Special Report: The Deteriorating Financial Health of New York's Health Centers

8/14/2019 Special Report: The Deteriorating Financial Health of New York's Health Centers

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Special Report:The DeterioratingFinancial Health

of New York StatesHealth CentersMarch 2009

PrePared by:

Primary Care Development Corporation


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About 1.5 million New York State residents depend on health centers or primary and preventive

care. Financial distress among an increasing number o health centers has become a

growing concern to the New York State Health Foundation (NYSHealth) and the Primary Care

Development Corporation (PCDC).

Within the last several years, NYSHealth has received growing numbers o requests or nancial assistance

rom nancially distressed health centers seeking to maintain primary care access in their communities.

In its role as the largest nonprot nancer o health centers in New York, PCDC also began seeing signs o

nancial distress among a growing number o the health centers with which it works.

To better understand the underlying actors that aect the viability o health centers, and the

sector as a whole, NYSHealth engaged PCDC to conduct an in-depth assessment o the nancialviability o New York States health centers. PCDCs work and mission to expand and enhance

primary and preventive health care in underserved communities made it well positioned to

undertake the assessment. In partnership with researchers rom Health Management Associates,

PCDC undertook a thoroughgoing study o the nancial condition o New York States health center

sector.

In this issue brie, PCDC presents key ndings rom the study, which examines nancial trends rom

2001 to 2007.1 These preliminary ndings are shared in advance o releasing the ull study (projected or

mid-April) because they have signicant importance on current budget and health reorm discussions in

State government and in communities throughout New York State.

The issue brie seeks to answer the question, How broad and deep is the nancial distress in the healthcenter sector? The ull report will address the causes and contributors to the nancial distress; describe

variation in nancial wellbeing by health center geography, size, and Federal program participation;

discuss the potential causes and contributors to these trends; and provide recommendations or

policymakers and unders in their eort to respond to this looming crisis in New York State.

Introduction

1

Special Report: The Deteriorating Financial Health of New York States Health Centers

1 This study drew primarily rom auditor-prepared elements o the New York State Department o Health Ambulatory Health Care Facility reports (AHCF-1)or calendar years 2001 through 2007. Centers were included i data met standards o completeness and reliability. Sample size ranged rom 57 centers in2001 to 66 in 2007.


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Background

Health centers (technically Comprehensive Diagnostic and Treatment Centers)

are a vital source o primary care or underserved communities o New York

State whose residents tend to be low-income amilies who are either uninsured or

enrolled in Medicaid and other public insurance programs. In 2007 there were 95 such

health centers operating more than 400 sites and providing more than 5 million visits to approximately

1.5 million patients.

Located throughout the Stateupstate and downstate, across urban, suburban, and rural communities

most o these health centers are in communities that the Federal government has designated as medically

underserved, where patients have ewi anyprimary care alternatives should the health centers close.

The centers included in this study include both Federally Qualied Health Centers (FQHCs) 2 and non-

FQHCs. In addition to health centers, hospitals and private practitioners are also important sources o careor these communities. These were not the ocus o this study, but they are subject to many o the same

nancial and policy actors as health centers.

The nancial distress evident in these ndings occurs at a moment when policymakers are pointing to

the critical need or primary care as part o the States agenda or improving access and quality o care.

Primary care provides crucial services known to reduce health care costs, improve quality o care, and

prevent and manage the rising tide o chronic illness that accounts or 75% o health care spending. This

distress occurs during an economic recession when health centers are more critical than ever or the

community-based jobs they generate as a source o care or the most vulnerable populations, and or the

access to care they oer to those losing jobs and their health insurance.

2 FQHCs provide their services to all persons regardless o ability to pay. In return, FQHCs receive compensation rom the Federal government in the orm o acash grant to help cover the costs o caring or the uninsured, cost-based reimbursement or their Medicaid patients, and ree malpractice coverage.


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Based on health centers annual nancial reports to the New York State Department

o Health, our analysis ound that health centers, or the most part, are in a tenuous

position with regard to solvency, cash fow, and adequacy o payments.

