22nd National Conference: How Will it Work? PPACA and the Community-based Teaching Hospital (Part 1, Flores)

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

We gratefully acknowledge the sponsorship of the Marian University College of Osteopathic Medicine (Indianapolis, Indiana) for funding the transcription and editing of this section of the Proceedings of the Twenty-Second National Conference:


Hector Flores, MD; White Memorial Medical Center, Los Angeles

Hector Flores, MD, White Memorial Medical Center, Los Angeles: Good morning! Our charge this session is to talk about community-based teaching hospitals. I am the co-director of the family medicine residency program at White Memorial Medical Center. White Memorial is an inner-city hospital, and certified as a “disproportionate share hospital [DSH]” that actually has been successfully growing its Medicare book of business.

But it’s still heavily dependent, like most inner city hosptals, on government program subsidies. 50% of our admissions are Medicaid, 35% of our admissions are Medicare and 15% are a mixture of the other payers, including the uninsured.

The Benefits of PPACA

I’m going to quickly go over some of the other issues, because Dr. Kahn, in the previous hour, did a really good job of sort of highlighting some of the benefits Dr Norman Kahn, in an earlier presentation this morning, showed a slide of a convoluted statue (see 22nd National Conference Proceedings: How Will it Work? The Physician Workforce and Medical Education (Part 1, Kahn)).

However, my remarks will be in the context of a teaching hospital and highlight some of the components I think are enabled by PPACA and a related “Medicaid Waiver” that has been authorized for the State of California.

First, improved coverage for patients: About 25% of our emergency room visits are uninsured patients. Roughly 5% of those that we admit ultimately end up being uninsured. The hospital does a good job of trying to find payers, at least on an emergency basis, to cover patients who are uninsured, but PPACA definitely will cut by half both the visits by the uninsured to the Emergency Department and their admissions to the hospital.

The Medicaid Waiver  that California received is in part catalyzed by the Accountable Care Act thinking. We call it the “bridge to reform” The Waiver is focused on enrolling virtually all patients (with a couple of excepted categories) into managed care. It creates a patient-centered medical home model for patients, regardless of whether they are Medicaid or uninsured. I’ll talk about those programs in a second.

Because the State of California also knows that this Medicaid Waiver is conceived as a bridge to reform, it approved the creation of a special fund for private hospitals, like White Memorial, which it called a “hospital fee”. Such a mechanism allowed the hospitals to then set up a fund that could get a federal match through the intergovernmental transfer (IGT) authority.

This was important because, since 2005, private hospitals could not benefit from the IGTs available to the University of California hospitals, or county hospital systems. Instead, private hospitals were told that they had to come up with their own funds. They did so, through this hospital fee and the state legislation required to implement it. By following through with that process, Disproportionate Share Hospital (DSH) funding was preserved for private hospitals. [For a previous discussion of educational activities funded through Intergovernmental Transfers, see Proceedings of the 22nd National Conference: Tim Henderson – The Funding of Graduate Medical Education through Medicaid Dollars.]

Second, the insurance exchange: The insurance exchange will be a benefit to hospitals like White Memorial because participating plans – pretty much every plan – are saying that they need to participate with the insurance exchange. The hospitals understand that if there is going to be two or three million new privately insured patients along with two or three million new Medicaid patients, if they want to access those privately insured patients, then they will need to play ball with the exchange.

The legislation that establishes California’s insurance exchange requires that if you want to access that newly insured commercial patient base, then you also have to also deal with Medicaid. That allows a hospital like White Memorial to seamlessly contract with a single health plan, as opposed to carving out who’s going to give me my Medi-Cal patients, and who’s going to give me my Medicare and who my commercial patients.

There’s a prominent rule for “local initiative HMOs”, which are the Medicaid managed care plans who are always seen as historically aligned with both the public hospitals and the private sector DSH hospitals.  The problem is that the 2013-14 rates are only guaranteed for two years. After that, the states are supposed to pick up the tab. Given where we all are, especially in California, it’s not likely to happen. I’ll return to that subject.

Third, increased numbers of FQHCs and funding for teaching health center models: There will be a session after us that will explore these models further, so I won’t spend any time on it.

Fourth, the expansion and reallocation of GME slots: This feature presents an opportunity for a hospital like White Memorial, which is in the inner-city to benefit. Even though rural communities will get the preference, inner-city and critical access hospitals will be second in line.

Fifth, the accountable care organizations: The ACO authority provides the ability to begin to integrate the medical staff physician workforce, with hospital imperatives around Medicare and around commercial plans also. In California, this really helps a hospital like White Memorial envision a new model of delivery where the physicians are truly aligned with the hospital’s mission. In California we have a corporate bar that prevents hospitals from employing physicians, but the medical foundation model as an ACO strategy would get past some of those barriers.

