Jr. Insure the Uninsured Project, Center for Governmental Studies Judith Yates Healthcare Association of San Diego and Imperial Counties

Other Stephanie Anthony Economic and Social Research Institute, Washington, D.C. Larry S. Gage National Association of Public Hospitals, Washington, D.C. Mark Legnini Economic and Social Research Institute, Washington, D.C.

* Interviewees of prior visits to Boston, Hillsborough County, Milwaukee, and San Diego are listed in earlier publications (see Assessing endnote 6). the New

Federalism 50 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION Notes

1. IOM (2000) assesses factors influencing safety net providers nationwide. The most recent estimate from the Census Bureau is that 44.3 million people were uninsured for all of 1998 (Campbell 1999). Holahan and Kim (2000) describe recent trends in rates of insurance coverage; recent rises in uninsurance are mainly attributable to declines in Medicaid coverage. The income distribution of the uninsured comes from unpublished data from the Urban Institute National Survey of America’s Families (1997), described at http://newfederalism.urban.org/nsaf/. Just under one-third of the uninsured have incomes below the federal poverty level (FPL), and two-thirds are below 200 percent of FPL. 2. Friedman (1997) quotes advocates on both sides of this debate as of the late 1990s in California. 3. Coughlin et al. (1998) and Holahan et al. (1997). 4. As a final check on accuracy of fact and interpretation, copies of this paper were made available to national experts as well as to at least three readers in each jurisdiction— representing government, hospitals, and clinics. 5. A caution: This study mainly observed large urban public hospitals thought able to survive only by privatizing. Such privatization is only one option. Andrulis (1997) emphasizes two others—reinvigorating public institutions for market competition and downsizing them to concentrate only on the poor, with targeted public subsidy. Another option is simply to close, as in Philadelphia. A full understanding of safety nets calls for comparisons with urban areas that have more robust public institutions, as well as more rural areas where the public facility may be the sole community provider. The localities in this study could move away from total reliance on their public hospitals because they had many alternatives for both inpatient and outpatient department care. 6. Important written sources for this background section include: all sites—Norton and Lipson (1998b); the Urban Institute’s prior, published case studies (1997, 1998) of health policy in California, Florida, Massachusetts, and Wisconsin; as well as highlights for Pennsylvania (various authors; see, for example, http://newfederalism.urban.org/ html/WIHealth.htm); Milwaukee—Lipson and Marsteller (1997), White (1999); Boston—Bovbjerg (1997), Corrigan et al. (1997), Katz (1995), Williams et al. (1999); Tampa—Florida Hospital Association (1999), Hillsborough County (2000), Lipson and Norton (1997), Needleman et al. (1999); San Diego—Hospital Council of San Diego and Imperial Counties (1997), Jacob (1999), Miller et al. (1996); Philadelphia—Burns et al. (2000), Gesensway (1997). 7. For example, although the city of Milwaukee represents almost two-thirds of the county’s population, it has less than half of the county’s tax base. 8. The metropolitan regions of table 3 are much larger in population than the public hospital jurisdictions of interest in this paper—except for San Diego County, which constitutes a metropolitan area by itself. The central cities and counties of these metropolitan areas are believed to have rates of uninsurance higher than the metro average figures of table 3 because cities generally have far more than their pro rata share of the metropolitan area uninsured. [In Milwaukee County, for example, interviewees said that 90 percent of people getting county health assistance live in the city, whereas table 3 shows that the city has less than two-thirds of the county’s total population. See also Center for Public Representation (1999).] Recent local estimates of uninsurance are often higher than table 3 would suggest—150,000 in Milwaukee (Milwaukee County 2000) and more than 600,000 in San Diego. 9. The Scripps system, one of the three main hospital systems in San Diego, asserts that the county is 20 percent overbedded. It is closing the eastmost hospital in the county, which has only a 30 percent occupancy rate (Scripps Health 2000). 10. Important written sources for this section on motives for privatization include: Mil- waukee—Lucey (1999), Schuldt (1995); Sneider (1995); Boston—Kohn et al. (1997), Sager et al. (1994); Tampa—Bunton-Pierce (1997), Holewa (2000b); San Diego—RHAC (1998), UCSD (2000), University of California (1999); Philadelphia—Friedman (1987b). 11. As the architect of Tampa’s privatization argued in an early report aimed at New York City, “Public hospital systems need more autonomy and expertise in their governance, as well as the ability to experiment and partner with other parts of the industry. This may require the conversion of some public hospitals to full not-for-profit status with independent self-perpetuating boards, as occurred at Regional Medical Center in Memphis. These corporations would be chartered with safety net missions and might have some government appointees initially. Their funding would be contingent upon continuation of their public missions as measured by clearly articulated quantitative criteria. Labor relations, budgeting, procurement, and personnel would belong exclu- sively to these corporations.” (Siegel 1996.) 12. Meyer et al. (1999) report that county facilities in Miami, Oakland, and Houston had deficits ranging from 20 percent to more than 50 percent of operating costs—much higher than those in Milwaukee, Boston, or Tampa. Moreover, in Tampa, the county was not directly responsible for any deficit. 13. The hospital’s last day of operations was December 21. 14. In 1980, the county had shifted TGH governance to an independent hospital authority, in large part so that the county would no longer have to backstop hospital bonds. Thereafter the county was not technically responsible for any hospital deficit, but it was paying ever-increasing amounts for indigent care. In 1992, the county ceased direct funding of TGH in favor of funding its new Hillsborough County Health Plan (described below). Also in the earlier 1990s, hospital employees had been shifted out of civil service, and staff pensions had been privatized. 15. Important written sources for this section on transition to new systems include: Mil- waukee—Milwaukee County (1997), Wisconsin Legislative Audit Bureau (1997); Boston—Brenneman (1997), Legnini et al. (1999); Tampa—Bunton-Pierce (1997), Hills- borough County (1997a, b); San Diego—RHAC (1998); Philadelphia—Friedman (1987b). 16. An additional 20 days was allowed for the county attorney to consider the ramifica- tions for ultimate public liability (American Health Line 1997). 17. TGH has sought additional revenues. At the time of the site visit in June 1999, TGH was asking the county to help restore its former prerogative as a public institution to levy a lien against any legal recoveries made by its patients where the hospital has provided below-cost care. The typical case is an auto accident victim brought to TGH’s level 1 trauma center who later recovers an award on an auto liability claim. County officials say they warned the hospital that going private would end this entitlement, but nothing was done at the time. The value of the provision is estimated variously from $8 million to $18 million annually. Another liability-related loss to TGH is that as a private institution its responsibility for personal injury claims is no longer limited to $200,000 per claim, as it was when it was public and benefited from sovereign immunity pro- Assessing tection under state law. In one claim alone in 1990, the hospital had to pay $1.775 mil- the New