43% o health centers lost money in all or most o the last seven years.

Health center margins have allen dramatically, rom 2.28% in 2001 to 0.56% in 2007.

With only 16.5 days o cash on handdown rom a high o 22 days in 2002health centers are

one payroll away rom ull-scale nancial crisis.

Health centers are systematically underpaid or their services:

costs per visit exceed the Medicaid ee-or-service rate by nearly 20%, a gap partially closed

by the State through special payments;

private payers pay $38$55 less per visit than does Medicaid ee-or-service;3 and

the State pays health centers only 30% o the cost or care or the uninsured.

43% o all health centers lost Money in all or Most

o the last seven years, while Median health center Margins droPPed

roM 2.28% in 20 01 to 0.56% in 2007.

h m mp 20012007

M m mm

a

13%

M

30%sm

30%

n

27%

Median magin fo ommunity health entes statewide

netMargin

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%2001 2002 2003 2004 2005 2006 2007

2.28%

0.87% 0.78%

1.79%

0.11%0.56%

1.46%

Source or all charts in this brie: HMA analysis o AHCF-1 Reports, 2001-2007, conducted in January 2009.

Summary of Findings

3 Improving Commercial Reimbursement or Health Centers: Case Studies and Recommendations or New York, RCHN oundation, October, 2007


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Summary of Findings (continued)

Nearly three-quarters o health centers lost money in at least some years o the study, and

43% o health centers lost money in most or all years o the study. Over the last seven years,the median margin has declined 75%rom 2.28% to 0.56%meaning that revenues are barely

covering expenses.

with only 16.5 days cash on hand, on average, health centers are one

Payroll Period away roM a ull-scale inancial crisis (at lea st 30 days is

considered MiniMally healthy).

Cash on hand is a measure o liquiditythe number o days a health center can cover its

operating expenses with cash immediately available to it. Cash on hand has declined steadily over

the study period and currently stands at approximately 16.5 days. Good scal management would

require at least 30 days cash on hand to pay essential expenses such as payroll.

d 32

30

28

26

24

22

20

18

16

days

2001 2002 2003 2004 2005 2006 2007

19.86

22.39

19.76

20.69

18.2316.18 16.49

Minimally healthy days cash on hand

health centers are substantially underPaid by Most Payers

Although Medicaid ee-or-service is the best payer o health centers, the Medicaid rate covers

only 79%85% o health center costs, a gap partially closed by the State in recent years with

special payments.4 While not included in this study, private (i.e., commercial) insurance payments

underpay primary care services even more dramatically. A recent study shows their rates to be

$38 to $55 per visit less than Medicaid ee-or-service.5 With regard to the uninsured, the State

4 Includes recruitment and retention add-ons and managed care transition payments

5 Improving Commercial Reimbursement or Health Centers: Case Studies and Recommendations or New York, RCHN oundation, October, 2007


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Summary of Findings (continued)

compensates only 30% o health center costs compared with 65% o uninsured costs experienced

by hospitals. (Data are unavailable on the adequacy o payment o Medicaid managed care, ChildHealth Plus and Family Health Plus.)

h p mx

Medicare

10%

Private

25%

Other

2% Medicaid/FHP/CHPManaged Care

26%

Medicaid FFS

21%

Uninsured

16%

s M . p

Underpayment

%

$160

$150

$140

$130

$120

$110

$1002001 2002 2003 2004 2005 2006 2007

17% 20% 16% 15% 21% 19% 19%

$124

$106$110

$113

$119 $120

$127$129

$133

cost pe visit

rate

$131

$137

$146 $151

$154


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Implications

While the ull report will identiy in some depth the many causes and contributors

to nancial distress in the health center sector and make recommendations

accordingly, the ndings presented in this issue brie allow or several

signicant conclusions.

h pm n y s

mm. Thousands o low-income amilies rely on health centers or their health care needs.

Most o these health centers are in communities ederally designated as medically underserved, so

these amilies would have ew primary care alternatives should health centers close.

