The following email was sent out by Thornton Kirby, President of the South Carolina Hospital Association, to membership. I believe Thornton sends these updates out to about 1,000 people. I think that is an example of his integrity and transparency. He really is the best hospital association executive that I have seen in my 25 years.
The email provides a great recap of the meeting and captures what I believe was a positive tone. However, I do want to speak to one comment that Tony made that did not make into the update. Those of you that have been following the Medicaid debate know that there has been some “chirping” back and forth between the association and the governor’s office. That came up in the meeting and Tony spoke to it. I am going from memory, but it was something like this…the Governor is not saying things about the providers because she is angry, but because she thinks you can do better. I thought about that comment the entire ride back to Greenville. At first I was defensive, but as I kept thinking about the comment, I became increasingly curious. As an aside, my experience is that whenever I get defensive, somebody is on to something. Next week we have set aside several days for our annual strategic planning meeting. We will be looking at what we need to do next year and for the next several years. The idea that we can do better will be a big part of that planning.
Letter from Thornton Kirby, President on South Carolina Hospital Association
Recap of SCHA Board’s Meeting with Tony Keck. Yesterday morning the SCHA Board held its regular meeting and invited Tony Keck to attend for an in-depth and less formal discussion of the Medicaid program. It seems odd to say a Board meeting would be less formal, but it was in the sense there were no reporters or elected officials waiting to seize on any nuance of the conversation. As a result, we covered a lot of ground and the Board members and Mr. Keck got a much better sense of each other. I want to use today’s update to share with you the highlights of yesterday’s conversation.
First of all, I would characterize Tony as forthright and open in his discussion of issues and opportunities. He was candid about the strengths and weaknesses in the system, the successes and failures of the agency and each provider group, and the urgency he feels to address them. In response to Tony’s openness, the Board members were quite open about their own assessment of the same issues. Based on the comments of Board members after his departure, the group felt Tony has a firm grasp on the Medicaid program and the policy implications surrounding it.
Rather than writing paragraphs about each topic discussed, I will share them in bullet format.
· Tony shared a lot of value-oriented comments about Medicaid, starting with this one. “We want to pay people fairly to do the right things for patients at the right time. We don’t want to pay people to deliver unnecessary care.�?
· The agency built into its FY 2011-12 budget an 8% growth factor ($114M) before implementing any cuts. As part of the cost-reduction plan, the agency will take $125M out of the provider line. According to Tony, the net reduction from the provider line (taking into account the 8% growth factor) will be $82M.
· Tony does not intend to accomplish 100% of the provider line savings through rate cuts; he intends to meet with each provider group and explore opportunities to reduce unnecessary spending. The more such opportunities can be identified, the less rates will have to be cut. He gave as an example pre-term births, which cost the Medicaid program tremendous amounts of money. If the provider community can legitimately reduce pre-term deliveries, the program can achieve savings without rate cuts. Mr. Keck and his team plan to schedule meetings with provider groups in the next few weeks, and he agreed with the Board yesterday that SCHA should organize a single, representative group of hospitals instead of having the agency meet with small groups or individual hospitals to discuss the impact of rate changes. The SCHA Board strongly encouraged Tony to deal with the hospital community as a whole, not as parts; everyone agreed a transparent process would engender more confidence in the end result, and Mr. Keck agreed.
· As part of the discussion on reducing costs, several hospitals noted the frustration they feel when they reduce costs and receive lower reimbursement in return (because of the cost settlement model). Tony noted this as a fundamental barrier to effective reform of Medicaid, and he expressed his desire to move toward a pure DRG system. By that he explained he wants to establish a payment rate that is fair and that rewards hospitals for driving down costs. Under such a system a hospital that reduced its costs to below the DRG rate would be entitled to retain the difference. He noted this as one example of how the Medicaid agency has too often disconnected policy issues from the reimbursement model.
· Tony also expressed his desire to make it easier for hospitals to develop Medical Home Networks (MHNs). He wants hospitals engaged in meaningful shared savings plans, and he believes they will serve to aid the transition to ACOs.
· The MHN conversation opened a discussion about Medicaid MCOs, and several Board members expressed their concerns about the lack of any concrete evidence to show the value MCOs have brought to the Medicaid program. Tony addressed these concerns forthrightly, explaining he has shared the same questions with MCOs and already begun to cut their administrative fees. He said he did not expect the initial cuts to administrative fees would be the only such cuts, and he is reviewing the value and cost of MCOs compared to similar programs in other states.
· When asked what hospitals should expect in terms of rate cuts July 1st, Tony said in the absence of agreed-upon opportunities to reduce unnecessary spending, hospitals should expect a rate cut of 10-11% as of July 1st. This number includes the 3% rate cut to be implemented April 1st. This information, though not unexpected, was obviously sobering to the Board. Their response was to direct SCHA to assemble a strong team to represent the hospital community in the cost-cutting discussions with Tony and his staff.
· Tony wrapped up the conversation by advising the Board he wants to build a strong partnership with any and all organizations that share the core values of reducing waste, increasing quality of care, and improving the health of South Carolina’s Medicaid population. Several Board members emphasized the hospital community’s demonstrated commitment to reengineering the delivery of care in our state, and Mr. Keck acknowledged that every interaction he has had to date reinforces that commitment. He ended the conversation by reiterating his desire to work with hospitals as the central and necessary players in the redesign of our state’s delivery system.
I hope this recap is helpful; I will share more details as the conversations around rate cuts and system redesign continue to unfold.