Federalism 52 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

http://www.tgh.org/about_tgh/about_tgh.htm, accessed February 15, 2000. 15, February accessed http://www.tgh.org/about_tgh/about_tgh.htm,

Indigent care goes unmentioned in the institution’s self-description on its Web page Web its on self-description institution’s the in unmentioned goes care Indigent

of the best in the nation,” its mission to be “a catalyst for excellence in medical care.” medical in excellence for catalyst “a be to mission its nation,” the in best the of

26. The hospital’s vision is to “be recognized as a leading medical center in Florida and one and Florida in center medical leading a as recognized “be to is vision hospital’s The 26.

homeless.

Clinic sources say that the requirements for proof of residency effectively exclude the exclude effectively residency of proof for requirements the that say sources Clinic

intake seems to be providers, so enrollees are mainly people sick enough to seek care. seek to enough sick people mainly are enrollees so providers, be to seems intake

25. Plan eligibility is not limited to people who are sick, but in practice the main source of source main the practice in but sick, are who people to limited not is eligibility Plan 25.

bridge Hospital. bridge

federal approach is used to support an analogous network run by the still-public Cam- still-public the by run network analogous an support to used is approach federal

waiver plan took effect in 1997, a year after the hospital merger; and the same state- same the and merger; hospital the after year a 1997, in effect took plan waiver

merger; final implementation and funding depended on state-federal action; the action; state-federal on depended funding and implementation final merger;

24. HealthNet was begun under Medicaid on a pilot basis in 1994, two years before the before years two 1994, in basis pilot a on Medicaid under begun was HealthNet 24.

