How the Affordable Care Act Affects NHRMC

January 06, 2014

By NHRMC President and CEO Jack Barto

One of the questions we get most often in the community is what kind of impact the Affordable Care Act, aka “ObamaCare,” is having on New Hanover Regional Medical Center.

The answer for right now: Not a very good one. The law’s benefits haven’t been realized, while the downsides are impacting everything we do.

First, understand that the reduction in funding as a result of the ACA is but one of many policy decisions at the state and federal levels we’re trying to overcome. In total, these decisions will cost us almost $20 million in Fiscal Year 2014. Unlike many of our hospital peers, we have been able to avoid layoffs and service reductions, but make no mistake, these reductions are causing us to re-examine how we operate on a day-to-day basis.

We certainly agree with the ACA’s basic premise of expanding health insurance to those who don’t have it. With health insurance comes regular access to health care. The question has always been how to pay for it. Our hospital industry, at a national level, realized that cuts were inevitable, so in 2010 it “negotiated” $1.55 billion in cuts in return for the noble goal of expanded health access.

In return, these cuts would be partially offset by new populations of paying patients created by the ACA. And this is the part that left hospitals out in the cold. First of all, enrollment in the newly created insurance exchanges has only recently started to pick up. Our state chose not to create its own exchange, so we have absorbed every inefficiency of the federal exchange.

The other new market was to be created by the Medicaid expansion. The law stated that all residents who earn up to 138% of Federal Poverty Guidelines (about $32,499 for a family of four) would automatically receive Medicaid. (It is a huge misconception that all poor people qualify for Medicaid. In our state, you basically have to be disabled or a single parent with a minor child living in the home to qualify. Many desperately poor people do not qualify.)

Last year the U.S. Supreme Court ruled that states had an option on whether to accept funding for this Medicaid expansion. Our state chose to decline. That leaves about 21,000 people in New Hanover, Brunswick and Pender counties, and several hundred thousand statewide, unable to get insurance through Medicaid and unable to afford it through the new insurance exchanges.

So where will these people receive care? The same place as before – their public hospital. Except we will have less funding to cover this care. It remains our mission to take care of all, regardless of ability to pay, and we’re proud of that mission. But this is hampering us financially and making it less likely we’ll be able to provide other services in the community.

We are not the only losers so far regarding the ACA. Our most valued community partners, our physicians, can tell much the same story – the law mandated they provide more services to more people for less reimbursement. Our friends in the business community now have to take on more cost to insure full-time employees, and either absorb that cost or pass it on to customers. And those who buy insurance on the individual market are finding that in many cases the cost of an insurance plan that meets the ACA’s requirements is significantly higher.

We may find that physicians drop out of the Medicaid program and decide not to take part in the insurance exchanges. Or employers will start to eliminate jobs or transfer employees to part-time. Or individuals who need care will not be able to afford the co-pay or deductible of their new “ObamaCare”-approved plan.

All scenarios will create more people who don’t have insurance or ability to pay, with nowhere to go for care except their community hospital. Which means we will absorb still more uncompensated care.

I would be remiss not to point out some positives from the new law. The ACA is tying payment to quality goals, such as infection control, mortality, 30-day readmissions and patient satisfaction. We are proud to say we have done very well on all these metrics. Our patient satisfaction is in the top quarter of all hospitals in the nation, and while close to 80% of hospitals in the state have been fined for their readmission rates, we have not.

And the law has created incentives for hospitals to change the basic business model of how we deliver care. Instead of paying hospitals for every test, procedure and prescription, the old “fee-for-service” model, it has created population health models, or “Accountable Care Organizations.” The goal here is to pay organizations a certain fee in return for keeping entire populations healthy. The only way for the organization to “win” is to reduce the cost of the care, and the best way to do that is to keep patients healthy.

So that’s a positive step forward courtesy of the ACA. New Hanover Regional officially started an Accountable Care Organization on Jan. 1 for selected patient populations, and we hope to become leaders in providing proactive care that keeps our patients healthy.

The ACA correctly recognized that the system of care in our nation needed to change. But funding decisions at the federal and state levels are jeopardizing hospitals’ financial health as they make this transition.