January 2001

Grant Results

SUMMARY

During 1995 and 1996, investigators at Kalkines, Arky, Zall and Bernstein took a snapshot of the state of the health care safety net in four major urban areas (Boston, Miami, Philadelphia, and New York City).

The research team also made program development recommendations to the Robert Wood Johnson Foundation (RWJF) regarding the maintenance and improvement of the health care safety net.

Kalkines, Arky, Zall & Bernstein was a Manhattan law firm specializing in health care law. It was acquired in 2003 by Los Angeles-based Manatt, Phelps & Phillips.

A similar contract was awarded to the Lewin Group under grant ID# 028039, to assess safety-net viability in Dallas, Los Angeles, Memphis, and also in New York City.

Key Findings
Along with findings related to each of the studied cities, investigators presented the following findings to RWJF regarding the overall state of the safety net:

  • The numbers of medically indigent were on the rise due to corporate downsizing, immigration, and rising health care costs that were causing employers to drop their health insurance benefits.
  • The Medicaid program, which had been the backbone of the safety net, was changing in ways adverse to low-income populations, communities and the health care providers that serve them.
  • The states and the federal government had begun to reduce a wide range of health care grant programs to safety-net providers, including support for maternal and child health, categorical aid for HIV, substance abuse and mental health.
  • The rapid implementation of mandatory Medicaid managed care presented challenges for the safety net, such as a shortage of physicians and facilities in inner cities, restrictions on choice of providers, and deeply discounted rates for community providers.
  • Most safety-net providers were poorly positioned to compete in the health care marketplace.
  • Despite overall consolidation in the health care field, few safety-net providers were linking to form integrated, resourceful delivery systems.
  • The proposed federal Medicare and Medicaid cuts threatened to deliver a "knockout blow" to many safety-net providers and the communities they served.
  • Nevertheless, there was not yet a major crisis in the safety net of the cities studied.

Funding
RWJF supported this project through a grant of $180,800.

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THE PROBLEM

The early and mid-1990s was a time of significant change and upheaval in the provision of health care and health insurance in the United States. Federal, state, and local budget cuts resulted in the fraying of the health and social safety net. In addition, price competition in the private insurance market and in Medicaid and Medicare managed care was forcing excess capacity out of the health care system. These changes helped rid the system of deeply rooted inefficiencies, but at the same time posed challenges — including financial sustainability — to the core institutions of the health care safety net. This was especially true in the case of America's urban areas, where public hospitals, community health centers, public health departments, not-for-profit hospitals, and other safety-net providers were a vital means of access to health care for many of the nation's poor.

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THE PROJECT

The purpose of this project was to provide RWJF with an overview of the state of the local health care safety net in four urban areas, and program options to help these communities maintain and improve the health care safety net. (A similar contract was awarded to the Lewin Group under grant ID# 028039, to assess safety-net viability in Dallas, Los Angeles, Memphis, and also in New York City.) The grantee completed four major tasks to achieve these objectives:

  • Background profiles were compiled for each of the four urban centers (Boston, Miami, Philadelphia, and New York City) in preparation for site visits. These study papers provided an overview of the dynamics involved in health care access in each city. They were based on data drawn from a large pool of sources and included safety-net infrastructure information; demographic, legal, and health research; background studies about specific care-giving institutions; and descriptions of key political, social, and economic pressures in each particular city. Each profile contained summaries of meetings, conference calls, and site visit schedules.
  • Site visits were scheduled and organized to all four cities. The grantee held interviews with key leaders and policymakers about the factors affecting the viability of each city's health care safety net. Meetings included RWJF staff, administrators and medical directors of public hospitals and academic health centers, public health and public hospital advocates, as well as representatives from insurance organizations.
  • Program development recommendations were analyzed based on the results of the site visits. A wide range of options for initiatives and grantmaking were outlined, some in a collaborative process with RWJF staff.
  • A final presentation was given to RWJF staff, particularly those engaged or involved in the access initiatives.

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RESULTS

Observations on the Overall State of the Safety Net

The presentation to RWJF in May 1996 included these observations on the overall state of the safety net:

  • The numbers of medically indigent were on the rise due to corporate downsizing, immigration, and rising health care costs that were causing employers to drop their health insurance benefits. Despite safety-net pressures and inefficiencies, the medically indigent still had access to care when intervention was required because safety-net providers had stretched their already limited resources a little further.
  • The Medicaid program, which had been the backbone of the safety net, was changing in ways adverse to low-income populations, communities, and the health care providers that serve them. Benefits were being scaled back; eligibility was being tightened; payments to providers were being reduced; the transition to Medicaid managed care was creating instability and posed significant threats.
  • The states and the federal government had begun to reduce a wide range of health care grant programs to safety-net providers, including support for maternal and child health, categorical aid for HIV, substance abuse, and mental health.
  • The rapid implementation of mandatory Medicaid managed care presented challenges for the safety net, such as a shortage of physicians and facilities in inner cities, restrictions on choice of providers, and deeply discounted rates for community providers.
  • Most safety-net providers were poorly positioned to compete in the health care marketplace. These providers, operating without financial reserves or endowment funds, faced cuts in local and federal funding, had inefficient labor structures, physical plant deficiencies, cumbersome governance structures, and poor management systems.
  • Despite overall consolidation in the health care field, few safety-net providers were linking to form integrated, resourceful delivery systems.
  • The proposed federal Medicare and Medicaid cuts threatened to deliver a "knockout blow" to many safety-net providers and the communities they served.
  • Nevertheless, there was not yet a major crisis in the safety net of the cities studied.

Site Visit Findings

  • Boston. The safety net was basically intact, despite gaps in care that affected people suffering from special problems such as AIDS, mental illness, and homelessness. A proposed merger of Boston City Hospital and Boston University Medical Center Hospital faced financial obstacles, but potentially offered a means to provide comprehensive coordination of services for low-income and uninsured patients. Also, Boston's community health centers were bigger and more powerful than their counterparts in other cities and were developing their own networks. The challenges facing the safety net included the future of Boston City Hospital; the uncertain commitment of mainstream health care providers; competing demands that were straining the state's uncompensated care pool; and pending federal cuts.
  • Miami. A tax referendum, supported by the voting public, provided Miami's dominant health care institution, Jackson Memorial Hospital, with adequate funding to cover indigent care. Miami's not-for-profit hospitals made only sporadic and limited attempts to play a safety-net role; there was significant excess capacity and the system seemed likely to downsize rapidly in the near future. Community health centers were beginning to develop alliances to survive under managed care. Growing gaps in safety-net services included exclusion of dental care, long waits, and the need for services for a large AIDS population. The challenges facing the safety net included the fragmentation of Miami's health care leadership; the lack of an independent entity to conduct health care planning for the city or county; the beginning of Medicaid managed care, which threatened to pull paying patients out of safety-net providers; and pending federal Medicaid and Medicare cuts, which in Miami could have a larger impact because its hospital system is unusually dependent on Medicare.
  • New York. The potential privatization of the largest public safety-net provider, the Health and Hospital Corporation (HHC), was moving forward with no comprehensive safety-net planning. The voluntary sector, which plays a major role in the safety net, was heavily dependent on Medicaid and straining because of severe reductions in state reimbursement rates. It was actively developing alliances to build integrated delivery systems to meet the needs of managed care organizations. The network of community health centers had created their own Medicaid managed care plans, known as prepaid health services plans (PHSPs). Most stakeholders believed that these were sufficient resources within the system to meet the needs of the uninsured, but that these resources were not coordinated or distributed in the most rational manner. Also, safety-net providers were generally pursuing independent strategies, resulting in a lack of coordination of services. Evidence of rips in the safety net included reduction in provider hours, delaying appointments for uninsured patients at community health centers, and HHC's required $10 co-payment for drugs. Other challenges included the potential of further state cuts in Medicaid; threats from Medicaid managed care; reformulation of the state's rate setting system that could make it more difficult for safety-net providers to treat the uninsured; the potential privatization of HHC; and potential federal cuts in funding.
  • Philadelphia. A network of small community hospitals has filled the gap left by the closing of the city's public hospital. Shrinking profit margins were beginning to spur hospital integration. The city played an unusually critical role in the delivery of ambulatory care through the operations of its own health centers. Safety-net providers were forming their own managed care plans. Most observers agreed that there was enough capacity in the existing system to provide most services for the safety-net population, but there were gaps in the system including shortages of nursing home beds and social services, and deficiencies in cultural sensitivity among primary care physicians. The challenges included impending changes in the state's Medicaid program, particularly the elimination of benefits to the general assistance population; implementation of the HealthChoices Medicaid managed care program that would result in lower reimbursement to providers and create increased competition among managed care organizations; and pending federal cuts.

Project Recommendations

In addition to recommending specific potential roles for RWJF in each of the urban centers studied, the grantee explored the shaping of a national Foundation program designed to improve the overall condition of the safety net by tailoring interventions and targeting needs to a particular city's circumstances.

Communications

Dissemination was not formally supported by this grant.

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GRANT DETAILS & CONTACT INFORMATION

Project

Analysis of Options to Help Remake the Health Care Safety Net

Grantee

Kalkines, Arky, Zall and Bernstein LLP (White Plains,  NY)

  • Amount: $ 180,800
    Dates: October 1995 to May 1996
    ID#:  027417

Contact

Richard J. Zall
(914) 697-9200

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Report prepared by: Avery Hart
Reviewed by: Marie Lyons
Reviewed by: Molly McKaughan
Program Officer: Michael Beachler