Payers & Providers Midwest Edition – Issue of November 8, 2011

8/3/2019 Payers & Providers Midwest Edition Issue of November 8, 2011

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At a time when states and municipalities arestruggling to survive on at or diminishingrevenues, the idea of taxing hospital propertyand earnings is tempting enough that it the

concept is spreading to the Show Me State.The state of Illinois is reviewing the tax

status of 15 hospitals, and has even gone sofar as to revoke the tax exemption of threehospitals in August. (Payers & Providers, Aug.23)

Most recently, perhaps inspired by theactions of the Illinois Department of Revenue,the St. Louis Post-Dispatch newspaper tried tocalculate how much the exemption fromfederal, state, and local taxes is worth to localhospital systems.

In St. Louis County, surrounding St. LouisCity, the buildings and land owned by not-for-

prot hospitals is worth at least $750 million,according to records from the countyDepartment of Revenue. The county loses atleast $20 million a year in property taxesalone from these hospitals and their afliatedoperations each year. Those funds would payfor police, re protection, roads and bridges,schools, libraries, community colleges,sewers, county administration, environmentalprograms and of course expenses of thepublic health department.

The tax-exempt properties include othernon-hospital sites that are worth a cumulativeminimum of $52 million. Mercy Health ownscommercial tax-exempt property in several

locations. BJC Health System has the Barnes-Jewish Extended Care facility in Clayton. AndAscension Health runs its far-ung system ofRoman Catholic hospitals from a tax-exemptheadquarters ofce in the county.

In Chicago there has been talk of askinghospitals to pay something toward the publictreasury, possibly starting with their waterbills. Hospitals in Chicago, along with othernonprot institutions such as museums,churches, and private schools, have receivedfree city water for decades. Now, somepolitical leaders, including Mayor RahmEmanuel and City Council Finance Committee

Chairman Ed Burke, are beginning to talkabout asking hospitals to pay for it. The citysbudget crisis has forced them to overturn a lotof traditional assumptions about what mightbe regarded as taxpayer-supported free goods.

Perhaps in response to this increase inquestions about hospitals status, theWisconsin Hospital Association last weekreleased a report, Caring for Our Neighbors,asserting that Wisconsin hospitals provided

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In Brief

Hospital Sisters Wantsa TIF for New Hospital

in Southern Illinois

Hospital Sisters Health System plansto ask the city of OFallon, Ill., to

annex a parcel of land and contributea tax increment nancing district tohelp construct a $300 million hospital.

The facility would replace St.Elizabeths Hospital in Belleville, Ill.The new hospital would have 120 to150 acute-care beds, an emergencyroom, and outpatient care center inOFallon, a fast-growing area acrossthe Mississippi River from St. Louis.

The hospital could become aregional referral center in the MetroEast region for cardiology, orthopedics,stroke care, and high-risk obstetrics, ahospital ofcial said.

The hospital company wants thecity to annex 108 acres and create the

TIF to pay for $8 million to $10 millionof needed site improvements, whichinclude stabilizing mine shafts andunderground caverns.

The Hospital Sisters Health Systemis based in Springeld, Ill., andoperates 13 hospitals in Illinois andWisconsin. It had $1.7 billion in netpatient revenues last year and about14,000 employees.

HealthGrades BuysCPM Marketing Groupof Madison, Wisconsin

CPM Marketing Group, based inMadison, Wis., has agreed to beacquired by HealthGrades, based inDenver. CPM provides tools to helphospitals manage physician relations,planning, forecasting, strategicmarketing, and customer relationships.HealthGrades offers ratings onhospitals and doctors for consumersthrough its web site,HealthGrades.com.

Continued on Page 3

NEWS

Missouri Tax Exemptions (Continued from Page One)

$232 million in charity care in 2010 whileabsorbing $800 million in governmentpayment shortfalls. In addition, hospitals

spent millions more supporting free medicaland dental clinics, medical screenings, andproviding health education programs. TheWHA concludes that hospitals contributed atotal of $1.4 billion in community benets andgenerated more than $28 billion in economicactivity.

In September the Ohio HospitalAssociation released a similar reportdocumenting $2.9 billion in annualcommunity benets, including $1.1 billion incharity care, $1.1 billion in Medicaidsubsidization, and $1.3 billion in communitybenet activities.

And last spring the Missouri HospitalAssociation published Behind the Big BlueH, which demonstrated the signicantpositive economic effect of Missourishospitals on the states economy especiallyduring the most recent recession.

As part of its report, the newspaper listedthe appraised values of several prominenthospitals in St. Louis County, with estimates ofwhat they would pay in property tax: Missouri Baptist Medical Center Appraised value: $85.6 million

Potential tax liability: $2.2 million Barnes-Jewish West County Hospital

Appraised value: $23 millionPotential tax liability: $667,000

Mercy Hospital St. Louis Appraised value: $129 million

Potential tax liability: $3.8 million SSM St. Marys Health Center Appraised value: $102.3 million

Potential tax liability: $2.9 millionThe Post-Dispatch also discovered that

Mercy Health, based in Chestereld, Mo.,which operates 28 hospitals in four states, hadnever led an IRS Form 990 income tax returnbecause it claimed that it was technically achurch, and therefore exempt from legal

requirements that it disclose basic nancialdata to the public or the government.

