Infrastructure Stresses and Strains in Texas: The Case for Regionalization

1
Infrastructure Stresses and Strains in Texas
The Case for Regionalization
Texas Rural Health Association Summit August 15,
2006

• Ron J. Anderson, MD, FACP,
• Parkland Health Hospital System
• Dallas, Texas USA

2
Safety Net Is Stretched Thin

• Providers of last resort for more than 5 million
  uninsured Texans
• Often provide services that will never be
  available in some areas of Texas, for example
• High fixed-cost services, like trauma, burn care,
  neonatal and pediatric intensive care
• High-cost, low-volume services like subspecialty
  referral and tertiary care
• Usually crucial to emergency preparedness and
  linked to public health infrastructure
• Funding vulnerable to changing economic
  conditions and fluctuating public support

3
Projections Indicate Situation Will Worsen

• Average household income may decline
• Percentage of uninsured likely to rise
• Cost of health care and health insurance likely
  to increase

4
Average Household Income in Texas Could Decrease
from 5,000 to 6,500 from 2000 to 2040
Assumes net migration of ½ or equal to 1990-2000
Source Murdock, et. al. 2002. Center for
Demographic and Socioeconomic Research and
Education. Texas AM University, 2000. A Summary
of the Texas Challenge in the 21st Century
Implications of Population Change for the Future
of Texas. http//txsdc.utsa.edu/download/pdf/TxCha
ll2002Summary.pdf
5
More Households Will Earn Less
Source Murdock, et. al. 2002. Center for
Demographic and Socioeconomic Research and
Education. Texas AM University, 2000. A Summary
of the Texas Challenge in the 21st Century
Implications of Population Change for the Future
of Texas. http//txsdc.utsa.edu/download/pdf/TxCha
ll2002Summary.pdf
6
If Current Trends Continue, Hispanics and Blacks
Will Earn Less Than Other Groups
Median Household Income in Texas in 1999 by
Race/Ethnicity of Householder
Source Murdock, et. al. 2002. Center for
Demographic and Socioeconomic Research and
Education. Texas AM University, 2000. A Summary
of the Texas Challenge in the 21st Century
Implications of Population Change for the Future
of Texas. http//txsdc.utsa.edu/download/pdf/TxCha
ll2002Summary.pdf
7
More People Lack Insurance, and Trend Is Likely
to Continue
Sources US Census Bureau Historical Tables from
website and Gilmer and Kronick. 2003. Its the
Premiums, Stupid Projections of the Uninsured
through 2013, Health Affairs Web Exclusive.
8
Historically, Texas Has a Higher Percentage of
Uninsured than the US as a Whole
Sources US Census Bureau Historical Tables from
website
9
Cost of Health Insurance Is Rising Faster than
Inflation and Income
10
In 2000, Safety Net Described as Intact but
Endangered

• 2000 Institute of Medicine (IOM) report the
  health care safety netthe Nation's "system" of
  providing health care to low-income and other
  vulnerable populationsis "intact but
  endangered."
• Precarious financial situation of many
  institutions that provide care to Medicaid,
  uninsured, and other vulnerable patients.
• Changing financial, economic, and social
  environment in which these institutions operate.
• Highly localized, "patchwork" structure of the
  safety net.

Source Safety Net Monitoring Initiative.
http//www.ahcpr.gov/data/safetynet/netfact.htm
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Defining the Safety Net

• Initial attempts focused on provider
  characteristics like open-door policies and
  services to vulnerable populations
• More recently, focus has shifted to more
  quantifiable factors
• Uncompensated care expense
• Adjusted uncompensated care market share
• Specialty service lines like neonatal and
  pediatric ICU, burn care and trauma
• Tier 1 1st decile ranking uncompensated care,
  all 4 services, 3 years of data
• Tier 2 2nd decile or higher ranking
  uncompensated care, some but not all services gt3
  years of data
• Tier 3 uncompensated care community level
  services
• Undesignated dont meet Safety Net criteria

