St. Lukes Hospital administrator Ken Shull says he is glad that the Congress has passed health care reform. But he doesnt think this one bill is going to fix the industrys problems.
“I am glad it passed,” Shull said. “We do need health care reform. But is this the end-all-be-all? No. Many think this is more of a fix than it is.”
Shull has been a hospital administrator since 1975, starting in a 98-bed hospital in Banner Elk, N.C. and rising to run a 292-bed hospital in West Columbia, S.C. He left that job in 1996 to serve as president of the S.C. Hospital Association, where for eight years he helped 100 member hospitals with local, state and national issues.
While Shull knows the hospital industrys problems from most every angle, that knowledge is not like a crystal ball. As far as how the Patient Protection and Affordable Care Act of 2010 will help or hurt St. Lukes Hospital, like most every other pundit, Shull says we all will just have to wait and see.
The enacted health insurance reforms could be helpful to St. Lukes Hospital, he said, since more people will have insurance, and thus will pay their hospital bills. So far in the current fiscal year, October 2009 through February 2010, St. Lukes has already written off $1.98 million in revenues, uncollectable fees charged to charity care and bad debt.
The price tag was $4.5 million in unpaid care each of the prior fiscal years, a total of $9 million for 2008 and 2009. That represents about 8.5% of the hospitals gross revenues.
“If more people have insurance there will be less cost shift,” Shull said, referring to hospitals pricing strategy which charges the insured enough to cover both the hospitals costs for services to the insured and the costs of providing unpaid services to the uninsured.

“With less shift, prices could go down,” Shull said that is, if the insurance payments are enough to cover the hospitals costs.
Shull said Medicare pays somewhat less than the hospitals costs on procedures now. Medicaid rates for “critical access” hospitals like St. Lukes are based on “allowable costs,” he said. But for three quarters of all hospitals which are not designated “critical access,” Shull said Medicaid reimbursement rates are “horrendous.”
“The idea of universal coverage is good, but the government hasnt decided yet how to pay,” Shull said.
Shull said another factor that makes predicting the future hard is the politics. There will be two congresses and one presidential election before the main provisions in the health reform bill take effect in 2014. Not only are politicians involved, but so are the bureaucrats.
“I hope we will recognize the bill after the bureaucrats get through writing the regulations,” Shull said.
Still, he said, reforms are welcomed. Shull particularly praised the reform bills savings taken from cuts to the Medicare Advantage program.
Medicare Advantage, a program which began with the Balanced Budget Act of 1997, gave Medicare beneficiaries the option to receive their Medicare benefits through private health insurance plans, instead of through the original Medicare plan. In the Medicare Prescription Drug Improvement and Modernization Act of 2003 these plans, then called “Medicare Choice” plans, became known as Medicare Advantage plans.
Shull said the idea was to create alternatives to Medicare in which the government would wind up paying less. Instead, Shull said, the government wound up paying more, 13% more.
“People are not getting more services,” he said. “Providers (hospitals and doctors) are being paid less and the government is paying more. And the clients thought they were on Medicare!”
Shull also noted that the reform legislation just passed does not fix the problem of how Medicare will pay doctors. In the Balanced Budget Act of 1997, the Medicare Sustainable Growth Rate (SGR) was enacted as a method to ensure that the yearly increase in the expense per Medicare patient does not exceed the growth in the national Gross Domestic Product (GDP).
On March 1st of each year, a physician fee schedule is updated according to formulas and conversion factors. The problem is that, due to the severe recession and its effects on GDP, the estimated SGR for 2010 is -8.8% and the conversion factor for the physician fee schedule is -21.3%.
“That threat is still hanging over the doctors,” Shull said. “It would have been nice if that had been fixed.”
For several years, fearing a revolt by doctors and seniors Congress has suspended those cuts. The original draft of the House health care bill included a permanent “doc fix.” But that ballooned deficits, so Democrats dropped it. The Congressional Budget Office (CBO) has estimated a “doc fix” would cost $247 billion over 10 years.
Republicans have been arguing that the $138 billion deficit improvement CBO predicted from health care reform is bogus because it does not include a measure to slow cuts in Medicare payments to doctors.
“The health care industry has problems,” Shull said. “The costs are too high and rising too rapidly and there are manpower shortages. This legislation may bend the cost curve, but as far as access to doctors, it does not do a thing.”
The United States needs an additional 5,000 new doctors every year, Shull said, but he estimated the new law will only add 300.
There is a shortage of primary care doctors as well as nurses, therapists, and physicians assistants. Shull right now is trying to recruit three physicians or mid-level practitioners to the Thermal Belt area.
“We have some challenges in physician recruitment,” Shull said, “such as the size of our small community and its rural nature. But we have also some advantages the quality of life, the beautiful surroundings, the horse community, the rural and welcoming nature of the community.”
Whatever else the new reform bill is, Shull said he does not see it as a government takeover.
“St. Lukes served 67% Medicare patients in January, and a few percentage more were Medicaid patients,” he said.
On the national level, when one adds military care to Medicare and Medicaid, the percentage of health care the government already manages rises to half, Shull pointed out.
Shull recalled the story of the Medicare patient who told his congressman he liked Medicare and said, “Dont you let the government get its hands on it.”
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