care (Weissman et al. 1999). al. et (Weissman care

a clear majority should qualify for some insurance program in place of hospital free hospital of place in program insurance some for qualify should majority clear a

that most services and payments are for people below 133 percent of the FPL and that and FPL the of percent 133 below people for are payments and services most that

23. Analysis of claims under the uncompensated care pool before HealthNet suggested HealthNet before pool care uncompensated the under claims of Analysis 23.

services, paid under the pool, not under HealthNet. under not pool, the under paid services,

visitors who are only temporarily in the state can receive only emergency and urgent and emergency only receive can state the in temporarily only are who visitors

the federal poverty level, partial coverage if below 400 percent of the FPL. Residents or Residents FPL. the of percent 400 below if coverage partial level, poverty federal the

22. Permanent state residents get fully free care if their incomes are below 200 percent of percent 200 below are incomes their if care free fully get residents state Permanent 22.

marked grants as well. as grants marked

in Medicare and Medicaid hospital payment rates. Often there are other, specially ear- specially other, are there Often rates. payment hospital Medicaid and Medicare in

and to a lesser extent Medicare DSH funding, along with teaching adjustments made adjustments teaching with along funding, DSH Medicare extent lesser a to and

21. Key sources include Medicaid allowances for disproportionate share hospitals (DSH), hospitals share disproportionate for allowances Medicaid include sources Key 21.

to accept patients or provide free care (Bovbjerg and Kopit 1986). Kopit and (Bovbjerg care free provide or patients accept to

health center grants are also required to offer charity; physicians have no general duty general no have physicians charity; offer to required also are grants center health

Hospitals and community clinics that have received federal Hill-Burton or community or Hill-Burton federal received have that clinics community and Hospitals

charity to maintain their nonprofit status and tax exemptions (Marsteller et al. 1998). al. et (Marsteller exemptions tax and status nonprofit their maintain to charity

Labor Act, 42 USC § 1395dd (1994)]. Nonprofit hospitals must provide some level of level some provide must hospitals Nonprofit (1994)]. 1395dd § USC 42 Act, Labor

sent in an emergency or in active labor [Emergency Medical Treatment and Active and Treatment Medical [Emergency labor active in or emergency an in sent

all of them) to assess and at least stabilize for appropriate transfer all patients who pre- who patients all transfer appropriate for stabilize least at and assess to them) of all

20. Federal law requires hospitals participating in Medicare or Medicaid (which is almost is (which Medicaid or Medicare in participating hospitals requires law Federal 20.

Philadelphia—Friedman (1987b), Shaffer (1999). Shaffer (1987b), Philadelphia—Friedman

Civil Grand Jury (1999), University of California (1998, 1999), Wulsin et al. (1999); al. et Wulsin 1999), (1998, California of University (1999), Jury Grand Civil

son and Norton (1997), Norton and Lipson (1998b); San Diego—San Diego County Diego Diego—San San (1998b); Lipson and Norton (1997), Norton and son

Tampa-Hillsborough County—Bean (1997), Hillsborough County (1997a, b; 1999), Lip- 1999), b; (1997a, County Hillsborough (1997), County—Bean Tampa-Hillsborough

han et al. (1997), Legnini et al. (1999), Norton and Lipson (1998b), Traylor (1996); Traylor (1998b), Lipson and Norton (1999), al. et Legnini (1997), al. et han

ical Center (1999), Bovbjerg (1997), Bovbjerg et al. (2000), Corrigan et al. (1997), Hola- (1997), al. et Corrigan (2000), al. et Bovbjerg (1997), Bovbjerg (1999), Center ical

and Marsteller (1997), Lucey (1999), Milwaukee County (2000); Boston—Boston Med- Boston—Boston (2000); County Milwaukee (1999), Lucey (1997), Marsteller and

19. Important written sources on the design of new systems include: Milwaukee—Lipson include: systems new of design the on sources written Important 19.

