Second Anniversary of the Strategic Plan for UF&Shands: Maintaining Momentum in a Changing Environment Part 1: Clinical Adaptations

May 20th will mark the second anniversary of the publication of the Strategic Plan for UF&Shands, the University of Florida Academic Health Center. We can be very proud that this plan, called “Forward Together,” has spurred tremendous progress. In the Jan. 11th issue of OTSP, our collective accomplishments were highlighted by college deans, research center and institute directors, and hospital CEOs. In the Jan. 20th issue, I summarized the strategic basis for our momentum, and the key factors responsible for maintaining our drive.

The ground on which we stand, however, is shifting. Recent legislative actions regarding state support for our academic and clinical safety-net programs must be taken into account as we assess the realities of next year’s budget and plan for the future. We must retain our core values and strategies, but we also must adapt to a changing environment.

Consider this summary of our core strategies and principles:

In my opinion, the considerable success we have achieved is largely due to embracing these strategies and principles collectively. As we adapt to the cumulative loss of state and federal governmental support, which is likely to slip even more, we must embrace these principles more than ever.

The Need for Adaptation in Response to Changing Circumstances

Our faculty, staff and administrators must increasingly focus on generating greater resources outside of state budgets — such as through off-book education programs, externally funded research grants, philanthropy and clinical revenue. Strategic Planning Cabinet members who met over 10 months to devise the May 20, 2010 plan — i.e., the leadership of the colleges, centers, institutes and hospitals — came together this week to discuss these issues. This newsletter represents an expression of their ideas. Adaptations in our clinical programs will be considered in this edition, followed next week by a review of ideas on academic adaptations. Your comments are most welcome.

Background on Clinical Environment

We begin by stating that, regardless of a patient’s payer status, the principles of care are the same: quality and safety; patient first; faculty-hospital partnership; faculty ownership of outcomes. We must take this as a given but then also recognize that we are running a business in two opposing worlds: traditional fee-for-service reimbursement (both faculty and hospital) in which we receive payments based on the volume of services rendered, versus capitated reimbursement, in which we receive a fixed payment to care for a patient throughout the year, regardless of the volume of service. Across time, the proportion of patients in the former category will likely decline, while the proportion in the latter category will increase. As this process unfolds, we will take advantage of opportunities in both worlds: expand fee-for-service revenues by providing highly sought-after care across a spectrum of patients, and create innovative approaches to managing populations of patients for whom we operate under capitation. And, as we develop our approach, we must take account of the fact that many patients have Medicaid, which provides a level of reimbursement that generally does not meet expenses, and that others have no insurance at all.

In Gainesville, approximately 26% to 29% of the patients taken care of by physicians in the University Faculty Practice, and by Shands at UF, have Medicaid, and an additional 8% to 10% have no insurance. In Jacksonville, these figures for Medicaid and uninsured patients are about 31% to 33% and 17% to 19%, respectively.

During the past several legislative sessions, state funding for safety net programs has been significantly reduced. Given the high percentage of Medicaid and uninsured patients, the cuts in Jacksonville have been particularly damaging. For example, there have been severe cuts to the Shands Jacksonville’s Low Income Pool (LIP) funding from the state, which is designed to partially offset the cost of care for Medicaid patients not reimbursed by standard Medicaid payments. The FY2012 annual LIP funding is $25.6 million less than what was received by Jacksonville in FY2008, and has resulted in a cumulative loss of $53.4 million in LIP funding over the last four years. The current annual LIP funding is now lower than what the hospital received 10 years ago, despite a much larger Medicaid population with more complex medical problems.

Provision of medical care for the uninsured is a national problem. Approximately 40 million Americans fall between the cracks of our public and private health insurance system and have no health insurance. They may not have a full-time job at a company that provides health insurance, but yet not be eligible for Medicaid (eligibility: low-income families with children, children, pregnant women, aged or disabled, total assets < $2,000). Uninsured individuals tend to avoid health care visits to avoid cost. Consequently, their medical conditions worsen, and they often show up in faculty offices or Shands emergency rooms in Gainesville or Jacksonville with an acute problem that is more complicated than would have been the case if they were seen earlier.

Clinical Adaptations

There has been no widely embraced solution to this problem. The Affordable Care Act (ACA) tries to address the issue by creating a system of private health plans (“exchanges”) in which uninsured individuals purchase health insurance with federal subsidies on a sliding scale based on ability to pay. This system of health exchanges, however, which requires a mandate to be operational as an insurance system, is under legal challenge and review by the U. S. Supreme Court. If health exchanges under ACA are upheld, currently uninsured patients will have access to insurance beginning in 2014. If such exchanges do not materialize, however, we must address care for the uninsured in a responsible manner.

The adaptation to address both Medicaid and the uninsured will be similar in Gainesville and Jacksonville, and involves a managed-care approach in both cases. With respect to Medicaid, we will concentrate on the development of our Medicaid Managed Care plan, called “First Coast Advantage” (FCA), which I highlighted in the March 20th issue of OTSP. FCA began seven years ago in Jacksonville and now provides Medicaid benefits to nearly 65,000 members. On March 14th, the Agency for Health Care Administration granted approval to the University of Florida and Shands to extend FCA as a Medicaid provider service network in Alachua, Marion, Bradford, Union and Columbia counties beginning this month. This plan was approved by the Board of Directors of Shands at UF on April 25th, and by the UF Board of Trustees on May 3rd. Our goal with FCA is to coordinate care so as to improve the quality of health care while containing cost, and to effect a smooth transition to October 2014, when all Medicaid members (with limited exception) will be required to enroll in a managed care plan throughout the state.

