February 4, 2005

Providers await impact from TennCare changes

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photo by Neil Brake

Providers await impact from TennCare changes

Analysis – Getting a handle on what the changes to the state's TennCare system will mean for Vanderbilt University Medical Center and other health care providers in Tennessee isn't easy. It's a fluid situation, one that's being made slippery by what seems like weekly developments that call into question precisely what form the altered program will ultimately take.

A U.S. District Court judge last week ruled that, because he has oversight of one of several legal disputes between the state and TennCare enrollee advocates, he must approve changes to the program, which provides insurance coverage for the poor, uninsured and disabled.

State lawyers are appealing to the U.S. 6th Circuit Court of Appeals and are confident that the changes proposed by Gov. Phil Bredesen will remain intact. Vanderbilt has gone on record in support of the TennCare reform package originally proposed by Bredesen in September and opposed by the lawyers for the Tennessee Justice Center on behalf of TennCare enrollees.

The highlights of the governor's most recent proposal include dropping 323,000 adults from the $8.7 billion-a-year program and drastically trimming benefits, moves state officials say will generate at least $575 million in savings in the upcoming fiscal year. Coverage for all 612,000 children currently enrolled in TennCare will continue and their benefits will not be limited. The state had hoped to begin cutting the TennCare rolls this spring, with conversion to the new program completed by 2006.

This drastic approach to TennCare was deemed necessary because the state has been unable to reach an acceptable compromise over the consent decree.

Without the ability to introduce realistic changes in certain benefits, especially the pharmacy benefits, the state is unable to see its way to a balanced budget next year. While the new proposal offered by the state will balance the budget, it is at an unacceptable cost to individuals and to the health care provider infrastructure of the state.

However, Vanderbilt cannot support the most recent changes proposed by the governor because they have a number of serious, unintended consequences for the health of many seriously ill citizens and for the health of the state's safety net hospitals, including, importantly, Vanderbilt.

While the final nature of the changes isn't quite clear, details about the timing of implementing the changes hasn't been revealed and plans for providing additional funds to safety net institutions such as VUMC have not been finalized. Combine those factors with the sheer magnitude of the changes proposed to TennCare and one can see how difficult it is to predict the impact.

A peek inside the numbers, however, gives a glimpse of what may — may — be in store for VUMC if the current plan to downsize TennCare is adopted and implemented. In the last fiscal year there were 824,103 visits to VUMC outpatient clinics, 39,738 admissions to Vanderbilt University Hospital and 76,831 visits to the Emergency Department. The percentages vary clinic-by-clinic and department-by-department, but institution-wide roughly 25 percent, or 235,168 of those nearly 941,000 visits, were by TennCare patients.

According to state figures, approximately 100,000 of the 323,000 people set to be dropped from the TennCare rolls live in Middle Tennessee.

These people are not going to suddenly cease to require medical care simply because they've lost their state-funded insurance benefits. These patients will continue to seek and receive care, but the institutions that provide that care, such as VUMC, will find it even harder to be compensated for caring for these people, some of whom will have nowhere else to go.

The net effect is that while the percentage of TennCare patients that will be seen at the Medical Center will surely decline, the actual number of people coming in and out of VUMC's doors is expected to remain relatively unchanged.

So instead of being TennCare patients, a great many of that 25 percent will become charity care or medically indigent patients, both of which fall under the category of uncompensated care.

Last fiscal year, VUMC's uncompensated care — which includes charity care, medically indigent care and bad debt — stood at $119 million, which accounted for 5.6 percent of total gross patient revenue. According to VUMC's Department of Finance, it's possible that, once TennCare changes go into effect, uncompensated care could rise to between 9 percent and 10 percent, levels not seen since the late 1980s. The sobering kicker is that each additional percentage point represents $22 million.

If they indeed rise to such levels, these are the kinds of numbers that will have an impact.

Every dollar that's used to cover the medical bills of a patient who cannot pay is a dollar that can't be spent on improving medical care for everyone, or teaching the next generation of physicians and nurses or discovering new drugs and devising new treatments.

Still, it's not all gloom and doom. These are projections, educated guesses as to what might happen if the radical downsizing of TennCare proceeds.

They are not facts, at least not yet. What can keep them from becoming facts is a reasonable compromise between the TennCare advocates and the state. It is in the best interests of all Tennesseans to not only hope for, but push for, such a compromise.