The Year in Health 2014: Reform leads to change

Eastern Long Island Hospital president Paul Connor III. (Credit: Carrie Miller)
Eastern Long Island Hospital president Paul Connor III. (Credit: Carrie Miller)

Eastern Long Island Hospital in Greenport had much to celebrate this year, what with word of a coming surgical unit expansion and the availability of new surgical specialty services.

They are a welcome change in a time when health care reform has made for many unexpected challenges for hospitals big and small. 

We sat down with Paul Connor, Eastern Long Island’s CEO, to discuss the Affordable Care Act’s impact on the community hospital, and the changes it has spurred.

As expected, there was a lot to talk about.

Q: Can you describe some of the major changes the Affordable Care Act generated at ELIH and how quickly they occurred?

A: The health care exchanges have now given access to another eight or nine million people nationally. What we’re seeing locally, here, is that a lot more New Yorkers qualify for Medicaid under the exchange. It is a very significant increase, and it was designed that way.

For us and for hospitals, it is good because it promotes access for those individuals who didn’t have insurance and did not qualify for Medicaid. Having access is obviously a good thing.

But on the non-Medicaid exchanges there are two sides. One, it is good that folks now have health insurance and can access the system. However, one of the problems we are concerned about — especially with the bronze and the silver models — is that they are now facing high deductibles.

So you find a family that couldn’t afford health insurance before, and now they can [but] they are faced with a high deducible. It is likely to become a bad debt. It gives you, sometimes, the illusion of insurance because of the very significant deductibles. That hasn’t happened locally, but it’s being seen nationally and through the Nassau-Suffolk Hospital Council, we are watching this to see how it manifests on Long Island.

Q: How drastically have inpatient numbers dipped since the law’s start? How did it impact the hospital’s bottom line?

A: We serve a population that is disproportionately older; at least a quarter of the population is Medicare-eligible and over 65. That is a whole order of magnitude higher than the rest of Suffolk County.

Since many of these older folks have chronic illness, that’s who we are seeing come in for treatment of a specific disease. Our [inpatient] numbers are down double digits from last year; however, most of it is because Medicare has initiated what they call an observation program.

Medicare came up with a rule called the two-midnight rule; that is, if a patient is not going to spend two nights [in the hospital], they go on what’s called an observation status.

The nuance is — while physicians and the nurses are still caring for them in the hospital, it is not an inpatient, reimbursed transaction. They are considered a Medicare outpatient, which is a different set of [reimbursement] criteria.

When I say we are off double digits, I can tell you that a very significant number of those digits are observation cases. We get substantially less reimbursement — and there is more financial responsibility that falls on the patient as well.

It is hard to predict if we will have a resurgence in those inpatient numbers, but I do know when Peconic Landing expands, which is within the next two years, we will have about a 25 percent increase in the Medicare population. We will see an uptick.

Q: How is that ‘two-midnight rule’ creating issues for the aging patient population?

A: In order to be discharged to a skilled nursing service or even get Medicare home care, you have to have a three-day stay in the hospital.

Now, with observation status, for those folks who may need to be discharged to a skilled nursing facility — Medicare will not pay [for it]. That has caused significant problems for some people.

I have not yet heard of that happening out here, but I know there is a class-action lawsuit initiated by [The Center for Medicare Advocacy and the National Senior Citizens Law Center, two national not-for-profit advocacy organizations.]

Q: At what point was it clear that merging with a larger institution was necessary? Why?

A: We’re moving away from volume-based reimbursement to value-based reimbursement, from quantity to quality. [Insurers] want to pay for performance, and more and more hospitals and providers will be paid on outcomes.

For ELIH, like most community-based hospitals — because we’re moving to a population-based health, or risk-based health — if you’re not part of a system or large academic medical center, you will not have the financial resources to participate in these risks-based products.

Q: Can you describe how these “value-based” reimbursements are decided?

A: Known as “value-based purchasing,” it is really the new way that Medicare and ultimately other payers incentivize the hospitals. Getting paid more for the quality of your work, not just for the quantity of services. Quality is the outcome, and value-based purchasing focuses on the hospital being able to meet a standard of care for a certain disease — pneumonia, heart attack, stroke, to name a few.

If you achieve that standard of care, your [insurance] reimbursement is favorably impacted. Should you fall short, then you actually receive a penalty. They want to pay for performance, not just that a service was provided.

An example of that is hospital readmissions. The government is trying to crack down on preventable readmissions — that is, for example, if 30 days after discharge someone who was treated for congestive heart failure is readmitted for the same [condition], then the hospital will take a [reimbursement] hit.

I think over 60 percent of hospitals nationally have taken hits. We have not taken a hit on readmissions, and we are neutral in terms of reimbursement … we’ve received neither an incentive nor a penalty.

Q: How exactly will a merger help the organization?

A: As we move forward and fee-for-service revenue starts declining, we’re going to need to be on the other side of that equation to be able to reap the benefits of those incentives on a [value-based] model. So without being part of a larger health system, I don’t know that we could survive.

I think we also felt it didn’t matter who was in the White House. Medicare and the cost of providing Medicare services has been a huge strain, and it doesn’t matter if it’s a Republican or Democrat — you’re going to want to use these features to be able to squeeze down spending. Even if part of the [Affordable Care Act] is repealed, these features would survive that.

When the ACA came across, I think that really put things into focus. We said, “Look, we will not be able to survive under these features.”

We’ve been actively talking with Stony Brook and North Shore-LIJ for the past two years, and most seriously over the past 15 to 18 months. One way or the other, 2015 is more likely to be the year that any decisions are made.

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