Sixth, comparative effectiveness research: Should this initiative get funded, it will present an opportunity for community-based teaching programs to participate.

Challenges that Inner City Community-based Teaching Hospitals Face

First, the elimination of Medicare Disproportionate Share [DSH] Hospital Funding:  The scheduled elimination of Medicare DSH dollars, starting next year, and the reduction of Medi-Cal DSH funding in 2014 really worries – even scares – hospitals like White Memorial, because we would not exist today – we would of closed, if it were not for the fact that DSH funds existed in 1989 and subsequently.

Second, accelerated enrollment of MediCal patients into HMOS: Accelerating the enrollment of nearly all Medi-Cal patients into HMOs is a worry for us as physicians and also as part of the hospital. This is because we don’t feel we’re “ready for primetime”.  By mandating the enrollment of the most complicated patients into managed care, into systems serving those communities (i.e. community clinics) that are either already overextended  or into private hospitals and physician practices who also are overextended. Now we’re going to be charged with the responsibility for everything that happens, and for every cost that they incur.

The Medi-Cal Waiver includes the Low Income Health Program (LIHP), which consists of dollars that go to the counties to help them foster relationships with private safety net hospitals, like White Memorial. However, this creates a “shotgun wedding”, because we have to figure out how we’re going to work together very, very quickly. The clocks are already ticking on that!

The Medi-Cal HMO rates do not reflect actuarial costs. They are, I think,  really underfunded. There’s a reason Kaiser Permanente limits the number of Medicaid patients they take. Back in 1992 Kaiser went on record saying the dollars are not actuarially sound, they were not going to do an imprudent thing that would end up penalizing the other already covered Kaiser members. I give the Kaiser leadership credit for having already stepped up to state that. In a moment I’ll describe ways that we found  to try to end run the limitations of the funding, but it’s not really constructive for the long term.

Third, uncertainty of future levels of Medi-Cal funding: The Medi-Cal rates beyond 2015 are a big question mark. Bundle payments, ACOs and other events will have winners and losers. Our hospital is trying to be one of the winners, but if we don’t get our act together, we will be one of the losers. We’ll come back to those themes as I finish.

Well-funded private hospitals already have a head start on all of this. We want the Center for Medicare and Medicaid Innovation and found that they are reluctant to invest in Medi-Cal ACOs. Their response to us was that they already paid through the Medicaid Waiver. They said for us to talk to our state officials about “transformation dollars” or pilot programs through the state, but not through CMMI. But then, the corporate bar that I mentioned earlier impacts this.

Yesterday, I made comment (see Proceedings of the 22nd National Conference: Thought Provocateur Session #1 (Geyman Q and A)) and I appreciate the chance to explain it. But you know, one person’s advocacy group is another person’s cartel. We all belong to cartels whether we like it or not. Donald H. Crane, who is the CEO and President of another cartel, the  California Association of Physician Groups, raised the question “Will ACA stand for the Affordable Care Act, or for Advancing the Cartel Agenda?” Dr. Geyman mentioned yesterday there’s a lot of game playing.

Dr Norman Kahn, in an earlier presentation this morning, showed a slide of a convoluted statue (see 22nd National Conference Proceedings: How Will it Work? The Physician Workforce and Medical Education (Part 1, Kahn)), which, I think, is symbolic of people playing the game behind the scenes. They “made nice” publicly  – “while we support this, we want to be proactive”. But behind the scenes, they’re going back to their old ways and they’re carving out their own special deals.

Fourth, Poorly Coordinated Efforts to Provide Care to Uninsured

How will all of this work in Los Angeles County, the “non-system of care”? We have a public system that is really underfunded for the obligation that it’s given. In L. A. County there’s about $50 billion worth of resources that come into the county, but only about $4 billion earmarked for the Department of Health Services – the public health department that includes public health, county hospitals, and some oupatient facilities.

The bulk of the dollars comes into the private sector. The private sector receives 10 times more money, but the private sector doesn’t have 10 times the obligation. If you look at the uninsured on the bottom, the majority of the uninsured get their care through the County – either as their only source of care or episodically. But that’s where they end up. Sadly, catastrophically ill patients enter the system through the Emergency Department and through the  county hospital system, rather than through primary care.

We’ve tried to create some bridges between the public and private sector, most notably with the entities that are friendliest with the public sector – the community health centers in the county. We created a program called public/private partnership, and now the Low Income Health Program (LIHP), that uses funds given to the county to create these important community relationships.

We also set up similar linkages to share the LIHP money with private hospitals. After the Martin Luther King Hospital closed, a trauma system called Metrocare was created in which several private hospitals and the emergency medical services system participate. Even non-trauma hospitals get paid some county dollars to be part of a fabric of services for the community. But this funding is very thin. It’s not really funding a system of care. The efforts are just more patchwork attempts to fix the problems of the uninsured.