With respect to the uninsured, a managed care approach is also being planned. In Jacksonville, there has been a decade-long contract between the city and Shands Jacksonville to provide care for uninsured residents who meet certain income and other criteria. Many individuals move in and out of this pool from year to year depending on whether they meet criteria, and there is significant flux even within a year. On average, however, there are approximately 10,000 residents of Jacksonville who meet the criteria at any given time. The city pays Shands Jacksonville a total of $23 million for the care of these 10,000 residents, an amount that hasn’t changed over a decade even as costs have increased. Beginning July 1, 2012, we will treat the $23 million as a capitated contract for the care of these patients ($17 million for Shands and $6 million for the faculty practice).

It is hoped that an emphasis on prevention, and on early diagnosis and treatment, will improve the health and reduce the cost of care for these patients, which in recent years has ranged between $45 million and $55 million annually. Since an important part of our clinical mission includes charity care, it is likely that we will expend more than $23 million on residents of Jacksonville who are members for the city contract or who are uninsured. It must be recognized, however, that health care for uninsured individuals in Jacksonville who do not qualify for the city contract represents a responsibility for all of the health systems and health providers in Jacksonville. We will do our share, but can no longer afford to do more than our share.

In Gainesville, there is no city contract, but there is state funding of $9.7 million annually that has been in place since 1980 for the care of uninsured patients throughout the state. Our faculty and hospital provide care that uses resources costing many multiples of that amount. Beginning July 1, 2012, we will treat the $9.7 million as a “soft cap” for uninsured patients in the state (“state uninsured funding”). We will take as a priority those patients who have already been cared for by UF physicians in their ambulatory practices, and those with specialized problems that cannot be handled elsewhere. Consideration will be given to a special clinic for patients with large numbers of emergency room visits to assist them with medical, educational and social needs to prevent repeat visits and admissions. We will maintain careful accounts regarding total expenditures on our uninsured patients as we wish to be held accountable for delivering good value to the state. Indeed, since an important part of our clinical mission includes charity care, we will no doubt expend more than $9.7 million on uninsured Floridians. Similar to the situation in Jacksonville, however, health care for uninsured individuals in Florida who do not qualify for state uninsured funding represents a responsibility for all of the health systems and health providers in the state. Again, we will do our share but can no longer afford to do more than our share.

The good news regarding clinical care is that, because the principles outlined above have been embraced by Gainesville faculty and hospital employees, and have been implemented slowly but surely across time, clinical volumes have increased strongly in Gainesville, with higher average complexity and reduced length of stay. Subject to the possibility of continued constraints in state and federal funding, these positive trends gives us some level of flexibility to make needed capital investments in our clinical enterprise and to invest in our research programs.

To reach our goals in the face of the budgetary headwinds described above, we must continue our momentum in attracting patients to our superb clinical service. This applies to patients referred to us from a distance for specialized care, and also to our own community of employees at Shands and UF affiliates through GatorCare and of UF employees through the Gator Advantage program. Both of these programs can improve the health of our community and become a managed-care model from which our faculty and staff can learn. We must also consider quality and network pricing enhancements for captive health benefit plans and enhance our capacity to take on capitation and quality-reward withhold risks. Finally, it will be important to generate new referrals for specialized care through targeted primary-care outreach efforts and an institutionally based regional affiliation strategy. A model of regionalized care will lower costs and improve quality by creating a critical mass of clinical volume in specialized centers. In addition, it will support CTSI research and augment the managed-care learning process in our Medicaid and GatorCare models by employing a model of collaboration with community colleagues in affiliated systems.

In Jacksonville, the legacy of Shands Jacksonville being perceived as a “public” hospital in the community has constrained growth in the volume of non-safety-net patients. A retreat with Jim Burkhart, Dr. Dan Wilson, and department chairs was held on April 14th to address this issue. Several promising proposals were developed at this retreat, which are now being followed up by the Shands Jacksonville and College of Medicine Jacksonville leadership on a department-by-department basis. Our goal is for the community of Jacksonville to recognize UF&Shands Jacksonville as its go-to place for health care, and to thereby achieve the same level of clinical volume and financial performance as at Gainesville. We will also consider the development of new hospital-based programs for specialized patient populations. Cumulatively, these measures will allow the hospital to establish a strong financial base, so that it can make needed capital investments with residual funds to support research.

In summary, in recent years there have been significant reductions in the level of state support for our safety net programs in both Gainesville and Jacksonville, and we must adapt our clinical enterprise accordingly to remain strong. This will allow us to continue the capital investments needed to remain at the forefront of patient care and also support the academic and service missions of the University of Florida. Next week we consider adaptations in our education and research programs.

Forward Together,

David S. Guzick, M.D., Ph.D. Senior Vice President, Health Affairs President, UF&Shands Health System