Business News

Critical But Stable

by Jeremy Alford

With far-reaching legislation pending on the federal level and a fiscal crisis enveloping the state, Acadiana's health care industry is at a major crossroads.

All the political hustle and bustle surrounding health care might not be anything new if it weren't for the national recession, according to Ric Trout. There's a real storm brewing, Trout says. And he should know. Trout has more than three decades of experience in the industry, having worked for insurance companies, physician organizations and some of the largest hospital corporations in the world. These days, he's back in his beloved south Louisiana, Lafayette to be specific, after years of working elsewhere.

Trout is the new CEO of Hospice of Acadiana, a nonprofit that cares for patients with terminal illnesses, and there's barely a day that goes by that he doesn't ponder what's around the corner when it comes to public policy. "I think the challenges today are more severe than ever for many reasons," he says. "We've seen legislation come and go in previous years, but nothing so far-reaching on the state and federal level, and never during a recession. Health care is a huge target; it's a major player in the state and federal budgets, and I think there's a sense that we're going to be hit hard."

For those who have been paying close attention in recent years, this day of reckoning is no big surprise. The cost of health care has been rising incrementally with each passing year, and lawmakers have been clamoring for reform, although the term tends to mean something different depending on party affiliation and which side of the health care fence you sit. The real rub, or sticking point, is the unknown. What exactly will happen in the coming months and years? "The effect of all of this is hard to gauge," Trout says. "Even Hospice, which has traditionally escaped major policy decisions in the past, is going to be impacted. If it's just across the board cuts, we're going to feel it this year."

On the state level, Gov. Bobby Jindal and the Legislature are trying to address a $3 billion shortfall that's forecasted over the next two years. As usual, health care, along with higher education, is slated to take the brunt of reductions. In response, medical professionals are shaking the bushes and awakening their constituencies, urging them to lobby elected officials in Louisiana to make health funding a priority. The state's Medicaid program is also facing a $2 billion expansion during a period when dollars are hard to come by. On the federal level, there's President Barack Obama's health care reform package, which is pending final approval in the U.S. House.

It's no wonder why health care professionals like Trout are keeping a careful watch over the government these days. The industry is standing on a precipice not knowing what comes next. In medical terms, you might call it "critical but stable." Yet for those who have been around the bend a few times, it's just politics as usual - wrapped up in a waiting game that, as of yet, has only vaguely defined winners and losers.

**On The Offensive
**Nearly 70 percent of Louisiana voters believe Jindal and lawmakers should make health care funding the top budget priority during the spring session. They likewise don't want elected officials to cut funding for health care services in order to balance the budget. At least that's the findings of a recent poll conducted by Southern Media and Opinion Research for the Louisiana Hospital Association. While the poll offers up some good info, it's also a political tool for the industry. "With the state facing a budget crisis this year, it is important that the Legislature have current research about what Louisiana residents think about health care budget cuts and funding priorities," says Bernie Pinsonat, president of Southern Media.

Nearly 97 percent of respondents stated that hospitals and their employees are important to the local economy, and 85 percent said communities will suffer if state funding for hospitals is cut. Additionally, 92 percent think hospitals provide good-paying jobs in the community, and the majority of voters think that health care funding cuts will lead to a loss of these jobs. And therein resides a major theme for the health care industry this year: economic development.

The Pinsonat poll, however, isn't the only research being circulated. An economic impact study conducted last fall by noted LSU economist James A. Richardson shows that Louisiana hospitals are a driving force in the state's economy. The study found that hospitals provide vital economic contributions that support the local economy, generating more than $27 billion annually in economic activity and directly employing more than 95,000 people throughout the state.

LHA President John Matessino says that economic impact is on the line. "It is imperative that we find fiscally sound solutions to fund health care for our most vulnerable residents so that the health care infrastructure in Louisiana does not crumble," he says. "Hospitals are not only tied to the health of our communities, but also to the health of our local and state economies."

