BusinessTN

New state legislation may be the “last chance” to save TennCare, according to Gov. Phil Bredesen, but recent proposed reform efforts could drown hospitals for the sake of buoying TennCare.

The state’s health care program for 1.3 million poor, disabled and uninsured Tennesseans did not work out as planned after it was introduced a decade ago. The $7.8 billion program has eaten away at the state budget, leading lawmakers to pray the latest reform efforts slow the destruction when changes are scheduled to be implemented Jan. 1, 2005. The reforms are aimed at cutting spending by $1 billion by fiscal year 2008, with limited pharmaceutical benefits for some enrollees expected to confer the most fiscal savings to the state, a reassuring priority considering Tennessee ranks first in the country for the number of prescriptions per person.

Hospitals stand to be overwhelmed by these changes. Representing the second-largest component of the TennCare budget, hospitals surely will feel the impact of the reform’s limit of inpatient days to 45 a year and new co-pays designed to pass to enrollees a greater share of financial responsibility for medical care. The combination of the measures and existing laws spells trouble for hospitals, says Tony Spezia, chief executive of Knoxville-based hospital system Covenant Health. If enrollees cannot pay co-pays, pharmacies can refuse to sell them drugs, and physicians can refuse care, Spezia says. Hospitals, on the other hand, are required by federal law to ensure public access to emergency services regardless of ability to pay.

Hospital administrators say the No. 1 problem they encounter with TennCare is the increasing number of enrollees who visit emergency rooms as their primary care clinics for convenience or because they cannot find physicians who will treat them. Some worry this issue will only be exacerbated by the reforms. TennCare reimburses health care providers at notoriously low rates. Spezia predicts Covenant Health will be able to collect only a very small percentage of co-pays from TennCare enrollees, and the cumulative impact of these reforms may cost the East Tennessee system millions of dollars. Also of concern to hospitals are the new limits on inpatient days and the potential impact on areas such as physical rehabilitation and psychiatric departments, which may serve patients for more than the 45-day maximum.

Taking a broader view of the recent reform, Marilyn Elam, spokesperson for the TennCare Bureau, says in large part concerns over the reform come down to a choice between a changed program and no program, which would leave 260,000 Tennesseans without any insurance, meaning zero reimbursement for providers. (Children, pregnant women and the disabled are in a protected class.) While attempts to salvage TennCare could be jeopardized if reform plans run afoul of court orders in a children’s health case, recently hired Deputy Commissioner J.D. Hickey and Chief Financial Officer Darin Gordon provide reinforcement to soldier ahead for now. Gordon Bonnyman, executive director of the Tennessee Justice Center, tempers Elam’s claims with his perspective. “The notion that ‘the sky is falling’ is set forth to mobilize people with the idea that this is the only way to save the program,” Bonnyman says, adding that children, pregnant women and the disabled are still subject to cuts in the drug formulary and a controversial “medical necessity” determination required for coverage. “The implications are that because these savings are so big and necessarily will have to come from the sickest people, they will have to come from the population that is most prone to hospitalization,” he adds, saying providers will be overwhelmed by these changes.

Still, any threat of TennCare’s demise and a subsequent increase in the uninsured population would mean additional self-pay and charity care patients, says Larry Kloess, president and chief executive of HCA’s Centennial Medical Center in Nashville. According to Kloess, the reform should offer greater stability and predictability for hospitals, although it’s too soon to tell how the reform will shake out. “While it might not be a reform that meets everybody’s needs, frankly I’m not sure if a total solution is really possible,” Kloess says.

One common thread among hospital administrators is that many are encouraged by the reform efforts to improve TennCare. Saving TennCare—partly at the expense of hospitals—appears to be the less odious of two unappetizing possibilities.