PROVIDENCE – In reporting on health equity and health care in Rhode Island, I have begun to talk about the concept of health care as a commodity: something that can be bought, traded, exchanged, invested in, and perhaps more importantly, measured by data in terms of outcomes as a way of improving efficiency and reducing waste, where personal behaviors and choices can be predicted by algorithms to enhance future buying decisions and to drive market penetration.

One of my astute readers, a long-time subscriber, challenged me to be more specific about exactly what I meant, saying I was losing readers when I used that analogy in my reporting, that I was not being clear.

Whenever someone you gives you that kind of feedback, whether you agree with it or not, it is worth listening to – and responding.

Here is a brief attempt to further explain what I mean when I call the current delivery of health care a commodity.

Analyzing the data
Three recent deep dives into the business of health care delivery provide the grist for this exploration. They include:

• A 285-page consultant’s report by John Snow Inc., commissioned by the R.I. Department of Health and paid for by Care New England, analyzing the impact of the closing of Memorial Hospital and its emergency room on the surrounding communities [Pawtucket, Central Falls, and Cumberland] and other Rhode Island hospitals.

• A 53-page white paper on Revisions to the Affordability Standards, prepared by the R.I. Office of the Health Insurance Commissioner in December of 2019, in order to “facilitate the public’s review of proposed amendments.”

• An in-depth opinion piece published on Feb. 20 in The New York Times entitled, “Why are nonprofit hospitals so highly profitable?” by Dr. Danielle Ofri, a physician at Bellevue Hospital and a clinical professor of Medicine at New York University

The report on the closing of Memorial Hospital and its emergency department confirmed the “symptoms” of the economic disease we face in the delivery of health care: the closing resulted in a ripple effect on other hospital emergency rooms, increasing the flow of patients, many of whom were uninsured or under-insured, who were using the ER as a primary source of primary care.

The problems, however, would not have been solved by keeping Memorial Hospital open, which had been hemorrhaging red ink, despite the emotional attachment that many residents had to the acute care community hospital. [See link below to ConvergenceRI story, “Life cycle of health care in RI: busy being born, busy living, busy dying.”]

Many residents living in the neighborhoods of Pawtucket exist in what could be called a primary care desert, with limited access to primary care services. In its last year of operation, the ER at Memorial had some 30,000 patients, according to the consultant’s report, which some observers mistook to be an example of a viable business model. The questions, unanswered, are: how many patients were paying for those services; and how many were being written off as uncompensated or charitable care?

Further, an analysis of EMS transports in 2017, the year before the closing of Memorial Hospital’s emergency room, documented that “acute alcohol intoxication” was one of the top “impressions” for patients being brought to the ER. [See link below to ConvergenceRI story, “Moving beyond dilly, dilly.”]

The reality is that the current business model for delivering health care services within a hospital-centric health system is not working out very well. As a nation, we spend the most money in the world to achieve some of the worst outcomes, often documented in well-used charts showing the disparities.

For much of the last century, hospitals were closely aligned with communities, serving populations that reflected the boundaries of cultures, neighborhoods and employment. Hospitals were a stable presence, the place where most babies were born, emergencies were treated, and where many older people died, covering a lifespan of care [pun intended].

Charity care?
Which gets us to the story in The New York Times, which lays out a thoughtful analysis about the apparent differences between for-profit and nonprofit hospitals.

The author, Dr. Danielle Ofri, writes: “Hospitals fall into three financial categories. Two are easy to understand: There are fully private hospitals that mostly function like any other business, responsible to shareholders and investors. And there are public hospitals, which are owned by the state or local governments and have obligations to care for underserved populations. And then there are “private nonprofit” hospitals, which include more than half of our hospitals.”

Nearly all of the nation’s most prestigious hospitals are nonprofits, Ofri continues. “Nonprofit hospitals have their origins in the charity hospitals of the early 1900s, but over the last century, they’ve gradually shifted from that model. Now their explosive growth has many questioning how we define “nonprofit” and what sort of responsibility these hospitals have to the communities that provide this financial dispensation.”

