It wasn’t long ago that the Centers for Medicare & Medicaid Services was rather tight-fisted with data like that found in this new report, in particular numbers related to annual Medicare spending per enrollee.  A few years back, when IHA was fighting to make the case that Medicare exploited low-spending, high-quality states like Iowa to subsidize states on the other end of the value spectrum, this information was as hard to find as a black cat in a coal crib.

Things have changed. Oh, Iowa is still low on Medicare per-enrollee spending, though we’ve moved from the bottom five to the bottom 10.  But at least the data is there – and there’s plenty of it to mull over as the report covers two decades of health care spending by Medicare, Medicaid and the population as a whole.  And though there are a lot of numbers, there are not a lot of easy answers about why the numbers are so different from one place to the next.

Here’s what the numbers tell us.  First, states with relatively low per-capita spending tend to have younger populations that don’t “use” a lot of health care, like Utah (median age: 28.8; annual per-capita health care spending: $5,031).  They also have another group that tends to use less care – the uninsured – like Texas (percent of population uninsured: 26 percent; annual per-capita health care spending: $5,934).

Iowa sits in the middle (28^th) for per-capita health care spending at $6,921.  This may seem surprisingly high, but it makes sense because Iowa is well insured (10 percent uninsured – only three states do better) and has a relatively large population of senior citizens (15 percent of Iowans are 65 years or older, the fifth highest rate in the nation).  Massachusetts provides the perfect storm for pushing up health care costs: nearly everyone is insured (4.4 percent uninsured) and the median age is high (39).  But most important is Massachusetts’ unrivaled density of medical providers; the state has one physician for every 189 people; in Iowa, there is one physician for every 479 people.  No wonder Massachusetts’ per capita health care spending is $9,277 (the highest of all states and 30 percent more than Iowa).

Older people are more expensive to keep healthy than younger ones, which is why in nearly every state (Alaska is the exception) more money is spent on each Medicare recipient than on the typical resident.  In Iowa, it’s about 22 percent more; in 18 states, it’s at least 50 percent more.  Some of that difference can be explained by a relatively young total population that keeps per capita costs down in some states.  However, while there are a lot of uninsured in Texas and the median age is 33 (it’s 38 in Iowa), that doesn’t completely explain why a Medicare patient costs nearly twice as much as a plain ole Texan, on average.  It certainly doesn’t make sense in Florida, where the median age is 40 but a Medicare patient costs 66 percent more than everybody else.

What about Medicaid?  Well, Medicaid doesn’t serve the same populations as Medicare – not exactly, anyway.  Most significantly, many Medicaid recipients are children or young mothers, so you’d expect Medicaid costs per enrollee to be quite a bit less than Medicare and about the same as everybody else (or somewhat higher because many Medicaid recipients are dealing with chronic health problems).  In Iowa, that’s exactly the case – the cost per Medicaid enrollee is 99.5 percent of the cost of a typical Iowan.

However, the real cost of taking care of a Medicaid patient is significantly higher – Iowa hospitals and physicians lose millions of dollars a year because of Medicaid underpayment.  But it could be worse.  California, which spends nearly $11,000 on each Medicare patient each year (ninth highest in the nation), spends only $4,569 on each Medicaid patient (the least in the nation).

Does that mean Iowa is spending too much on Medicaid?  Only if you feel ok about scores of physicians refusing to be part of the program, effectively making millions of Medicaid patients uninsured.  That is precisely what has happened in California, which is more than happy to take advantage of low-cost states like Iowa to pump up its Medicare spending, while strangling providers with ridiculously low Medicaid payments and thereby cutting off health care to millions of the state’s poorest and most vulnerable citizens.

“Wide variation” comes up a lot when discussing numbers like these and how much is spent on seemingly the same patient groups in different parts of the country.  As this brief discussion shows, there are many factors to consider.  Still, while the actual cost of providing health care may be more in Manhattan than Marengo, it doesn’t completely explain why a New York Medicare patient costs 31 percent more and a Medicaid patient costs 37 percent more than the same patients in Iowa.

It is complicated, but it starts with providing value and making value a strategic priority in every Iowa hospital.  It’s about providing quality care, not just quantity care.  And it’s about putting patients first.

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“The Iowa Hospital Association is the organization that represents Iowa hospitals and supports them in achieving their missions and goals.” 

That is IHA’s mission statement, and it’s a good one. Basically, IHA helps hospitals do what they need to do to meet the expectations of their communities by educating hospital staff, collecting data that helps hospitals plan and representing Iowa hospitals in Des Moines and Washington, D.C. 