Fifth, the self-protective behavior of health care cartels

We all have our business model. Even those whom we would call traditional providers who see some Medicaid patients, limit the number of uninsured patients. I will include our group in that. Only about 8% of our patients are uninsured. We have the capacity to see a lot more patients, but we just don’t have the resources to be able to see them. I do believe in tithing. If everybody did their 10%, we wouldn’t have the problems we have today. But our ethos is “just say no” to the uninsured. Find some way to unload it onto somebody else.

I remember that when I was in medical school, I attended conferences where I would talk about working with underserved communities. Many attendees told me, “That’s what you pay taxes for.  Let someone else worry about that when you go into your own practice.” The greatest tragedy in the United States is that most teaching hospitals are in underserved areas and their graduates can’t wait to get out of there. The ethos that many of their faculty express encourages that.

The private nonprofits have the FQHCs and other kinds of supplemental funding to help them fulfill their missions. The private hospitals spend a lot of their time lobbying for DSH and supplemental funds, even though they might bicker amongst themselves. As an example, the hospital fee was not universally adopted by all hospitals in California. Some, when talking to their own peers, were very vocal about saying, “I’m doing well without this fee. I don’t want to subsidize a loser hospital”. Then the county hospitals have to protect their access to what we call the MIA (Medically Indigent Adult) Fund, as well as their own version of Medi-Cal, DSH and the Medicaid Waivers.

This is how the cartels protect their turf. If we’re going to have real progress in redesigning healthcare – with community-based teaching hospitals as part of the fabric – we need to get past those behaviors. Part of that is understanding. In the medical practices we sometimes have the California Medical Association, the American Medical Association, the California Association of Physician Groups, and even our own specialty society, at odds with each other, each lobbying the same individuals with a different message. Yet we’re all supposed to be physicians doing the right thing!

The private nonprofit community has similar issues. The California Primary Care Association (CPCA) and the National Association of Community Health Centers (NACHC) both represent the community health centers. Many times physicians and clinics are at cross purposes with each other, when in fact we should be trying to build alliances. Then the hospitals through the California Hospital Association, the American Hospital Association, and the California Children’s Hospital Association, each has its own lobbying force and special concerns.

Back in 1992, a very colorful California State Assembly member, Richard Alatorre, who (for those of you who might know him) was Chair of the Assembly Committee on Health, held a hearing on health services to needful populations. Three health care entities, among others, came in to testify. Alatorre finally threw up his arms and said, “You know the hospitals come in and say we’re doing God’s work. Just give us more money we’ll fix the problems of the world. Then the community clinics come in and say we’re doing God’s work. Just give us more money and we’ll fix the problems of the world. Then the doctors come in and say the same thing. If we’re all doing God’s work, then why are we in healthcare Hell?”

It’s true!  We’re all beating up on each other with our lobbying. The counties have their own public hospital associations. The health plans have their own lobbying firms and their own cartels. Then we also have the academic medical centers. Then we have organized labor playing both sides.  We need to unite ourselves.

I like what Jay Lee said, “If we’re not at the table, we’re on the menu”. That so often is what happens! We can have CPCA working with CMA on one particular issue, but they’re at odds on another. We have to get past that!

To begin to build a unified system, we must understand the politics of the situation. Soon the ACOs  will be coming. This is a major concern to me from a policy perspective. Our hospital, among others, is trying to build an ACO around Medicare and commercial patients. At some point they’re going to say “we’re saturating our capacity with our commercial payers. Let the county system worry about the indigent and Medicaid”. That’s the flaw in the system. We’re allowing people to carve out what they want to be their market. What will end up happening is that we all work in our own silos.

HMOs and IPAs would prefer to do business with Medicare and employer-provided insurance, but they’ll dabble with Medicaid as sort of a loss leader for some people that age into Medicare. (They call it “aging in populations”. They focus on 64 year old Medicaid patients to get them into their business as 65 year olds.)

We’re all trying to figure out, how do we make all of these disparity programs work towards a unified system that will ultimately improve quality and reduce cost? I see an opportunity with the ACOs as reducing costs if we really, truly have ACOs that expand into the uninsured and Medicaid populations.

Somehow we need to tweak the healthcare legislation to mandate that –  just like the insurance exchange provision that specifies that if you’re a health plan you participate with Medicaid as well as commercial populations.We should support a mandate that ACOs do the same thing.

The vision for us, and this is a collaborative initiative we’ve been working on for the past year, is to begin teasing out what our cartels are telling us to do and putting it aside when it doesn’t make sense.  We should be moving together – with what our heart tells us to do – to create a new system of care.

There are something like 17 different proposed agreements we’ve got to come up. Hopefully, next year we’ll have executed agreements.Perhaps next year I’ll have better news around this issue. Thank you very much!

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