Medicaid DSH, enhanced by a federal match achieved at the state level. state the at achieved match federal a by enhanced DSH, Medicaid

its DSH intergovernmental transfer program that sent county funds to the hospital via hospital the to funds county sent that program transfer intergovernmental DSH its

18. The county continued to provide a small amount of indirect support to TGH through TGH to support indirect of amount small a provide to continued county The 18.

bers on the TGH board (Karp 2000b). (Karp board TGH the on bers

TGH and greater public oversight, most recently seeking to put county-selected mem- county-selected put to seeking recently most oversight, public greater and TGH lion (Shepherd 1998). The county commissioners have sought much more openness at openness more much sought have commissioners county The 1998). (Shepherd lion 27. The county also runs a very small program called Primary Care Services, which funds community clinics. 28. San Diego County also has the unusual ability to increase insurance coverage through its administration of enrollment for MediCal and the new state children’s health insurance program. Ironically, some observers complain that the county in practice holds down MediCal enrollment, thus increasing the pressure of the uninsured on the small county medical services (CMS) program. 29. Hospital interviewees reported that by law 3 percent of their hospital care must be uncompensated care in Pennsylvania, but that most hospitals easily exceed this level. 30. This section on performance of the new systems relies heavily on interviews and recent news accounts. Important written sources include: Milwaukee—Milwaukee County (2000); Boston—Boston Medical Center (1999), Legnini et al. (1999); Tampa—Bean (1997), Hillsborough County (1997a, b, 1999); San Diego—RHAC (1998), San Diego County Civil Grand Jury (1999); Philadelphia—City of Philadelphia (1999), Shaffer (1999). 31. For one view of three public hospitals’ operating budgets, see Meyer et al. (1999). 32. Hillsborough County privatized legal responsibility for Tampa General’s deficit by moving to its hospital authority form of management in 1980, although the county continued to pay TGH for care rendered to uninsured indigent residents. 33. In the fall of 1999, the county cut its contribution further by agreeing to make to the state an intergovernmental transfer of funds that formerly had gone directly to GAMP hospitals; the state then draws down an additional federal match that helps pay the hospitals. The county’s net gain is almost $4 million a year, reducing its tax-funded GAMP contribution still further. 34. The county received a sale price of $4.1 million and the promise of a share of future Froedtert earnings, which are uncertain but in the first two years were $2 million and $4 million. The county also avoided the anticipated expense of upgrading Doyne facilities; it still has to pay off existing hospital bonds, but it hopes to do that from its share of Froedtert revenues. Finally, the sale improved the county’s bond rating, so it will save on all county borrowing for years to come (Fitch IBCA 1998). The only costs of closure to the county were some consultant fees and other one-time costs and a promise to pay half the demolition costs and all environmental clean-up costs when much of Doyne is torn down, which was scheduled to start in July 2000. 35. Nor did the city get any sales price from its merger or any share of future hospital revenues. The city did avoid the worrisome possibility of worsening hospital finances. Further budgetary savings came from reducing general bond financing. Moreover, removing the hospital from the city budget also reduced the need to maintain a percentage of its expected spending in reserve, under a state mandate for contingency funding. 36. The city budget shows $11 million for 1999 (City of Boston 1999). Also, the city has at various times helped fund capital improvements at “its” four CHCs, the ones licensed through the city hospital. 37. By one estimate it is the lowest of any large urban area in California. Wulsin et al. (1999) estimate county spending from all sources at less than $100 a year per uninsured person. 38. Figure 2 covers only the 1990s, because in 1991 the state realigned state/county responsibilities and funding. Support seems to have declined further, according to the pro- Assessing posed budget for 1999, which requested only $2.1 million in county funds (San Diego the New

Federalism 54 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

cerned. According to Census estimates, there were some 137,000 uninsured below the below uninsured 137,000 some were there estimates, Census to According cerned.

of the metropolitan area, not the central county or city with which this paper is con- is paper this which with city or county central the not area, metropolitan the of

49. Census-derived estimates like those presented in table 3 are credible only at the level the at only credible are 3 table in presented those like estimates Census-derived 49.

mally coordinated at best. at coordinated mally

waukee’s, coverage is episodic, payment levels are very low, and services are infor- are services and low, very are levels payment episodic, is coverage waukee’s,

County Medical Services program has even more stringent eligibility limits than Mil- than limits eligibility stringent more even has program Services Medical County

hospital care, but they have to plead for assistance on a case-by-case basis. San Diego’s San basis. case-by-case a on assistance for plead to have they but care, hospital

48. Philadelphia created no enrollment or continuity of care. The city clinics try to arrange to try clinics city The care. of continuity or enrollment no created Philadelphia 48.

is old safety net care, not fully insured care. insured fully not care, net safety old is

those interviewed for this study agreed. The right comparison for new safety net care net safety new for comparison right The agreed. study this for interviewed those

tion that the uninsured receive less care than the insured under any circumstances, and circumstances, any under insured the than care less receive uninsured the that tion

47. A managed safety net may fall short of the ideal. Much research supports the observa- the supports research Much ideal. the of short fall may net safety managed A 47.