The definition of “charity medical care” changed in 1969, when the tax code changed was changed, which as Ofri explained, “to allow for a wide range of expenses to qualify as community benefits,” with charitable care becoming optional, leaving it up to the hospitals to decide how to pay back that debt.

“It’s time to rethink the concept of nonprofit hospitals,” Ofri argues. “Tax exemption is a gift provided by the community and should be treated as such. Hospitals’ community benefits should be defined more explicitly in terms of tangible medical benefits for local residents.”

Ofri acknowledges that communities are often “conflicted” about nonprofit hospitals in their midst, because many of these institutions are enormous employers – sometimes the largest employer in town – but the economic benefits do not always trickle down to the immediate neighborhoods.

And, Ofri also acknowledges the emotional attachment to community hospitals, writing: “In some communities, nonprofit hospitals are beloved institutions, with a history of caring for generations of families. In other communities, the sums of money devoted to lavish expansions, aggressive advertising and eye-popping executive compensation are a source of irritation.” Sound familiar?

New payment models
Are you with me so far? Have I lost anyone? Which gets us to the third leg of the stool in this effort to explain why I have begun to talk about health care as a commodity. The White Paper by the R.I. Office of the Health Insurance Commissioner was an eye-opener. The new amendments proposed to the Affordability Standards seek to put into regulation “alternative payment models”

There is much to digest in this document, some of which I will briefly summarize. First, OHIC is proposing to continue its primary care spending requirement under the Affordability Standards and its continued support for the patient-centered medical home model.

Second, OHIC will seek to continue its efforts to support a comprehensive integration of primary care and behavioral health care delivery as a necessary investment, praising the solid groundwork laid by the Care Transformation Collaborative in these efforts, but warning that patients still face “headwinds” from insurer payment and coverage policies.

The big news in the White Paper involves the decision by OHIC to establish a global minimum for an Alternative Payment Model [APM] and to specify risk-based contracting standards that increase levels of risk assessment over time.

Translated, OHIC is proposing a system-wide capitation model for Rhode Island using Alternative Payment Models to control health care costs through payment reform.

The move is in sync with the move away from fee-for-service payments and the adoption of an accountable care model of payment, promoted by Medicare nationally and by the R.I. Medicaid office, in its development of what are known as “accountable entities.”

However, on Page 29 of the 53-page White Paper, there is a startling revelation about the progress of payment reform in Rhode Island, which was based upon the idea of moving from fee-for-service payment models to an accountable care model with bundled payments: “Despite OHIC’s efforts to promote increased uptake [of non-fee-for service models of payment], in 2018, only 3 percent of commercial medical payments were from non-[fee-for-service] models.” Wow. Wow. Wow.

Health care as a commodity
In summary, the business model for acute care community hospitals doesn’t really work anymore, reflecting the breakdown of economic links to neighborhood and communities, where lack of access to primary care is driving many uninsured and under-insured residents to emergency rooms for care.

Nonprofit hospitals, in turn, are free to define charity care as a community benefit, thanks to a change in the tax code in 1969, enabling them in to increase their “profits” despite declining rates for inpatient hospital care.

Attempts to reform the payment system, to move toward a business model of capitation and risk-contracting to control costs, despite the best of intentions and regulations, have not moved the needle as much as expected in moving away from fee-for-service payments.

Over and over again, voters polled in the 2020 Presidential election campaign to date have identified health care as the number-one issue. The debate over Medicare for All often resembles the old Miller Lite beer commercial, with two sides shouting at each other, “Tastes great!” and “Less filling!” arguing about the costs. Perhaps it would be more accurate to change the slogans to: “Health care is a right!” and “Health care is a commodity!”

Both are correct. The larger question is: what are the costs of preserving the status quo, compared to making changes?