Steffie Woolhandler, MD & David Himmelstein, MD, November 26, 2008

Cambridge Health Alliance (CHA) is facing massive layoffs and cuts in services to our patients because Governor Patrick has reneged on a promise of $55 million dollars for the current fiscal year, on top of cuts to reimbursement under the 2006 health reform law. In 2006, the Bush administration threatened to withhold $300 million in Medicaid funding unless the Massachusetts health reform (Chapter 58) reduced free care pool payments to safety net hospitals (principally CHA and Boston Medical Center). Private hospitals and insurance companies – who funded the free care pool – also lobbied for this change. In response, Chapter 58 diverted funds from free care pool payments, using them instead to expand Medicaid enrollment and to help fund Commonwealth Care (a Medicaid-like program that includes Network Health). As a result, free care pool reimbursement – which formerly covered most of the cost of care for the uninsured at CHA – now covers a small fraction of the actual cost of care.

In addition, Chapter 58 shifted Medicaid payment rates – increasing payments for inpatient care and decreasing reimbursement for outpatient primary care. This shift greatly benefitted tertiary care hospitals, but penalized CHA. As a result, tertiary care centers have racked up record surpluses ($350 million at MGH last year, $80 million at Brigham and Women’s), while CHA faced a deficit even before the latest round of cuts.

To partially compensate for these free care pool and Medicaid losses at CHA and BMC, the state promised special “transition” payments to CHA to protect its health care to the poor. It is these transition payments that Patrick has now reneged on.

The number of people seeking free care at CHA has declined only modestly since passage of Chapter 58, while free care funds have shrunken dramatically. While Chapter 58 has increased state spending on health care by $1.1 billion this year, only about half of Massachusetts’ uninsured have gained coverage under the new law. Unfortunately, the need for free care has fallen even less – by about 1/3 statewide and about 20% at CHA. If CHA severely curtails its services due to the Patrick cuts, many of these uninsured patients will have nowhere to go when they get sick or become dangerously psychotic.

All Massachusetts hospitals are heavily dependent on direct or indirect government subsidies. Yet Governor Patrick has singled out two safety net hospitals (CHA and BMC), to bear fully half of all health care cuts in the state. The four major tax-payer subsidies are Medicare, Medicaid, the costs of health benefits for government employees, and the tax –subsidy to private insurance. Altogether, such government spending accounts for about 60% of health spending nationally, and more than that at most hospitals. While CHA receives a higher share of its budget from public sources, in absolute terms, government (federal and state) payments to Boston’s large tertiary care hospitals are several-fold higher than payments to CHA.

CHA requires special government subsidies because it provides vital but money-losing services that private hospitals shun: care for the poor, primary care, care for chronic mental illnesses and addictions, and emergency services. Despite the predominance of taxpayer funding, health care dollars are channeled through a fee-for-service system that gives two very clear market signals: 1) care for the affluent pays well while care of the poor is a money loser, and 2) elective, procedure-oriented services like knee replacements, CT scans, and cardiac surgery generate high margins (profits), while primary care, care for chronic mental illness, and emergency room care generate losses. Other hospitals have prospered by obeying these “market signals” and minimizing their provision of money-losing services. CHA has, for decades, assumed the safety net role and taken on a substantial share of socially necessary but under-paid medical work. For instance, CHA has about half as many inpatient admissions as the BI, and one third as many as the MGH or Brigham and Women’s. But we see more emergency patients than any of them, and provide more primary care. CHA also provides about 1/3 of the care for uninsured patients with chronic psychiatric illnesses in the entire state. We also play a disproportionately large role in training primary care physicians and mental health professionals who care for the chronically mentally ill.

Until our health care finance system is changed to treat all patients and all medical needs equally, services and training such as those that CHA provides will require special subsidies from the government. These subsidies have come in various forms: Medicare disproportionate share payments, special Medicaid payments, free care pool payments, and most recently the transition funds described above.

6- The current fiscal crisis at CHA has nothing to do with efficiency. While all hospitals have inefficiencies that should be addressed these are not the cause of CHA’s current crisis. Funding cuts are.

According to the Dartmouth Group, care for comparable patients (Medicare recipients in the last two years of life, with adjustment for severity of illness) is actually cheaper at CHA than at any of Boston’s major teaching hospitals - $66,207 at CHA, vs. $87,721 at Brigham and Women’s and $85,387 at Tufts. The differences in private insurance reimbursement are even more dramatic. According to the Boston Globe, the MGH and Brigham get paid about twice as much as CHA for the hospital care of similar patients, as well as procedures such as CT scans. And our quality measures are comparable.

Governor Patrick’s cuts to low cost, primary care-oriented institutions will actually drive system-wide costs up, shifting more patients to the highest cost institutions and away from primary care to more expensive specialist care.

6- While Boston’s big teaching hospital do provide some care for the poor only CHA (and to a lesser extent BMC) have made commitments to care for all of the poor, all of those needing mental health care, and all of those needing primary care services. With tens of thousands (and perhaps hundreds of thousands) in the Commonwealth facing loss of jobs and personal savings in the current economic downturn, it is a particularly dangerous time to destroy the safety net.

CHA staff and faculty have consistently and effectively advocated for humane, dignified care for all. Though many concerned and dedicated individuals work at private hospitals, these institutions have never thrown their clout behind health care for the poor. Cutting CHA means permanently weakening advocacy for health care for the poor and underserved, and foreshadows worse cuts ahead. Destroying public hospitals destroys the major institutional base for care, research and public advocacy on behalf of the poor and any other American whose health care needs are not met through market driven medicine. As health professionals we can find other jobs (and often higher paying ones) in the private sector. However, private sector options for many of our patients are limited or nonexistent.

Cuts at CHA are part of a nationwide pattern of cuts to safety net hospitals. Within the past three years, the public hospitals that provided tertiary care for the uninsured in Louisiana and Texas have closed their doors to the poor. The public hospital which was the only hospital in South Central Los Angeles was shuttered. Cook County Hospital in Chicago suffered massive funding cuts; routine services like screening mammograms, follow-ups on abnormal pap smears, and primary care appointments are essentially unavailable to many of Chicago’s poor. Grady Hospital in Atlanta teeters on the edge of financial ruin, and Emory has pulled its faculty from the public clinics in Atlanta. Years ago, Philadelphia and Detroit lost their only public hospitals – a prelude to an exodus of many other hospitals from the inner city in those towns.

Note: The views expressed in this document are ours alone and do not reflect the views of The Cambridge Health Alliance or Harvard Medical School.