Until recently known as the Sisters ofMercy Health System, the organization led avoluntary tax return for the rst time thisMay, in which a number of facts weredisclosed:

* Ten of its employees earn more than $1million a year.

* Board members held a retreat in Irelandtwo years ago to visit where the Sisters ofMercy religious order was founded in 1830, ata cost of $279,000.

* Executives y to meetings and hospitavisits in a midsize corporate jet, a RockweSabreliner.

The parent company includes more thatax-exempt subsidiary companies, whichincludes physician groups, hospitals, andfundraising organizations.

BJC Health System, which runs a dozenhospitals in Missouri and Illinois, enjoyed billion in total revenue last year and earne$200 million on operations, but paid noincome taxes. Its various properties are wo$1.5 billion, on which it pays little in proptax. Steven H. Lipstein, BJCs chairman andchief executive, was paid $2.1 million in2009, while Anthony Tersigni, head of

Ascension, makes about $3.4 million a yeaLipstein argued that BJC hospitals in St.Louis provide a safety-net function, especiBarnes-Jewish and Christian hospitals. In2009 BJC provided $58 million in charity to 82,267 patients in its system (dened asfree care and discounts on services). Thatcomprised 1.7% of operating revenue.

At the same time, Jesuit-founded St. LoUniversity Hospital, now owned by TenetHealthcare Corp., a for-prot company, paproperty and sales taxes of $4.8 million in2010. The 350-bed hospital provided $5.6million in free (not discounted) care in 200

according to MHA gures. SSM St. MarysHealth Center, a 580-bed not-for-prot,provided $72 million in free charity care thyear.

The for-prot SLU takes the same hit onMedicaid as the not-for-prots, and it admtwo-thirds of its patients through theemergency department, where many no-paand uninsured persons turn for care. SLU aprovides medical education, free clinics, aconducts medical research all activities tnot-for-prots frequently cite to justify theiexemption.

In a commentary published Nov. 1,

Lipstein wrote that If BJC were to convertfor-prot, publicly traded corporation, weindeed would pay taxes. But we no longerwould be obligated to provide communitybenet, and we would be permitted todistribute earnings for the benet of indivishareholders.

Then he raised the specter of whatirresponsible governments might do with tnew revenues. Would local, state and fedgovernment use those funds to ll the voidcommunity benet programs and services longer provided by hospitals?


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NEWS

In Brief

The Wisconsin company will bemerged into a HealthGrades businessunit with an existing HealthGradesproduct.

Hospitals are under increasingpressure to improve their clinical aswell as nancial performance, saidKerry Hicks, HealthGrades chief

executive ofce, in a statement. CPMis the relationship managementplatform hospitals trust to measurablyimprove the performance of theirpatient health management andphysician alignment initiatives.

The combination will create aunique online entity with more than200 million annual visitors. Financialarrangements were not disclosed.

MetroHealth Lays Off104, Anticipating

High Losses Next YearMetroHealth System, the Cleveland

area hospital for the indigent,announced it will lay off 104 workersand eliminate 151 open positionsbecause ofnancial problems.

The hospital said it is seeingincreases in uncompensated care,reductions in payments fromgovernment payers and commercialinsurance companies, as well as a cutin its subsidy from Cuyahoga County.

In September the hospital systemannounced it would eliminate 450

jobs. MetroHealth expects to sustainoperating losses of $6.3 million thisyear and $21.1 million next year.

Chief executive Mark Moran saidthat increasing rates of poverty,

especially in Clevelands suburbs, areshowing up on the hospitals bottomline. Also, like many public and safetynet hospitals, MetroHealth faces anuncertain future because of federalhealth reform, which may allow manyof its patients to obtain care at privatehospitals.

MetroHealth is trying to movesome of its operations to the suburbs.It recently announced plans to open a$23 million outpatient facility inMiddleburg Heights, southwest of thecity near Cleveland HopkinsInternational Airport.

With support of the Ohio HospitalAssociation, an Ohio legislator is proposing toeliminate a state-supported website that allowspatients to compare quality of care at nearbyhospitals.

House Bill 353, proposed by Rep.Barbara Sears, a Republican, would get rid ofa legal requirement to report performancedata on commonly measured care metrics,

such as infection rates, patient satisfaction,surgical care, and cardiac quality.

The site was just launched in January 201the product of a law signed in 2006 by theprevious governor. The OHA wants toeliminate the requirement because itduplicates the federal governments HospitaCompare website, said Tiffany Himmelreichspokesperson for the OHA.

Minnesota Gov. Mark Dayton, a Democrat,last week appointed 17 people to a task forcethat will work on ideas to improve medicalcare, reduce health disparities, and trim costs inthat state.

A second group has been convened tosupervise the creation of a health insuranceexchange, a web site where individuals andsmall businesses may comparison shop for ahealth insurance policy that meets their needsand budget. The state has to have a workingexchange by 2014, or the federal governmentwill step in and impose its own.

