published Tuesday, June 18th, 2013

With little money coming from Hamilton County, Erlanger seeks other revenue sources

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PUBLIC HOSPITAL FUNDING

Regional Medical Center at Memphis

• $26.8 million from Shelby County

• Trauma funds from Arkansas, Mississippi and Tennessee

Metro-Nashville General Hospital

• $32.7 million from Davidson County

Knoxville hospitals

Knox County indigent care is divided among five hospitals, which split about $1.2 million per year based on the number of patient days each hospital has for indigent patients. Knox County also appropriates an additional $3 million to other indigent medical care.

Erlanger

• $1.5 million from Hamilton County

FAST FACT

This year, Hamilton County allocated $1.5 million to Erlanger to help offset the cost of indigent care. That amount barely covers one day of operating expenses at the public hospital, executives said. And it did not cover the cost of one indigent patient with a lengthy hospital stay in March whose final tab was $1.6 million, budget records show.

Sources: The Regional Medical Center; Shelby County 2013 Budget; Knox County Mayor's Office; The Tennessean; Erlanger Health System; Hamilton County

Health care costs may have surged across the nation, but for 36 years the dollar figure next to "Erlanger Health System" in Hamilton County's budget never has exceeded $3.5 million.

That figure is just a fraction of what other large metro Tennessee counties provide their public hospitals.

"It's pretty bad," said state Rep. Gerald McCormick, R-Chattanooga, who helped write legislation attempting to reform the hospital's governance this year. "It is such a tiny percentage of Erlanger's revenues that it's not really significant. And I don't really see a groundswell of support for putting more money in there."

The Regional Medical Center at Memphis, known as The MED, typically gets about $50 million annually from Shelby County to help cover the cost of indigent care, along with funds from both Arkansas and Mississippi to help support the trauma care the hospital provides for those states' residents.

This year, Nashville Metro-General Hospital renewed its annual request for $32.7 million from Davidson County.

"Fundamentally Erlanger is a public institution and is treated differently than other public hospitals in Tennessee," said Dr. Chris Young, Tennessee Medical Association president and an Erlanger anesthesiologist. "I think the public officials, [commission], mayor, legislative delegation need to be paying attention to Erlanger, what its problems are, and what its public support oversees."

But Erlanger CEO Kevin Spiegel said lobbying the city and county for more money is not the answer to help the region's safety net hospital, Level 1 trauma center and teaching facility regain financial stability.

"Other counties in the state do fund their public hospitals more. They just do," he acknowledged. "But the big thing for us to do right now is for everybody to work together to try to tap into other, already-existing payment sources that we're not drawing from right now."

That includes trying to get access to a public hospital payment pool in Tennessee that Erlanger has never been included in, and trying to pursue more state funding from Georgia.

And, ultimately, it means pursuing status as a tax-exempt, nonprofit 501(c)3 corporation, Spiegel said.

That, McCormick said, means new legislation to make that happen.

"I think we've got good people running the hospital," McCormick said. "But their hands are tied in an unfair and ancient system that we need to reform."

NEW FUNDING

In his first year as Erlanger's CEO, Spiegel hopes local officials will help the hospital secure funds from sources outside the county.

  • photo
    The Erlanger Baroness campus.
    Photo by Staff File Photo.
    enlarge photo

He has County Mayor Jim Coppinger on his side.

"There's no doubt the citizens of the county benefit substantially from Erlanger's presence," Coppinger said. "There's no doubt that our funding is a great deal for the taxpayers of the county. But we can't exclude the others who take advantage who don't necessarily share in the expense."

Spiegel is looking south of the border. Erlanger shoulders a large indigent care burden from North Georgia, for which there is no compensation. Erlanger receives about $600,000 from the state of Georgia for air ambulance services.

One strategy Spiegel wants to pursue is getting trauma designation in Georgia, making the hospital eligible for Georgia funds to help offset trauma care for indigents.

Craig Becker, president of the Tennessee Hospital Association, said The MED being able to get funds from across state borders was crucial, although it "was a long fight, and [the hospital] was in danger of going out of business at the time."

Public hospitals like The MED and Nashville General also get significant funding from a recently accessible Public Hospital Supplemental Payment pool.

In 2010, Tennessee received federal approval to have funds provided by local governments matched with federal dollars to create a supplemental payment pool to help offset the cost of uncompensated care.

The local governments in Memphis and Metro Nashville contributed about $24.5 million, then drew down $45.5 million federal funds currently available.

For some reason, Erlanger was never included in that pool.

"It does beg the question -- how come Erlanger was never put in this pool initially, especially if the pool was created for public hospitals?" said Spiegel. "We want our fair share. Not more, not less, but our share."

For Erlanger to be added to the pool, the state would require permission from the federal government to amend the TennCare waiver, an agreement between the state and federal government on how the program is administered.