That last part means IHA is a lobbying organization, not unlike other lobbying organizations that work on behalf of farmers, builders, school teachers, school boards, restaurants, grocers, insurance companies, lawyers, newspapers and dozens of other industries and organizations, including many non-profits, from Boys and Girls Clubs to Ducks Unlimited to Easter Seals. 

Some people don’t like lobbyists; one of those people may well be Dean Lerner. Which would be more than a little ironic, since the Department of Inspections and Appeals, the state agency Lerner used to run, has its own lobbyist. 

Certainly Lerner dislikes IHA, leaving one to wonder if he doesn’t feel the same way about the hospitals that make up IHA’s membership and drive the Association’s lobbying priorities. For the record, that would be every hospital in the state. 

It’s a little hard to tell just what Lerner’s mission is, even after several reads of his 650-word opinion in Sunday’s Des Moines Register.  Well, maybe it’s not that hard, as Lerner concludes early on that “hospitals…have come to reflect the values of Wall Street,” though he doesn’t bother to explain what that means or how it has affected one of the highest quality, most efficient health care systems in the country. 

But it is obvious Lerner doesn’t like that there are hospitals in West Des Moines (a city of nearly 60,000 people located in the fastest-growing region in the state that Lerner, nonetheless, describes as “nowhere”) even though these hospitals see nearly 2,000 patients each month – in just their emergency rooms. 

He doesn’t like Iowa’s smallest hospitals, either, because the federal government has the temerity to pay these hospitals 1 percent more than their cost of care. Lerner doesn’t seem to mind at all that these hospitals are almost completely dependent on Medicare and Medicaid dollars for their survival and that, without the Critical Access Hospital Program, their buildings would remain best suited for medicine as it was practiced 50 years ago. 

Maybe Lerner doesn’t realize that Iowa hospitals, particularly in smaller counties, are often the largest employer and always an economic cornerstone for a state desperate to attract and keep young, well-educated workers and their growing families. His position seems to be that these hospitals, and the communities they serve, should just get it over with and die. 

He also apparently believes hospitals should not be tax-exempt, though, once again, does not say why. He doesn’t think Medicaid losses by hospitals should count as a community benefit, though it’s difficult to imagine a greater benefit to taxpayers than the $196 million hit Iowa hospitals take each year to keep the program afloat (not to mention $63 million lost to Medicare).  

He doesn’t think a half billion dollars in charity care and another $67 million in additional health care services are enough. He doesn’t think $344 million lost to people who simply decide not to pay their hospital bills is enough. And he apparently has ready replacements for hospitals and the millions they expend supporting and improving the health of their communities through education, counseling, sponsorships and research that extend above and beyond day-to-day patient care. 

If he does have a different idea, rest assured that it will come at the expense of the communities that hospitals serve, the same communities filled with Iowans who each year donate millions of dollars and thousands of volunteer hours to their hospitals. It is those communities and their representatives that drive each hospital’s mission – the mission that IHA represents and supports. 

Because there is one thing Lerner does manage to make clear – he is still the dedicated former bureaucrat who would gladly add more layers of legislation, regulation and expense to health care, ultimately making nurses and physicians more accountable to the government than to their patients and communities. 

That’s a mission Iowa’s hospitals will not support, and neither should the people of Iowa.

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The co-chairs of the Joint Select Committee on Deficit Reduction have announced that the committee has failed to come to an agreement on a deficit reduction strategy.  The bi-partisan, bicameral committee, formed by the Budget Control Act, was charged with reducing the national deficit by at least $1.2 trillion.

The committee’s failure to reach an agreement means automatic spending cuts totaling $1.2 trillion, to be split between defense spending and non-defense programs, will become effective in January 2013.  Under this across-the-board cut, hospitals face a 2 percent reduction to Medicare payments over nine years (2013 to 2021).  Medicaid cuts are, however, exempt from the cuts.

Congress will now take the time to determine the next steps for deficit reduction.  Some are calling for the cuts to be repealed or delayed further, though the president has already threatened to veto any attempts to do so as a means to encourage continued Congressional action on deficit reduction.

IHA strongly opposes the cuts to hospitals as not only are they incredibly arbitrary, but hospitals have already committed to more than $155 billion in Medicare cuts to help finance the health care reform law.  By simply piling on more and more cuts, hospitals are finding themselves unable to expand critical services and are unable to create jobs with so much financial uncertainty, adding additional pressure to the economy.  IHA will continue to work with Iowa’s Congressional Delegation on this issue.

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“I think the focus needs to be on what staff, physicians and leaders can do to improve the patient experience instead of the ‘throw up your hands’ approach and blaming patients for being more difficult,” said David Brandon, CEO of The Finley Hospital in Dubuque.  “You cannot have an ‘opt-out’ culture if you’re going to succeed in creating an exceptional patient environment.” 

