Medicaid Tab Hurts Grady; State Must Help

By Mike King - The Atlanta Journal-Constitution - 12/13/07

The state of Georgia shouldn't have a hard time finding more money to help pay for trauma care at Grady Memorial Hospital and other trauma care centers around the state. Certainly, that will be easy compared to Grady's most threatening financial ailment —- compensation for the thousands of Medicaid patients who rely on the Atlanta hospital for basic health care.
Put aside, for the moment, how Grady has been managed over the years. The hospital has always served as the canary in the coal mine for public health care financing in Georgia. And that bird is chirping at the top of its little lungs.

Grady can't survive without a major overhaul in the way the state pays for acute care to the poorest of the poor and those who have no health insurance. The problem it faces is duplicated at dozens of public hospitals statewide, even if they do not face Grady's immediate financial crisis.
To Grady's benefit, a political consensus seems finally to be forming to create a special fund for trauma care. Gov. Sonny Perdue, House Speaker Glenn Richardson and Lt. Gov. Casey Cagle have all indicated they will encourage the General Assembly to find a way to directly support the statewide network of trauma hospitals. Grady, which operates the busiest and most sophisticated trauma unit in the network —- and the only one in North Georgia —- could wind up getting as much as $30 million if they prevail.

That will help, but it won't come close to solving the hospital's financial problems. Grady bleeds most of its red ink in providing routine, acute-care services for the 56 percent of its patients whose bills are supposed to be paid by Georgia's Medicaid program. And when a hospital loses money treating more than half of its patients, its long-term survival prospects are bleak.
The decades-old Medicaid program was originally designed for those among the poorest of the poor who needed to be hospitalized for acute illnesses. But the health insurance program has changed dramatically over the years, now covering, among other things, nursing home care for the indigent elderly and disabled.

How the program is financed has changed as well. In Georgia, the state is responsible for about 40 percent of the costs for covering roughly 600,000 residents. As Congress moved to restrict how much is paid at the federal level, Georgia and other states have taken on more of the financial burden —- so much so that for several years Medicaid was the fastest growing part of the state's annual budget.

To keep Medicaid costs from accelerating even more, the state has done two things: It cut the reimbursement rate for most Medicaid patients to about 85 percent of what the hospitals usually get for a Medicare patient getting the same care, which means high-cost hospitals lose money on many Medicaid patients. The state also contracted with managed-care organizations to run the program; physicians are required to get permission before admitting a Medicaid patient for hospital care.

The first measure was strictly for belt tightening. The second is supposed to improve the quality of care —- forcing Medicaid patients to use a physician for routine care instead of just showing up in emergency rooms. But the change also reduced costs $78 million in its first year.

While that may have helped the state's bottom line, it has hurt public hospitals, especially Grady. For instance, if a Medicaid patient is treated in an emergency room for a condition the managed-care plan doesn't consider an emergency, the hospital gets a flat fee of $50 to $75. Yet, hospitals are required to screen all ER patients who routinely run up hundreds of dollars in diagnostic charges.

With no relief from the federal government in sight, the state now faces some hard decisions —- start paying a much higher percentage of Medicaid's tab by raising more revenue (meaning taxes) or continue to let hospitals bleed more red ink.

Reaching a consensus on what to do about that will not come easily or quickly. Grady officials will have to take a leap of faith that the state is up to the task. And state officials need to get started in finding a solution, otherwise more Georgia hospitals will soon be in the same shape Grady finds itself in now.

Mike King is a member of the editorial board. His column appears Thursdays.
mking@ajc.com