St. Joseph’s higher than Tampa General, Sharp Memorial higher than UCSD-Hillcrest. than higher Memorial Sharp General, Tampa than higher Joseph’s St.

46. Beth Israel was higher than Boston City Hospital, Sinai Samaritan higher than Doyne, than higher Samaritan Sinai Hospital, City Boston than higher was Israel Beth 46.

charge from the acute care unit of each hospital. each of unit care acute the from charge

45. Efficiency is computed by case mix– and wage-adjusted expense per equivalent dis- equivalent per expense wage-adjusted and mix– case by computed is Efficiency 45.

elsewhere (Bovbjerg and Miller 1999). Miller and (Bovbjerg elsewhere

on another project interviewing advanced private physician groups in California and California in groups physician private advanced interviewing project another on

44. Interviewing for San Diego elicited accounts that sounded very similar to those heard those to similar very sounded that accounts elicited Diego San for Interviewing 44.

1999).

oughcounty.org/health_ss/notable.html, accessed May 4, 2000 (Hillsborough County (Hillsborough 2000 4, May accessed oughcounty.org/health_ss/notable.html,

43. These numbers are the latest posted on the HCHCP Web page http://www.hillsbor- page Web HCHCP the on posted latest the are numbers These 43.

were nonpharmacy claims (Milwaukee County 2000). County (Milwaukee claims nonpharmacy were

ing. In 1999, GAMP served 19,887 enrollees and paid 269,000 claims, of which 109,000 which of claims, 269,000 paid and enrollees 19,887 served GAMP 1999, In ing.

claims for emergency medical services accounted for 47 percent of total medical spend- medical total of percent 47 for accounted services medical emergency for claims

percent of claims were administrative visits to refill prescriptions; the 12 percent of percent 12 the prescriptions; refill to visits administrative were claims of percent

7.5 per person, which implies about 14,000 clients (Milwaukee County 1997). Some 39 Some 1997). County (Milwaukee clients 14,000 about implies which person, per 7.5

42. In 1996, the first year after Doyne closed, GAMP paid 105,000 claims, averaging about averaging claims, 105,000 paid GAMP closed, Doyne after year first the 1996, In 42.

(1999).

County Civil Grand Jury (1999); Philadelphia—City of Philadelphia (1999), Shaffer (1999), Philadelphia of Philadelphia—City (1999); Jury Grand Civil County

Tampa—Hillsborough County (1997a, b, 1999); San Diego—RHAC (1998), San Diego San (1998), Diego—RHAC San 1999); b, (1997a, County Tampa—Hillsborough

Milwaukee County (2000); Boston—Boston Medical Center (1999), Legnini et al. (1999); al. et Legnini (1999), Center Medical Boston—Boston (2000); County Milwaukee

recent news accounts. Important written sources include: Milwaukee—Lucey (1999), Milwaukee—Lucey include: sources written Important accounts. news recent

41. This section on efficiencies under the new systems relies heavily on interviews and interviews on heavily relies systems new the under efficiencies on section This 41.

care is accessible (Billings and Teicholz 1990, Weissman et al. 1992). al. et Weissman 1990, Teicholz and (Billings accessible is care

priate outpatient care, and many emergency room visits are unnecessary if primary if unnecessary are visits room emergency many and care, outpatient priate

conditions, like diabetes, asthma, and heart problems, can be avoided through appro- through avoided be can problems, heart and asthma, diabetes, like conditions,

40. Overuse of hospital care is expensive. Many admissions for complications of chronic of complications for admissions Many expensive. is care hospital of Overuse 40.

