Proceedings of the First National Conference on Community Health Center – Primary Care Residency Program Linkages, "Community-Oriented Primary Care and the Role of Community Health Centers" (Part 3, Holmes)

Last Updated on April 16, 2022 by Lee Burnett, DO, FAAFP

We gratefully acknowledge the sponsorship of the Valley Consortium for Medical Education (Modesto. California) for funding the transcription and editing of this section of the Proceedings of the First National Conference on Community Health Center-Primary Care Residency Linkages (Lake Tahoe, Nevada, October 16, 1993):


Location of Cook, Minnestora
Location of Cook, Minnestora

Michael Holmes (Cook Area Health Services, Cook, Minnesota):  Good morning.  I’m going to spend a few minutes talking about some of the changes that are taking place in the financing of health care in the Sate of Minnesota, and the effect the process of change has had on the administration of community health centers.

Program planning educational linkages would do well to factor in their planning process that change in health care financing is on the horizon, even in areas where it is not now process, and that adds uncertainty to the planning process.

In Minnesota, the Legislature reached a consensus that they must act to reform health care.  Once that was decided, it became politically inevitable that they were going to do something, no matter what, whether it was right or wrong, whatever.  They were going to pass legislation.

They said it may take ten years to fix it after they pass it, but, they were going to enact it because they had a unified voice in the House and the Senate and a Governor who was willing to sign the Health Reform Legislation.

It began without controversy until they met the providers and until they met some of the delivery systems.  Then the fur began to fly.

Right now they are undergoing some court challenges as to whether this legislation will maintain its basic original format or whether it will be changed.

They have  to fight the HMO battle and whether or not the HMO plans are governed by the Minnesota Reform Legislation or whether they are covered by a different Act.

A vacation destination served by Cook Area Health  Services
A vacation destination served by Cook Area Health Services

They have to fight the taxation battle, whether or not Minnesota can go over state lines to tax non-Minnesota based providers who see Minnesota patients – patients who are subject to the 2% tax that was levied to help pay for the plan.

The original legislation called the plan Health Right and now, I believe, they have determined that the name of the plan is Minnesota Care.  It took them nine months to come up with a name because it seemed that every name that they came up with was copyrighted, except Gopher Health (laughter).

Efforts to increase coverage and access and to control costs

The first task of Minnesota care was to increase coverage, and to provide access to care for the uninsured population.  In Minnesota, the uninsured population ranges from 12 to 14 percent, which is neither on the high end nor the low end nationally.  There are over 500,000 people that they feel fit this population group.

The most important part, from the legislature’s standpoint, was to control the cost increases in the health care industry.  The legislation contains some very specific provisions to control cost increases.  By next year, we will start seeing some of the cost mandates.

The legislation contains maximum rates of increase in health care revenues that are based on CPI plus a certain percentage.  With 1993 as the base year, in 1994 the cost increases are supposed to be limited to CPI plus six and a half percent which they think will be somewhere in the range of 9.4 or 9.5 percent, depending on what the 1993 CPI turns out to be. 1995 will be CPI plus five and a half percent.  The add-on factor will ratchet down until the end of the decade where it should be restricted by CPI only.

They have followed different methods of trying to calculate the increased cost of care in the system.  It may be the revenue charged by providers per patient visit.  It may be based on the revenue per individual over the course of the year, or it may just be rate freezes, where your fee increases will be held to the specific limits and you have to demonstrate that you are below the state-mandated caps.

Lake Vermilion, in the a vacation destination served by Cook Area Health Services
Lake Vermilion, in the a vacation destination served by Cook Area Health Services

As a part of the Health Right Legislation, the State of Minnesota established integrated service networks which appear to be fairly similar to the health plans that are discussed in President Clinton’s proposal.  The “integrated services networks [INS] in Clinton’s plan seem to be similar to the “HMOs” as defined by the Minnesota Health Maintenance Organization legislation and rules.

But, there are some differences.  The HMOs in the Minneapolis/St. Paul area were fairly instrumental in the legislation’s development.  Thus, a lot of the language is lifted straight from the HMO act.  This has led to discussions as to whether or not it establishes “super HMOs” that can go outside of the Minneapolis/St. Paul area, and go statewide.

Some of the controversy is over whether the ISN legislation actually creates a number of the under-capitalized HMOs, since the capital requirements are a lot less for the ISNs than for the HMOs.  There is some concern that there will be failures of integrated service networks.