Both Sioux City and Dubuque are in multi-county hospital referral regions (HRRs) that rank in the top 20 nationwide for patient satisfaction.  The HRR around Mason City ranks at the top.  Meanwhile, out of nearly 300 HRRs, Manhattan is dead last and Cleveland is 237^th. 

“Where many CEOs fall down is they see this as a fluff kind of thing,” said Greg Paris, CEO at Monroe County Hospital in Albia, who received IHA’s hospital leadership award in 2007 in part for his work to pull that hospital’s patient satisfaction scores out of the basement.  “What they don’t realize is that satisfaction is directly related to quality outcomes, financial results and employee engagement.”

But, he added, “Smiles and singing don’t drive satisfaction.” 

Paris talks about how using key words reduces patient anxiety, which improves compliance with care plans and leads to better outcomes.  Hourly rounding (“I hear large hospitals gasping,” Paris laughed) reduces patient falls by 50 percent.  Checklists reduce errors.  Discharge calls save lives because one in six patients has an adverse health event after they go home.  Lower employee turnover means fewer mistakes and less harm to patients. 

But shouldn’t getting the highly touted care at Cleveland Clinic or NYU be enough?  The better question – the one really being asked through HCACHPS and Hospital Compare – is why not expect high-quality care and a first-class patient experience?  Anyone who has made use of the Iowa Healthcare Collaborative’s “Iowa Report” will see Iowa hospitals are uniformly committed to both. 

“Yes, we need to have the right facilities and evidence-based strategies in place, but more than anything else it is the never-ending commitment to create a culture that holds service in the highest regard,” said Brandon.  “Without the right culture, the strategies and facilities alone will not allow you to meet the expectations of your patients.” 

And because of the growing amount of publicly available data, hospitals cannot depend on just their word-of-mouth reputations or referrals.  “The next generation will pick their hospital based on outcomes and experience, not just by where their doctor sends them,” noted Paris.

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A recent Des Moines Register article expounded on publicly reported information to support the obvious conclusion that bringing tax-exempt organizations onto the tax rolls would lower other taxpayers’ proportional tax liability.  It’s important to know that two different standards on tax exemption are involved in an evaluation of this question.  

One is a standard in Iowa law that exempts from property taxation any religious, educational or charitable institution.  The other is a federal regulation that exempts organizations from taxes on revenue if that organization provides community benefits that the government otherwise would have to provide or, at the time of application for tax exemption, don’t exist in the community.   

Each standard involves evaluation by regulators – the Internal Revenue Service for community benefit and the Iowa Department of Revenue for charitable status – and both have had extensive and consistent scrutiny by the courts.  The Register noted that hospitals pay significant sums in property taxes and in addition to that, some make payments in lieu of taxes to support police and fire protection. 

Iowa hospitals supported mandatory reporting of community benefits in federal law because of their practice of doing so prior to this mandate.  Iowa hospitals continue to support the community benefit standard for the express reason that an assessment of community need is driven by its demographics and by the needs and priorities identified by community members.  The capacity, opportunity and definition of community benefit is different in a community of 1,500 than one modestly or significantly larger.  It’s certainly different when that institution exists in Des Moines or Chicago or Los Angeles. 

As the Register noted, opinions of policymakers and policy wonks differ on the question of what should be included in the definition of community benefit or whether a flat percentage mandate should be required.  Iowa Senator Charles Grassley supports inclusion of Medicaid payment shortfalls in an analysis of community benefit.  In 2010, Iowa hospitals’ net losses from Medicaid equaled nearly $200 million.  Uncompensated care, that care which was not classified as charity but which otherwise had no identifiable source for payment, equaled $340 million in 2010. 

So, what should be the appropriate ratio for calculating community benefit?  The Register took a very narrow view and used charity care divided by total expenses.  Hospital expenses consist of labor costs, infrastructure costs in delivering patient care as well as expenses unrelated to patient care.  Why not net patient revenues?  Perhaps because it supports a conclusion exactly opposite of the position promoted by the Register.   

Using the analysis of charity care plus Medicaid losses plus uncompensated care, Iowa hospitals provided 11.2 percent of net patient revenues for community benefit.  Using the same inputs and expenses for the denominator as the Register does shows Iowa hospitals allocated 10.2 percent of expenses for free care. 

In a country with a stagnating economy, it’s tempting to toss out simplistic solutions that rarely account for all the policy considerations at play let alone consider the implications for an industry that has a $6 billion impact on Iowa’s economy and provides nearly 70,000 jobs.  The important thing to know is that Iowa’s hospitals believe in and live up to being accountable to the communities they serve.

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