But that won't be possible until a decision is made about whether to expand TennCare, said TennCare spokeswoman Sarah Tanksley. State and federal officials are discussing Gov. Bill Haslam's alternative "Tennessee Plan."

"The state would need clarity and resolution on the Tennessee Plan before a waiver amendment on the topic of supplemental payment pools could be submitted," Tanksley said in a statement.

That may not be until early 2014. But in the meantime, Spiegel has reached out to members of the county's legislative delegation and to Coppinger.

"We need the Legislature and everybody to band together to help pull down federal funds for Erlanger," Spiegel said. "Every government official should be asking, 'Why do all these funds affect Middle and West Tennessee and not us?"

POLITICAL INSTITUTION

When Erlanger was established as a public hospital in 1977, the state law forming it required Chattanooga and Hamilton to pay $3 million to help the hospital. At the time, Erlanger's indigent care costs -- not charges -- totaled below $20 million. Last year, that figure reached $85 million.

In 2012, Erlanger provided more than three-quarters of the charity care for Chattanooga-area patients who met certain qualifications or are unable to pay their bills. Hamilton County "certified free care" alone, just a portion of indigent care, totaled $10.9 million last year.

Costs for caring for the county's inmates totaled $1.4 million in 2012, records show.

Erlanger ended last year $9.5 million in the red and has posted $9.6 million in losses this year.

While the bottom-line impact of the county's annual contribution -- now at $1.5 million -- may not be significant, county and city officials still have significant sway over the hospital's governance.

The county still has four of 12 hospital board appointments, as does the city. And hospital matters still get very political, very fast.

This year, Hamilton County commissioners rejected an overhaul of Erlanger's board that McCormick and state Sen. Todd Gardenhire steered through the General Assembly. Commissioners objected to the legislation because it included a mechanism that would adjust the county's funding according to the Consumer Price Index.

Some commissioners say that the hospital does not deserve more funding because of mismanagement and a steep fine from federal regulators in the past. Lavish severance packages and high executive salaries don't make Commissioner Fred Skillern feel sorry for the hospital's financial state.

"The way Erlanger has been operated over the last several years, I don't think it should get a dime," Skillern said. "It is one of the worst-run businesses around. I did not come to this conclusion over night. It's been a process. ... Why give away the taxpayers' hard-earned money until they have proven themselves?"

Plus -- he adds -- he's never had "John Q. Citizen" ask him to give more money to the hospital. It's hard for people to advocate for an industry that is so complicated, and so expensive.

An attitude of letting the safety-net hospital fend for itself for political reasons is "shortsighted," Becker said.

"Right now, you're looking down the barrel of a distressed hospital that is very important for the fabric of the community," he said. "And it's only going to get worse with the federal cuts we're about to see."

Those cuts include the end of a federal program that pays hospitals that care for a disproportionate share of uninsured patients, which is being phased out under the Affordable Care Act.

Those cuts were meant to be made up for through Medicaid expansion, but it is still unclear whether Tennessee will expand its program to cover more of the uninsured -- leaving hospitals such as Erlanger facing painful shortfalls.

"FREE TO COMPETE"

For over a year now, Young said, the Chattanooga and Hamilton County Medical Society and the Erlanger staff have pushed for a study to see how the hospital needs to be reconfigured. It hasn't happened yet.

"Let's have the board of trustees sit in with delegation, the commission, the mayors' offices ... and come to a resolution so the [hospital authority act] could be modernized to meet the needs of the 21st century," he said. "I think if you don't have people at the table before you start writing new legislation, you'll end up with what we've got so far -- which is nothing."

Spiegel adds that a study would just reiterate questions that are already hanging in the air.

"Why are there public hospital pools and Erlanger has never been allowed to draw down from them?" he said. "Why is the funding from the county and city so low, with so many restrictions that come with it? I think at the end of the day we just have to say -- We need to free the hospital to let it compete."

That means 501(c)3 status, he emphasizes. Erlanger could continue in its mission, but not be beholden to what he calls the obstacles of being a taxpayer-funded institution: Open budget and board meetings, public financial statements and a bidding process for vendors and services, among other obligations.

Becker agrees that the hospital moving to 501(c)3 status could help the hospital's competitive edge.

"That gets you out of the political realm. It's hard to get anything done when politics play into it like they have," he said.

It would take some politics to move Erlanger out of the political realm. McCormick said his legislation that died this year will need to be revived, but with substantial changes -- including language to change the hospital into a 501(c)3. And the county may not have much say in how that happens, he said.

"We'll probably bypass the county when we work on next year's legislation," said McCormick.

For Spiegel, the goal right now is building relationships and moving past some of the bitter disagreements that preceded him.

"Right now the most important thing we can do is to get everybody to work on the same page," said Spiegel. "If we start fighting with each other -- if the hospital starts fighting with the county and the city -- we're not going to go anywhere. We have to develop these relationships, and we need to start from there."

Contact staff writer Kate Harrison at kharrison@timesfreepress.com or 423-757-6673.

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