The definition of the networks are such that they could be employer-based where a large employer or a group of employers can form a network to purchase health care services from a variety of provides in the state.  They might be provider-based, where a group of providers get together to establish a network to deliver a block of services to a patient population, or they may be community-based.

By law, the first ISN will not be formed until July 1, 1994, but there have been several announcements already of ISNs forming and there are certainly several task forces which have met to discuss potential formation of these networks.

Now how does this apply to community health centers and primary care systems?  My organization, Cook Area Health Services, operates three full-time primary care delivery sites in Northern Minnesota and one part9time site.  Our particular clinics are scattered in 6,600 miles of Northern Minnesota.  In that territory, there are only 15,000 year-round residents.  In the summer time we add about another 32,000 in tourists, summer residents and some seasonal workers.

We have seven primary care physicians on staff and a nurse practitioner.  We have vacancies for two additional providers.  We currently are the only providers of primary care within this p articular service area.  There are two small hospitals in our service area, both of which we staff.

We have two family physicians and an internist practicing in a town of 680.  70 miles west of this site we have three physician FTEs practicing in a town of 397.  40 miles west of that we have another fill-time site with one physician FTE, a part-time nurse practitioner and the internal medicine physician who travels 100 miles once a week, to see patients at that site.

We are already practicing and involved in managed care systems.  As the only physician group, we see virtually every patient in our service area.  Over a three-year period, our market penetration is over 85 percent.  We will see people one way or another, whether it’s in our clinics, in the emergency room or in the hospital providing inpatient services.  Right now the State of Minnesota runs a Medicaid demonstration project.  Our big site, which is the site with three family practice physicians, is mandated to be in this demonstration project.

Minnesota’s Medicaid managed care project involves the metropolitan area counties whee they contract with the HMOs to deliver Medicaid services.  But the rural project is a contract between the State and the County.  The county operates the health care plan to provide services to the Medicaid population.  The county, in turn, contracts with the three clinics and the three hospitals within the county to deliver services to the population with the cost provisions focusing on out-of-county referrals.

We are also involved with the Blue Cross preferred provide organization, which is a statewide arrangement.  Blue Cross feels that this particular arrangement will probably classify as an integrated network if they so choose because it meets statutory requirements.

We not have additional proposals which we are currently reviewing for various other system of managed care in the state.  Medica which is an HMO out of Minneapolis, which is a merger of the Shared Health Plan (which was a staff model HMO) and PHP (which was a physician IPA), has the worker’s compensation managed care contract for the State of Minnesota employees and for some of the labor groups.

If you are not a Medica provider for the worker’s compensation case, you can see that patient for emergency service.  But immediately after the emergency treatment that patient must be referred to a Medica provider, even if that means that that patient has to travel 60 or 70 miles to the closest provider.

We are looking at the Medicaid contract.  But, Medicaid is interested in assigning their whole array of contracts, not just for workers comp, but also for their Medicare population and for their medical insurance population.  Each one has a different set of  standards; each one has a different set of referral physicians; each one has a different set of fundamental requirements, whether it be malpractice coverage, credentialing or the various other contract provisions that occur.

At the same time, the  State of Minnesota is looking at setting up integrated service networks, even though the State realizes the fact that these networks may not find the way out into some extremely rural parts of the state.  They are looking at an all-payor system, with mandated all-payor regulations.  They have just issued the first draft of the all-payor system but they don’t know how it will work because there isn’t another all-payor system in any other state.  But, when the State begins to look to containing the rate of increase of medical costs, they will have to look at establishing some type of delivery system.

As a primary care delivery system with our particular sites, we are involved in trying to assess how we fit in.  Not as one managed care system, but a multi-system.  One thing that we are assured of is that we are going to be involved in one fashion or another.  The question is how many systems will we be a part of.

 Marc E Babitz MD (Moderator): Thank you, Mike.

This presentation is preceded by: 
Proceedings of the First National Conference on Community Health Center – Primary Care Residency Program Linkages, “Community-Oriented Primary Care and the Role of Community Health Centers” (Part 2, Anderson)

This presentation is followed by: Proceedings of the First National Conference on Community Health Center – Primary Care Residency Program Linkages, “Community-Oriented Primary Care and the Role of Community Health Centers” (Part 4, Strange, Q and A)

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