Minnesota has been a leader in reforms

that have expanded access to qualityhealthcare, Dayton said in a statement. Wemust continue to innovate, and there is realurgency to our mission. The status quo is notgood enough.

Members of the Health Reform Task Forceinclude business leaders, labor, foundations,public ofcials. The governor also included fourmembers of the legislature, two to be appointedby the speaker of the House and two by theSenate majority leader.

Republicans, who control the legislature,were not enthusiastic about the decision. SeDavid Hann, chairman of the Senate Healthand Human Services committee, wants to hohearings on the Dayton plan.

Members of the states DFL Party, alignedwith Democrats elsewhere, had hoped to gebill through the legislature earlier this yearenabling the state to start work on anexchange, but a bill to do that failed, and noaction was taken.

The Minnesota Health Insurance ExchanAdvisory Task Force has 15 members and isbeing led by Commerce Commissioner

Michael Rothman. Its

rst meeting is Nov. 8We know that we can get control ofhealthcare costs and also improve quality ifwe x the incentives so that we pay forhealthy outcomes, Dayton said.

Human Services Commissioner LucindaJesson, who is going to chair the main taskforce, said, Minnesota has always been aleader in healthcare, and this executive ordekeeps us on the path of staying in the forefroof healthcare innovation.

Minn. Governor Names Task ForcesRepublicans Cool to Insurance Exchange Concept

OHA Supports Dismantling Web SiteOhio Hospitals Say Information Duplicates CMS Site

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In July, the American Academy of FamilyPhysicians, the largest and purest of themajor primary care societies the AmericanCollege of Physicians (ACP), the AmericanAcademy of Pediatrics (AAP) and the AmericanOsteopathic Association (AOA) are all heavilyinuenced by sub-specialists !announced!thatit has convened a national task force chargedwith identifying new, better approaches tovalue primary care services.

This initiative is nationally signicant forseveral reasons. By denition, it challenges themethodology used for nearly two decades bythe American Medical Associations Relative

Value Scale Update Committee(AMA RUC), which hasdrastically under-valued primarycare services while over-valuingmany specialty services. (Payers& Providers, Oct. 18) It is not unreasonable to assertthat the RUCs advisoryrelationship with the Centers forMedicare and Medicaid Servicesis one of the deep roots ofAmericas healthcare cost crisis,an extraordinarily destructivemechanism that has had severely

negative impacts on patients,purchasers and, of course,primary care physicians.

By taking on this effort, AAFPnot only announces that the fruits ofthe AMA RUCs labors areunacceptable, but also points out that themethodology the RUC uses to value medicalservices this is founded on!the Resource-Based Relative Value Scale (RBRVS) inputtaxonomy!developed by William Hsaios teamin the late 1980s is incomplete and outdated.

For example, the RUCs methodology forcalculating value doesnt consider whether a

service produced a worthwhile benet to thepatient or society, whether it was evidence-based or even necessary.

The 22-member task force is not limited toAAFP members, but includes a wide range ofprofessionals drawn from other primary caremedical societies, business, the health plansector, policy groups and subject matterexperts. The group includes Christine Bechtel,of the National Partnership for Women &Families; Robert Berenson, M.D., of the Urban

Institute; Paul Ginsburg, president of the Cenfor Studying Health System Change; VeronicaGoff, vice president of the National BusinessGroup on Health; John Goodson, M.D., of thSociety of General Internal Medicine; KavitaPatel, M.D., of the Brookings Institution; andRichard Salmon, M.D., ofCigna HealthCare. will also be a participating member of the groIn other words, unlike the RUC, this group ismore representative of the sectors whose inteit will focus on.

Finally, a representative from the CMS, EdiHambrick, M.D., will participate as an observDr. Hambrick has been one of CMSs liaisons

the RUC for many years. But hpresence at the task force willconvey gravity, along with theimpression that CMS is taking effort seriously.

It is worth noting that the Ais still an active participant in RUC, but has been reassessingtheir role since January, whenDavid Kibbe, M.D. -- a familyphysician, a senior advisor toAAFP and my writing partner several years -- and I rst!calleon all primary care societies to

quit. In June, they issued a!lettthe RUC containing a series ofdemands:

* 4 more primary care seats.* A permanent seat for gerontolo* Sunsetting of the RUCs rotatin

sub-specialty seats.* New seats for non-physicians, such aseconomists, purchasers and consumers.

These are all reasonable, well-consideredrequests, especially for a body that has had thmost inuence over medical services valuatiothe past 20 years, and whose recommendatioare core to the public interest.

Still, acquiescing would be a big leap for tRUCs leadership. The real question here iswhether the AAFP board of directors will havewill to walk away if the RUC rejects theirentreaties. AAFPs valuation task force has thepotential to be disruptive to the current parad

OPINION

The AAFPs Bold Valuation InitiativePrimary-Care Organizations Are Challenging the RU

Brian Klepper is!a healthcare analyst,consultant and commentator. He is!managprincipal of!Healthcare Performance Inc., inAtlantic Beach, Fla. He blogs at http://

ReplacetheRUC.org.

R+B

By Brian Klepper


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Payers & Providers Midwest Edition – Issue of November 8, 2011

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