Source Unpublished manuscript. Amarasingham, R.,
Stauffer, B, Pickens, S. and Anderson, R.
12
Hospital Distribution Using Safety Net
Designation Formula
Short-stay, General Medical/Surgical Texas
Hospitals from MSA 193
Undesignated Hospitals 140
Designated Hospitals 53
Non-Safety Net Hospitals 140
Tier 1 Safety Net Hospitals 19
Tier 2 Safety Net Hospitals 19
Tier 3 Safety Net Hospitals 15
Source Unpublished manuscript. Amarasingham, R.,
Stauffer, B, Pickens, S. and Anderson, R.
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Hospital Distribution by Ownership Safety Net
Designation
14
ER Visits Admissions by Safety Net Designation
Parkland in 2005 143,601
38,793
15
Total Amount of Uncompensated Care per Year by
Safety Net Status in Millions
Fig 2
Dollars in Millions
Safety Net Status ( of hospitals)
16
Total Amount of Medicaid Care in 2003 by Safety
Net Status in Millions
Fig 2
Dollars in Millions
Safety Net Status ( of hospitals)
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Total Margin by Safety Net Status per Year
Fig 3
Total Margin
18
Functional Capacity by Tier by Year
Fig 4b
Functional Capacity
19
Age of Plant by Safety Net Status Over 3 Years
Fig 5
Age of plant
20
Special Challenges to Tier One and Two Regional
Hospitals

• Must maintain utility-like or value-added
  services requiring high stand-ready costs
• Must bear higher costs of caring for high volumes
  of low-income patients
• Must bear higher drug costs associated with
  special populations like HIV/AIDS patients
• Most must absorb cost of medical education,
  clinical research, new procedure development
• Must bear cost of emergency preparedness

Difficult to compete on price in the marketplace
21
Old Funding Methods No Longer Adequate

• Current system is not sustainable due to
• Demographic pressures and
• Changing tax bases

22
Parkland as an Urban Example

• Began as a city effort
• Joined by county
• Became a hospital district to increase tax
  fairness
• Now sees increasing patient volumes from
  contiguous counties and other parts of the state
• Current system is not sustainable due to
  demographic pressures and changing tax bases
• Doughnut effect due to affluence moving to
  suburbs

23
Parklands Trauma Volume Is Twice Regional and
National Averages, 2003
Source Texas Trauma Registry/ Regional average
includes Parkland data for FY 2003 Source
National Trauma Data Bank, Report 2004 National
Average is a 5 year average.
24
Parkland Incurs Substantial Costs for Trauma Care.
Costs are defined as charges to the patient
25
Parklands Out-of-County Trauma Patient Mix by
County (Jan.-Sept. 2002)

• 70 come from contiguous counties
• 10 are unidentified
• 20 come from other Texas counties, out of state
  or outside the US

Denton
Collin
Hunt
595 17.5
626 18.4
222 6.5
Rockwall
62 1.8
Tarrant
Dallas
Kaufman
540 15.8
171 5.0
Ellis
170 5.0
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Parklands Payer Mix for Out-of-County Trauma
Patients
Inpatients Outpatients
27
Parklands Burn Center Serves a Large Area.
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Parklands Out-of-County Burn Patient Mix by
County (Jan.-Sept. 2002)

• 53 come from contiguous counties
• 4 are unidentified
• 43 come from other Texas counties, out of state
  or outside the US

Denton
Collin
Hunt
80 7.6
89 8.5
53 5.0
Rockwall
7 .07
Tarrant
Dallas
Kaufman
243 23.1
37 3.5
Ellis
52 4.9
29
Parklands Payer Mix for Out-of-County Burn
Patients
Inpatients Outpatients
30
Texas Population Is Increasing Faster Than the
U.S. Population
Source US Bureau of the Census Texas AM State
Data Center
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Growth Is Not Evenly Distributed

• Urban areas and contiguous counties are growing
  most rapidly, while rural counties grow at slower
  rates or even lose residents.

Source Texas AM State Data Center
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Texas has 77 metropolitan counties and 177
Non-metropolitan counties.

• In 2004,
• Metropolitan (urban) counties
• 86.5 of the states population in 26 of its
  area
• Generally had an abundance of all types of
  healthcare providers.
• Non-metropolitan (rural) counties
• Less than 14 of the states population spread
  over 74 of its area
• Generally lack quick access to many types of
  healthcare providers

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64 Frontier Counties in Texas

• Defined as a county with a population that
  averages less than 7 people per square mile
• 2 Urban counties
• Armstrong (Amarillo)
• Irion (San Angelo)
• 62 Rural counties

34
Urban Areas Are Seeing Affluence Move to Suburbs

• Dallas County is typical of this Doughnut Effect

80 of Median HH Income (Low Income) 50 of
Median HH Income (Very Low Income) 30 of Median
HH Income (Extremely Low Income) Greater than 80
of Median HH Income
Source 2000 Census definitions of poverty by
Census Bureau personnel, July 2003
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Safety Net in Rural Texas

• Fewer resources
• Hospitals, with fewer staffed beds
• Primary care physicians
• Specialty care physicians
• Less access to all levels of healthcare

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Texas Critical Access Hospitals

• Many rural counties lack hospitals, and many of
  these hospitals would not be viable without
  funding help from State or Federal governments.