, p jp, j

n y m. With slim and shrinking margins and little cash on hand,health centers are increasingly vulnerable to even minor downturns or crises. New York State

could lose many o these centers at a moment when more people are losing health coverage or

enrolling in public insurance programs, and when policymakers have committed to investing in

primary care to control health care costs and improve the health o residents.

s f m

mm. Financial distress drains organizational resiliency. It limits health centers ability

to address routine needs, maintain adequate stang, make internal investments, and expand

services to amilies in need.


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Recommendations

Cmm p m p .All payers must pay or

the cost o the services they purchase rom health centers, including State programs

such as Medicaid ee-or-service, Medicaid managed care, Family Health Plus and

Child Health Plus, as well as commercial payers. Similarly, the State should pay more

adequately or care o the uninsured.

Pm m m m m. Health centers report delaysoten in excess

o a yearin receiving payments due rom the State, including rate adjustments, transition

unds, and payments or the uninsured. Such delays contribute to health centers deteriorating

cash on hand and, in turn, the deteriorating cash on hand makes health centers even more

vulnerable to late payments.

h mp m f m. Primary care

in New York State has suered decades o underinvestment. Moreover, investment in health

centers has been shown to be an important source o community economic development in

the number o direct and indirect jobs it produces and the primary and secondary spending it

generates. Investment in primary care thus addresses dual public priorities: health care reorm

and community economic stimulus.

inancial study advisory coMMitteed. n cm, CEO, Institute or Family Health, NYC & Hudson Valley;

s c, Director o Health Care Finance, United Hospital

Fund; g cp, CEO, Hudson Health Plan; d d, CEO,

Northern Oswego Health Center; P epp, Principal, RSM McGladrey;

a gzz, CFO, Lutheran Family Health Network, Brooklyn; r

gzz, CEO, Settlement Health, Manhattan; Pm hz, CEO,

Urban Health Plan, Bronx; tm Mp, PCDC Board Member Principal,

Trailhead Advisors and ormer head o DASNY; c P, HRSA

Consultant and Interim CFO, Hometown Health Center; Schenectady; d.

M rm, Pediatrician, CEO, Nassau DTC & Triboro Management;

M r, ormer CEO, Brownsville Multi-Service Family Health

Center, Brooklyn; J b sm, Associate VP, National

Association o Community Health Centers; Jm s, CEO, WhitneyYoung Health Center, Albany; ez s, CEO, Community Health

Care Association o New York State.


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About the Organizations

the new york state health oundationNYSHealth, whose mission is to expand health insurance coverage,

increase access to high-quality health care services, and improve public

and community health was established by the State o New York with

charitable unds rom the privatization o Empire Blue Cross/Blue Shield.

the PriMary care develoPMent corPorationThe Primary Care Development Corporation is the only Community

Development Financial Institution in New York Stateand the largest

and frst in the U.S.ocusing solely on primary care. Since its inceptionin 1993, PCDC has invested $165 million in 77 health center projects,

leveraging a total investment o $240 million in community health

centers statewide; created health care acilities that have generated

more than 2,100 permanent jobs; built or renovated 620,000 square eet

o space; and created the capacity to serve approximately 525,000

New Yorkers and provide 1.6 million medical visit s annually. PCDC

has also helped more than 400 health center teams transorm their

operations by decreasing appointment backlogs, reducing no-show

rates, implementing HIT systems, and increasing provider productivity.

PCDC partnered with Health Management Associates (HMA) to complete

this analysis. HMA is an independent national research and consulting frm

specializing in complex health care program and policy issues. Founded

in 1985, HMA provides leadership, experience, and technical expertise

to local, state, and ederal governmental agencies, regional and national

oundations, investors, multi-state health system organizations and single

site health care providers, as well as employers and other purchasers

in the public and private sectors. HMA has 10 ofces around the country.


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VOICE: 212-664-7656

FAX: 646-421-6029

MAIL: 1412 Broadway

Suite 2304

New York, NY 10018

WEB: www.nyshealth.org

Improving the State o

New Yorks health

Special Report: The Deteriorating Financial Health of New York's Health Centers

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