Richardson's study reveals that the health care sector in the Lafayette area provides jobs for more than 21,000 employees with an annual payroll of $686 million. These figures are nothing to sneeze at for the local economy; they account for 8 percent of Louisiana's health care sector salaries and 8 percent of health care employees statewide. From a regional perspective, hospital employees in Lafayette make up 6 percent of Acadiana's total employment.

Needless to say, there's a lot on the line, even locally, and industry insiders have every reason to worry - just look at what's going on in other states. As of this month, at least 28 states have implemented cuts that will reduce health care access for low-income children or families.

Rhode Island, for instance, has slashed health coverage for 1,000 low-income parents; Tennessee has halted enrollment in its children's health insurance program; and Minnesota is canceling an insurance program that supports about 30,000 low-income adults. As for Louisiana, there are already signs that serious cuts are on the way.

Midyear Reductions Hit Home
The new fiscal year kicked off July 1, and by the time December rolled around - the fiscal year's midpoint - Jindal announced that there was a $248 million shortfall. Since then, serious reductions have been implemented, and the usual suspects were hit the hardest: $108 million in health-related services and $84 million in higher education. Making matters worse, this midyear shortfall comes on the heels of $1.3 billion in cuts that lawmakers made last spring in preparation for the current fiscal year.

Department of Health and Hospitals Secretary Alan Levine says his reductions were part of an overall across-the-board plan for each state agency and can be added to a previous reduction to DHH's Medicaid private provider program of $46.9 million, which was implemented last summer. "Gov. Jindal made clear he wanted us to protect services for the elderly and the disabled as we approached the mid-year budget challenges," Levine says. "He also has inspired us to find ways to provide the same or better services but at a lower cost. With the budget challenges we face, it is important we be methodical and targeted while also recognizing the economic reality that revenues are simply lower and will likely be for some time."

The December reductions to non-Medicaid programs, though, were hefty. State officials say the strategy involved in making the cuts relied more on community-based care, rather than institutionalization, and leveraging the resources of the private sector. "By relying less on more costly state-operated services when we have capacity existing in lower-cost, highly effective and proven private community-based services, we are able to deliver high quality, compassionate care to our clients at a lower cost to the taxpayer," says DHH Deputy Secretary Anthony Keck.

Here's a look at what fell under the ax:

Louisiana Emergency Response Network: $355,551 cut and three positions eliminated
Office for Addictive Disorders: $833,195 cut and five position eliminated
Office of Aging and Adult Services: $959,090 cut and 56 positions eliminated
Office of Citizens with Developmental Disabilities: $1.5 million cut and 479 positions eliminated; this includes a privatization plan for a state-run group home in Acadiana
Office of Mental Health: $5.9 million in cuts and 178 positions eliminated
Office of Public Health: $2.8 million in cuts and 45 positions eliminated
Office of the Secretary: $4.3 million in cuts and 12 positions eliminated
Developmental Disability Council: $60,982 in cuts
Human Services Districts: $2.8 million in cuts
Bureau of Health Services Financing/Medicaid: $46.9 million in cuts and 40 positions eliminated

A so-called "Transition Task Force" led by DHH secretaries and state Civil Service has been formed to ensure that the employees who were displaced, where possible, find opportunities to fill needed vacancies in other offices or departments. In addition, Keck says the task force is exploring retirement incentives and other initiatives to encourage private providers to hire state employees. "Many of our employees will be highly sought-after in the private sector, and we will do everything possible to match-up employees with employers," says Keck.

The Medicaid Problem
When it comes to health care woes in Louisiana, few have grabbed more ink than the dilemma facing the state's Medicaid program. The federal spending formula that decides how much money Louisiana gets in Medicaid matching funds is based on its per capita income over a certain period. Since the 2005 hurricane season, this figure has increased by more than 40 percent because of two factors: Louisiana lost a large number of poor families, and billions of dollars in federal recovery money have been directed to the state.

As a result, the federal share of Louisiana's Medicaid costs is expected to decrease by 10 percentage points next year, a change that could mean an additional $500 million in costs for the state annually. The Louisiana Hospital Association estimates this shortfall could result in a loss of approximately 8,390 jobs statewide, a decrease in personal earnings of $340 million and a reduction in overall business transactions of $660 million.