1998, University of California 1998). California of University 1998,

that amount to illegal immigrants, largely as federally required emergency care (RHAC care emergency required federally as largely immigrants, illegal to amount that

that it provided some $24 million a year in uncompensated care in 1995, about half of half about 1995, in care uncompensated in year a million $24 some provided it that

39. UCSD-Hillcrest reports that about half of its inpatients are under- or uninsured and uninsured or under- are inpatients its of half about that reports UCSD-Hillcrest 39.

uninsured to other health functions, including medical services in county jails. county in services medical including functions, health other to uninsured

grants and “realignment” aid. Some state funding has been shifted from care for the for care from shifted been has funding state Some aid. “realignment” and grants

shifting of support from county sources to state revenue-sharing under tobacco-tax under revenue-sharing state to sources county from support of shifting County Civil Grand Jury 1999). During the 1990s, the decline has been driven by the by driven been has decline the 1990s, the During 1999). Jury Grand Civil County age of 65 in metropolitan Milwaukee. The uninsured are believed to be highly concentrated in central parts of metropolitan areas, as explained in note 8 above. 50. For Milwaukee, the baseline period is the average of 1993 to 1995, the last three years of Doyne Hospital. Data are averaged because reported uncompensated care at Froedtert fluctuated markedly during this period. The after period is 1998, because 1997–98 was the transition period during which Froedtert operated as the de facto public hospital. For Boston, the baseline is 1992, the first year of hospital operations after price deregulation; after privatization, 1997 was the most recent available year at the time this report was drafted. For Tampa, the baseline is 1990, before either aspect of privatization—the design and implementation of HCHCP or the conversion of the public hospital to private nonprofit operations. The first full year after conversion is 1998. 51. See notes to table 7. Boston’s “uncompensated care” includes only charity and emergency bad debt, based on audited charges and reduced to estimated cost; its figures would be much larger if reported as charity plus all bad debt stated as charges, as in Milwaukee. 52. The slow growth in Milwaukee is a result of the closure of Doyne Hospital, which had a huge share of areawide uncompensated care, averaging fully $40 million in the three years before closure, according to unpublished data supplied by county officials. These data may have been compiled differently for Doyne and for other hospitals; the state data office chose not to include Doyne in its reports. But Doyne would have to have been overstating its uncompensated care by a factor of two to raise the growth rate in uncompensated care to that in all care. 53. Boston is an exception. The levels of uncompensated care in tables 7 and 8 also include the Medicaid demonstration waiver funds, of which about $50 million a year go to Boston Medical Center and its affiliated clinics. But the Boston data in the tables under- state uncompensated care relative to Milwaukee and Hillsborough Counties. 54. Even allowing for a large discount from charges to arrive at actual cost, the hospital contribution is major. 55. Table 7 data are not discounted to constant-year dollars; changes in uncompensated care are instead benchmarked against changes in all care. Froedtert in its first year after privatization had a very large increase in bad debt, consistent with continued treatment of near-poor former Doyne patients. Levels declined nearly to premerger levels by the third year. 56. After HCHCP but before hospital conversion, TGH’s share of uncompensated care did drop a little, but it rose again after conversion (not presented). 57. About a third of countywide uncompensated care is said to be at UCSD-Hillcrest, about half of non-MediCal indigent patient days. 58. The local newspaper sued the hospital to hold open meetings on the ground that TGH still had that public obligation. Testifying in a deposition, TGH’s president was asked what the hospital’s top priority was (Karp 1999). He emphasized providing high-quality care, and the paper played up his failure to list indigent care as the very top priority. The hospital subsequently issued clarifying statements (Stobbe 1999). 59. Holewa (2000a, b), Shepherd (2000). 60. Interviewees suggested that the uninsured indigent have as much access to care as they used to have or more, not as much as the well-insured or as much as respondents thought was ideally needed. In this, interviewees agreed with a wealth of research evidence about reduced access to care for the uninsured and the indigent (ACP-ASIM Assessing 1999); some even referred to research evidence. the New

Federalism 56 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION OR CLOSURE HOSPITAL’S PUBLIC A AFTER UNINSURED AND POOR THE FOR CARE HEALTH

