Kaiser Permanente’s switch reverberates

When Kaiser Permanente opted to refer its Clark County patients starting last October to Legacy Salmon Creek Medical Center — ending a longtime relationship with PeaceHealth Southwest Medical Center – the nonprofit insurer was motivated by Legacy’s data-driven approach to health care, said Susan Mullaney, Kaiser’s vice president of hospital operations for Oregon and Washington.

Kaiser uses an integrated electronic medical record system to manage care — identifying patients who make frequent emergency room visits, for example, and then trying to find ways to treat those patients outside of the ER.

Mullaney said PeaceHealth is “an excellent organization — we were generally disappointed that we could not continue our relationship with them,” but she also added that Legacy was better able to integrate its medical records with Kaiser’s system.

4.9: Percentage point drop in uninsured patients from a year ago at Legacy Salmon Creek Medical Center.

2.4: Percentage point drop in uninsured patients from a year ago at PeaceHealth Southwest Medical Center.

17.1: Percentage of patients at PeaceHealth Southwest covered by Medicaid last year.

19.2: Percentage of patients at Legacy Salmon Creek covered by Medicaid last year.

23: Current percentage of patients at both hospitals on Medicaid.

$200,000: Amount of additional reimbursement revenue for each percentage point shift from uninsured to Medicaid.

4.2: Percentage drop in acute admissions in the past year at PeaceHealth Southwest after Kaiser shifted its patients away from that facility to Legacy Salmon Creek.

7: Percentage drop in emergency room visits in the past year at PeaceHealth Southwest.

1.8: Percentage rise in surgical cases in the past year at PeaceHealth Southwest.

Across the country, millions of newly insured people are flooding major hospitals, but industry leaders in Clark County say health reform is playing out differently here.

Both PeaceHealth Southwest Medical Center and Legacy Salmon Creek Medical Center say they’re seeing notably fewer people arriving without any health insurance, a shift that’s good for any hospital’s bottom line. But a decision last year by health insurance giant Kaiser Permanente to shift patients from PeaceHealth to Legacy seems to be having a much bigger financial impact on local hospitals than the expansion in coverage that came with the Affordable Care Act.

The result: PeaceHealth Southwest is feeling a financial squeeze, with fewer visits since the start of the year and less money coming in the door.

At Legacy Salmon Creek, revenue is up, visits are climbing and new jobs have been posted for medical professionals. But hospital leaders say they’re having to spend more, too, to keep up with the growing demand.

Kaiser covers about 121,000 people in Southwest Washington, while the Affordable Care Act has added only 26,700 enrollees to local Medicaid rolls and 8,600 people to private individual health plans since the beginning of the year.

It’s little wonder that it’s difficult to tease out just how significant health reform will ultimately be for local hospitals’ bottom lines, says Bryce Helgerson, chief administrative officer at Legacy Salmon Creek.

Fewer uninsured

The good news for both Clark County residents and the hospitals that serve them: fewer local people lack health insurance.

A year ago, 7.8 percent of all patients visiting Legacy Salmon Creek and 5.7 percent who visited PeaceHealth Southwest were uninsured, the hospitals report. Those numbers have dropped to 2.9 percent uninsured at Salmon Creek this year and 3.3 percent at PeaceHealth.

Many seem to have enrolled in Medicaid plans. The program covered 17.1 percent of PeaceHealth Southwest patients a year ago and 19.2 percent at Legacy Salmon Creek. Today, 23 percent of patients at both hospitals are on Medicaid.

Every percentage point shift from uninsured to Medicaid equates to about $200,000 in additional reimbursement revenue, says Randy Querin, spokesman for PeaceHealth.

Major shift

But commercial health insurance is hospitals’ payer of choice, and Kaiser Permanente covers significantly more people than have been signed up for Affordable Care Act plans in Southwest Washington.

Kaiser’s shift away from PeaceHealth in October 2013 brought a dramatic and immediate boost to Legacy Salmon Creek, says Helgerson.

“We started seeing up to 40 additional patients in the ER per day, and about 30 new inpatients per day,” Helgerson says. “We ramped up staff for that. Then, right around Jan. 1, as more people signed up for health insurance, we started to see additional changes in our emergency department” and elsewhere in the hospital, he said.

More visits might be good news for doctors or nurses in search of a job, but Helgerson says he does not expect a dramatic boost in Legacy Salmon Creek’s profit margin this year.

Medicaid and Medicare programs do not pay enough to cover the full cost of care, and the influx of new patients has prompted spending on staff and equipment, he said.

“We are still challenged financially with the payer mix shift, though it’s a change to the positive for us in the long run,” he said.

PeaceHealth Southwest and its associated clinics on the losing end of Kaiser’s shift have seen acute admissions drop 4.2 percent compared to a year ago, Querin says. Emergency department visits are down 7 percent.

“The only area we did see moderate growth was in our surgical cases,” which are up 1.8 percent, Querin says.

Commercial health insurance, which a year ago covered 33 percent of PeaceHealth Southwest visits, now covers only 30 percent of these visits.

Vancouver-based PeaceHealth is a 10-hospital, three-state chain that reported a $95.4 million profit in its 2013 fiscal year, and the Catholic nonprofit is well-positioned to absorb the financial hit that came with losing Kaiser.

“But hospitals that are doing the best have the highest levels of commercial payers,” Querin says. “We have to go out and find more commercial customers. We are trying to take our story to employers.”

Sometimes that involves encouraging businesses to choose an insurance company other than Kaiser so their workers can go to PeaceHealth Southwest for care, he said.

Uncharted waters

With more than 8 million people across the country now enrolled in private health insurance and millions more enrolled in state-run Medicaid programs, hospital officials are navigating uncharted waters — and not just in Southwest Washington.

In Oregon, where Legacy and PeaceHealth both operate numerous hospitals, the Medicaid expansion has overloaded some health care networks. That has led to months-long waits to see a doctor, reports of overloaded emergency rooms in some communities, and conflicts between hospitals and the coordinated care organizations that manage Medicaid in that state.

On the East Coast, some for-profit hospital chains are reporting record profits, while others have been downgraded by Moody’s because of poor financial performance, according to the Wall Street Journal.

“I have a feeling we’re going to go through an incredible amount of tumult for the next probably five to 10 years,” Glenn Steele, CEO of Geisinger Health System in Pennsylvania, told the newspaper.

At Legacy Salmon Creek, Helgerson said that estimate might well be on the mark.

“I wish I could say, ‘Here’s what our net operating income is going to be this year,’ ” he said. “But it’s difficult to tease out these changes.”