Here's why the Medicaid cash is so important, according to the Richardson study: Hospitals are funded through private insurance plans, self-paying customers, Medicare and, of course, Medicaid. The Medicaid program in particular is crucial since it is a matching program with the state receiving federal support dependent upon state contributions (historically, the federal government contributes about 70 cents for every 30 cents that the state contributes to the Medicaid program). In Lafayette, Medicaid payments to non-state, community hospitals are about $28 million.

There's been a great deal of jockeying in Louisiana's congressional delegation because of the expected gap. Congressman Joseph Cao of New Orleans became the only Republican in the House to vote for Obama's health care proposal, and he partly cited the Medicaid challenge as a reason. Sen. Mary Landrieu, D-New Orleans, meanwhile, traded her vote in favor for $300 million in Medicaid money.

But that doesn't mean Louisiana is any closer to a solution. In fact, DHH just recently created the Medical Care Advisory Committee to advise officials on how best to guide the state's Medicaid program, which provides health coverage to more than 1.2 million Louisiana adults and children for health care services ranging from acute to long-term. "While DHH is charged with the huge task of being accountable for the Medicaid program, we believe our decisions are better when they include input from the people who are impacted," says Levine. "We always try to get feedback from the affected stakeholders before we implement policy, and this committee will provide us with good continuity and expertise."

With the significant expansion of Medicaid being a major part of all the reform bills in Washington, it is anticipated the Medicaid rolls in Louisiana will grow to more than 1.6 million people, with most of the expansion population being adults. With the added cost of this expansion exceeding $2 billion annually ($130 million state match), Levine is advocating the formation of a coordinated delivery system to ensure the structural solvency of the program. "With nearly 40 percent of our population potentially being covered by the Medicaid program, this adds urgency to our efforts to reform our state's program," he adds.

The new committee has a number of local voices, including Drs. Virginia Singleton-Alfred and Maitland Deland of Lafayette; Ruth Fontenot of New Iberia, the COO for the Alzheimer's Association Louisiana Chapter; and Dr. Keith Ramsey of New Iberia.

Moving Forward
Obviously, there's no shortage of health care issues for lawmakers to debate during their upcoming legislative session. In addition to the state budget situation and the challenges that must be addressed with the Medicaid program, lawmakers are expected to review proposed guidelines for how patients will access health care during a pandemic, bioterrorist attack or natural disaster like a hurricane.

And then there's primary and mental health care. Last month, the Publican Affairs Research Council, a Baton Rouge-based advocacy group, released a report titled "Public Mental Health Care in Louisiana." The report provides an overview of the system and focuses on several issues that are barriers for those who seek treatment for mental illness. Overall, the analysis found that the system is biased toward expensive institutional care and does not have the capacity to treat many of those with mental illness.

The most striking difference between Louisiana and most other states is the high level of spending for state mental hospitals that provide intermediate to long-term inpatient care. Nationwide, spending on mental health services in 2006 included 28 percent for state or county psychiatric hospitals, 70 percent for community-based care and 2 percent for administrative costs. For Louisiana, the split was 56 percent for state psychiatric hospitals, 30 percent for community-based care and 13 percent for administrative costs.

Among the recommendations being pushed by PAR include sustained funding to expand patient-centered medical homes for primary care and integrated behavioral health services, and integrating public systems of medical care and behavioral health care through regional care networks. PAR also believes the Louisiana Medicaid program should review and revise its method of paying for treatment of patients diagnosed with mental illness or behavioral problems in order to encourage physicians to integrate primary and mental health care services and treatment plans.

Alone, it's a tall order. But when mixed in with everything else going on with health care public policy, it has all the makings for a watershed year, says Trout. For the industry, it could also provide an opportunity to evolve and find new ways to work together. "All of these kinds of changes can spur innovation and prompt health care providers to cooperate like never before," Trout says. "After this, we can no longer be standalone castles. By working together, regardless of the environment, we can get the best benefits for our patients and clients and be fairly and reasonably reimbursed. We just have to wait and see."

Jeremy Alford can be reached at [email protected].