Huntsville Hospital Health System CEO David Spillers recently discussed the future of Alabama’s cash-strapped Medicaid program; why Medicare reimbursement rates for Alabama hospitals are among the lowest in the U.S.; and his new role as chairman of the state hospital association.
Q: We seem to be at a crossroads with health care in Alabama. Medicaid is underfunded. Our Medicare reimbursement rates are among the lowest in the nation. What do Alabama’s hospitals need to do to survive in the current climate?
A: Alabama has some of the lowest Medicare and Medicaid reimbursements in the country, and also the lowest commercial insurance reimbursements. So the key to survival is efficiency. When we look at Huntsville Hospital compared to our peer hospitals, our cost per discharge is in the lowest 15th percentile nationwide. But our revenue generated per discharge is around the 16th or 17th percentile. So if we’re not unbelievably efficient, then we have no resources to reinvest in the organization. Many public hospitals in the state are only surviving because they get tax support. Huntsville Hospital does not get any tax support. There’s no question that we in Alabama ask our hospital employees to do more with less than just about anyplace else in America. But they do it, and they do a very good job.
Q: After rejecting the governor’s lottery proposal, the Legislature voted to use part of the BP oil spill settlement to plug the state Medicaid shortfall for 2017 and 2018.
Do you see a longer-term solution on the horizon?
A: The BP oil money was a two-year stopgap measure, and it alone wasn’t sufficient to adequately fund the Medicaid program. So we’ll be back at the table two years from now trying to figure out what to do for the future. We have about a million people out of a population of 4.8 million on Medicaid, so we have to figure out how to fund it long term. Whether that’s the lottery or some other method, I’ll let the legislators decide.
Q: Huntsville Hospital has been working to set up a Regional Care Organization (RCO) to coordinate the care of Medicaid patients across North Alabama. Are you still confident the RCO idea will happen given Medicaid’s unsettled finances?
A: I am confident that we would provide better, more proactive care to the Medicaid population through the RCO. But I’m not confident that RCOs are going to work because they require a level of funding from the state that’s currently not there. For us to assume the risk of these patients, we have to build a new insurance company. That’s an extremely expensive process. Meanwhile, the state only has funding – and not even sufficient funding – for the next two years. That’s like asking Walmart to build a new Supercenter on land they can only lease for two years. Those of us looking at starting these RCOs are going to have to decide if we are willing to invest lots of money to create a company that may not exist two years from now. It’s going to be hard for us to recommend that to our Health Care Authority Board.
Q: Turning to Medicare, Alabama hospitals are reimbursed less than hospitals in almost every other state for the same procedures. Why is that?
A: The Medicare funding system as it stands penalizes efficient providers over non-efficient providers. The more efficient you are, the less you get paid. When that happens, you have to cut costs even more. Huntsville Hospital’s payment from Medicare will significantly fall again next year because we have become more efficient than we were two years ago. Meanwhile, hospitals that are less efficient have rising costs and Medicare pays them more. It’s just all the wrong incentives. I tell people that if you want to solve the national Medicare cost problem, send all your patients to Alabama. We can treat them for significantly less money and still have great outcomes. It’s truly impressive to me that despite our declining Medicare reimbursements, Huntsville Hospital is continually recognized as a top hospital, including one of America’s 50 best cardiovascular programs.
Q: Besides Medicare and Medicaid, what other issues keep you up at night?
A: It’s making sure that we’re addressing the growing demand for health care in our community. The Huntsville area is just exploding with growth, and patients are coming faster than we can add facilities. There are days when our emergency departments in Huntsville and Madison are full. We’re going to have to invest huge sums of money to build additional facilities to alleviate those problems. We also have to replace our 15-year-old patient information system with a new electronic medical record that will allow us to eliminate paper records. We’re in the final stages of making that selection. It will be painful to pay for, but it will pay huge dividends for the patients and clinicians once it’s up and running.
Q: You were recently installed as board chairman of the Alabama Hospital Association. What are your top priorities for your tenure as chairman?
A: We’re working in Washington, D.C. to try to make sure Alabama hospitals get paid more fairly by Medicare. That would give every hospital in the state more resources to care for their community. I also want to work on state hospital licensure issues. There are small communities in Alabama that could benefit from converting their capital-intensive, outdated inpatient hospital to something more in line with their needs today. We’ve got to find a way to let some of these hospitals reinvent themselves.
Q: You came to Huntsville Hospital 10 years ago from Mission Health System in Asheville, N.C. Can you reflect on some of the changes at Huntsville Hospital during the past decade and talk about what might happen in the next 10 years?
A: I came here believing we had the potential to be bigger than Madison County and have relationships with other hospitals in the region that were mutually beneficial. That’s proven to be true. We’ve developed a good system with great relationships in the communities where we work. I truly believe some of these communities wouldn’t have hospitals today if we hadn’t partnered together. But they have also made us better. It’s hard to predict out 10 years, so we just need to focus on the things we can control. Our goal is to have our quality and customer service rank in the top 10 percent of hospitals nationally while keeping our costs in the lowest 25th percentile. If we can do that, we’re going to be OK whatever changes happen in the health care industry.