INSTITUTE

THE URBAN THE

impact of DSH funds, see Ku and Coughlin (1995). Coughlin and Ku see funds, DSH of impact

impact were beyond the scope of these case studies. On disentangling the practical the disentangling On studies. case these of scope the beyond were impact

tenance-of-effort requirement. The details of DSH accounting and political-budgetary and accounting DSH of details The requirement. tenance-of-effort

additional state aid may substitute it for local effort unless there is an enforceable main- enforceable an is there unless effort local for it substitute may aid state additional

dollars received can be spent on other public priorities. Similarly, a locality receiving locality a Similarly, priorities. public other on spent be can received dollars

funding as DSH-eligible, then use it to leverage federal matching, from which the new the which from matching, federal leverage to it use then DSH-eligible, as funding

67. However, states may use DSH funds to recategorize preexisting wholly state or local or state wholly preexisting recategorize to funds DSH use may states However, 67.

(1997), Spillman (2000), Ullman et al. (1999). al. et Ullman (2000), Spillman (1997),

66. Important written sources for this section include Coughlin and Liska (1997), NHeLP (1997), Liska and Coughlin include section this for sources written Important 66.

(1999), table 285. table (1999),

public primary and secondary education, or 45.5 percent. See U.S. Census Bureau Census U.S. See percent. 45.5 or education, secondary and primary public

65. In 1995–96, localities funded $131.5 billion of their total spending of $289.2 billion on billion $289.2 of spending total their of billion $131.5 funded localities 1995–96, In 65.

2000 have changed a few minds in Hillsborough County, however (Karp 2000a). (Karp however County, Hillsborough in minds few a changed have 2000

64. Tampa General’s continuing fiscal woes and the departure of its chief executive in early in executive chief its of departure the and woes fiscal continuing General’s Tampa 64.

al. (1999) and Norton and Lipson (1998a, b). (1998a, Lipson and Norton and (1999) al.

vately managed under contract. For studies of ongoing public hospitals, see Meyer et Meyer see hospitals, public ongoing of studies For contract. under managed vately

63. Only Philadelphia continued to run city facilities—its clinics, some of which are pri- are which of some clinics, facilities—its city run to continued Philadelphia Only 63.

ment,” “no regular provider”). regular “no ment,”

patient-reported generalized experience (e.g., “waited over 7 days for an appoint- an for days 7 over “waited (e.g., experience generalized patient-reported

tus after a 1987 closure of a public hospital in semirural California, measured by measured California, semirural in hospital public a of closure 1987 a after tus

needed. Bindman et al. (1990) reported a diminution of access and perceived health sta- health perceived and access of diminution a reported (1990) al. et Bindman needed.

cessful. More detailed investigation of actual practice for well-specified conditions is conditions well-specified for practice actual of investigation detailed More cessful.

expect what types of treatment in their areas, but qualitative questioning was not suc- not was questioning qualitative but areas, their in treatment of types what expect

62. Interviews sought to have respondents specify what types of medical conditions could conditions medical of types what specify respondents have to sought Interviews 62.

rivalry. 61. Los Angeles was frequently cited with disapproval and possibly with some local some with possibly and disapproval with cited frequently was Angeles Los 61.

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Federalism 66 HEALTH CARE FOR THE POOR AND UNINSURED AFTER A PUBLIC HOSPITAL’S CLOSURE OR CONVERSION About the Authors

Randall R. Bovbjerg is a principal research associate in the Health Policy Center of the Urban Institute. His main research interests are health coverage and financing; regulation, competition, and the appropriate role for government action; and the working of law in action, including the influence of legal culture upon policy. He has contributed to a number of publications for Assessing the New Federalism. Earlier work on changing state policy led him to coauthor one book on Medicaid and another on block grants, both from the Urban Institute Press.

Jill A. Marsteller is a Ph.D. candidate in health services and policy analysis at the School of Public Health, University of California, Berkeley. For much of this project, she was a research associate in the Health Policy Center of the Urban Institute, where she investigated changes in health care delivery and finance, the spread of managed care, health insurance reform, and market competition. She previously worked in Employee Benefits Research for KPMG Peat Marwick in Washington, D. C.

Frank C. Ullman is a research associate in the Health Policy Center of the Urban Institute. His recent papers have focused on implementation of state children’s health insurance programs. Other research has examined the impact of managed health care on infant health and a range of health care issues in Georgia, Mississippi, and New Jersey.

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