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In explaining how and why CDPHP reached a tentative reimbursement agreement with Ellis Medicine, Capital District Physicians’ Health Plan, Inc. spokesperson Natalia Burkart said “collaboration was key.”
Burkart went on to tell Gazette reporter Chad Arnold that both sides came together, “with an understanding that we need each other in this community.”
It’s a nice sentiment. But, frankly, community goodwill is about all that Ellis, as a community hospital, has to bank on as it faces significant revenue loss and another negotiation with a second insurance company, Empire Blue Cross. If the deal with Empire falls through, the struggling hospital could very well be in need of life support.
In reality, community spirit is likely not the only reason CDPHP was willing to agree upon terms with Ellis. As Burkhart also told Arnold, the insurer and medical provider found a “fair and equitable agreement for both parties.”
In other words, the only notion you can truly take to the bank in negotiations over reimbursement rates for medical care is that financial bottom lines are always the foundation.
This means Ellis, which is in a desperate financial state, has pretty much no leverage. And I don’t think many of us would bet on an insurance company striking a business deal purely out of the goodness of its heart.
The currently failing talks between Ellis and Empire are particularly foreboding. We very well may be watching a vital community hospital that provides critical care to many in our region limping toward its deathbed.
The rift with Empire could imperil a potential merger between Ellis and St. Peter’s Health Partners. That merger is meant to improve efficiencies and keep Ellis alive.
In the near-term, a reimbursement-rate deal with Empire could inject life into Ellis.
In the long run, we need systemwide overhauls if we expect Ellis and community hospitals like it to survive.
Ellis is in critical condition. Between 2019 and 2022, Ellis Medicine experienced a 14.5%, or $66 million, drop in revenue, from $445.9 million to $380 million, according to hospital data provided to the Gazette.
What’s more, between 2017 and 2021, Ellis Medicine recorded more than $42.2 million in operational losses.
Much of the loss was due to the pandemic, a time when elective procedures were put on hold. Ellis lost a whopping $32.9 million in 2020.
While the hospital was in trouble before COVID-19 – Ellis reported $2.8 million in operational losses in 2019 – its financial troubles were clearly made exponentially worse during the pandemic.
Add in inflation and health care labor shortages that, for instance, have required Ellis to bring in expensive contract nurses, and it’s no wonder the hospital is in such bad shape.
A hospital that habitually operates in the red is a hospital that won’t continue to treat patients.
It’s unclear how Ellis can recover.
Some culpability certainly comes from within, and Ellis administrators need to examine their own management to determine what they can do differently.
Still, the hospital is also a victim of circumstances. If you remove the severe financial strain induced by the pandemic, Ellis’s situation appears more hopeful.
Ellis also faced added challenge when state regulators approved Albany Medical Center’s Union Street campus, causing Ellis to lose out on some customers seeking higher-paying specialty services like outpatient surgery.
But it’s the reimbursement model that greatly exacerbates Ellis’s underlying ailments.
Much of Ellis’s patients receive care reimbursed through Medicare or Medicaid. Medicaid reimburses the hospital 75 cents on the dollar, while Medicare reimburses 90 cents on the dollar, Arnold reported in Sunday’s Gazette.
Gov. Kathy Hochul is proposing a 5% increase to these reimbursement rates in a state budget still being negotiated. But even that hike wouldn’t fill the gap to pay for care reimbursed by these programs.
That means Ellis, and many smaller hospitals around the country, depend on private insurers to make up the difference. That’s hardly a healthy arrangement.
Neither Ellis nor Empire Blue Cross would talk with Arnold about specific reimbursement numbers, but Burkart, of CDPHP, said during that insurer’s negotiations, the hospital had been seeking a 25% increase for in-network services and 45% for those out-of-network.
While we don’t know the numbers Ellis and CDPHP agreed to – and there’s obvious reason to believe the reimbursement increases were less than what the hospital sought – at least a deal is imminent, meaning the 287,939 Capital Region CDPHP customers, including 50,967 in Schenectady County, can still be reimbursed for care at Ellis.
Empire appears poised to go in the other direction. In fact, Empire is encouraging its clients to search for providers elsewhere ahead of a May 1 sunset of its current reimbursement agreement with Ellis.
Empire doesn’t share its membership information, but the insurer is a critical player that provides coverage to state employees. Losing this base of customers could be devastating for Ellis.
Across the country, community hospitals – particularly rural hospitals – are shuttering due to fiscal stress. More than 200 rural hospitals are at immediate risk of closure, and more than 600 rural hospitals overall (30% of rural hospitals nationwide) are at risk of closing in the near future, according to a January Center for Healthcare Quality and Payment Reform report.
When community hospitals close, people are cut off from care. An Ellis closure would undoubtedly strain our region’s overall health care. As the Times Union reported, Albany Medical Center and St. Peter’s already have the longest ER wait times in the state, with averages topping five hours. Ellis’s wait times aren’t much shorter.
If we want to keep smaller hospitals open, something needs to change.
Yes, we absolutely must address the health care labor issue – I recently wrote about this, specifically to do with mental health.
But we also need to change the funding model. Higher reimbursement rates for Medicare and Medicaid should be part of the solution so hospitals aren’t continually in a bind.
“As we continue to confront the challenges facing our community hospitals, including Ellis, it is crucial that we recognize their financial struggles and work to find sustainable solutions,” U.S. Rep. Paul Tonko, D-Amsterdam, said in a statement sent to me. “I’ve been committed to addressing these issues in Congress through my work on adjusting the Medicare Wage Index to strengthen local hospitals and my support of the American Rescue Plan’s Provider Relief Fund, and I’ll continue to advocate for policies that ensure the vitality of our local healthcare systems.”
We’ll see what political will comes of this.
Right now, private insurance companies driven by profits have too much sway over the fate of hospitals like Ellis, which provide necessary, accessible care.
Sure, some private insurers may very well care about the community and come together with hospitals for the greater good. So, yes, every Empire customer who depends on Ellis should call their insurer and demand Empire reach a deal with the Schenectady hospital so local patients don’t have to scramble for care, and so Ellis can get much needed temporary relief.
But, unfortunately, this will be little more than a Band-Aid for a problem that needs surgery.
Columnist Andrew Waite can be reached at [email protected] and at 518-417-9338. Follow him on Twitter @UpstateWaite.
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