37
Medically Underserved Areas

• Many rural counties qualify as medically
  underserved areas, as do some urban counties,
  where areas with high poverty dont have adequate
  medical resources.

38
Health Professional Shortage Areas

• Rural counties are more likely than urban
  counties to qualify as Health Professional
  Shortage Areas.

39
Texas Has Long Had Fewer Physicians per 100,000
Population than the U.S. and the Gap Is Getting
Wider
Source Texas State Board of Medical Examiners.
40
Urban Counties Have More Physicians Than Rural
Counties
Source Texas State Board of Medical Examiners.
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22 Rural Counties Had No Physicians in 2004

• In general, the highest concentration of
  physicians was in East and Central Texas, with
  the Panhandle, West and South Texas having the
  lowest.

Source Texas State Board of Medical Examiners.
42
2004 Levels Showed Loses in Rural Areas

• In addition to the 22 counties without
  physicians, 66 counties saw a decline in the
  number of physicians or in the ratio of
  physicians to population.

Source Texas State Board of Medical Examiners.
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Regionalization Could Provide Answers
Texas Health Department Regions
44
Regionalization Would Allow Fairer Distribution
of the Tax Burden
Many counties have neither public hospitals nor
hospital districts.
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Existing Medical Schools Could Serve as Important
Resources
46
Local/Regional UPL Pools

• Hospital district transferring hospitals have
  reached their UPL caps
• Non-profit and private for-profit hospitals may
  have significant UPL cap room (statewide estimate
  is 375 million to 750 million)
• Public funds, particularly from hospital
  districts, may still be available for IGT match
  for UPL

47
Dallas Model (Hypothetical)
UPL cap room donated to regional pool Example
100 million
Hospital District provides IGTs as states share
for the federal match Example Approx. 40 million
UPL Pool 100 million 40 local match/60
federal dollars

• A formula devised to recapture local dollars for
  hospital district mission (weighted payments).
• The 60 million can be used locally determined
  through participating hospital agreement or
  through creation of a non-profit trust.
• Could be used to cover current uncompensated care
  burdens from regional referrals.
• Could be partially used for 3-pay insurance
  product for working poor 1/3 employee 1/3
  employer 1/3 UPL pool
• Participating hospitals/teaching programs could
  care for these newly covered lives

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Integrated Care Management Model

• ICMs Predicate--PCCM (on Steroids)
• Operates in most Texas metropolitan areas
• Arkansas, North Carolina serve as models
• Allows for federal match
• Cost reductions due to cost avoidance, disease
  management, reducing inpatient hospital and
  nursing home utilization
• Improved care coordination

49
Safety Net Non-Safety Net Facilities Have
Different Incentives and Perspectives
Saving expenses versus Losing revenue
Market forces dont reward preventive care and
public health functions, which tend to reduce
utilization of billable services

• Public sector has motivation to reduce
  utilization while improving access and
  maintaining quality

50
Non-Metropolitan Areas Need Different Solutions

• Rural Health Districts patterned after co-ops
• Self-insured communities
• Employed physicians (corporate practice of
  medicine)
• Special reimbursement concepts akin to Norways
  mining regions

51
Friday Night Syndrome

• Competition to have hospital in their community
• Shattuck, Oklahoma
• The Little Mayo Clinic of the Panhandle
• Wetumka, Oklahoma
• Post mortem

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What We Need to Do

• Strategic planning
• Build to needs
• Indigent
• Immigrants
• Disaster preparedness
• Rational regional system for primary through
  tertiary care

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What We Need to Do

• Seek remedy to regional problems at state level
• UPL pools requires state and CMS agreement
• Iowa waiver concept Federal waiver automatically
  enrolls persons at or below 200 FPL in Medicaid
  when they are treated at specially-designated
  facilities
• Critical Care Provider designation
• Medicaid plan amendment Governors designation
  for Medicaid enhanced payment at Cook County
  Hospital in Chicago, Illinois
• Regionally-tiered tax analogous to the hospital
  district tax
• Higher rate for urban areas, lower for
  suburban/rural areas
• Subject to federal match
• Collaboration of Safety Net facilities with
  public health providers on a regional basis to
  decrease demand through prevention

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• You cannot escape
• the responsibility of tomorrow
• by evading it today.
• Abraham Lincoln