Health Law and Policy Update
This week's updates
- Colorado Health Foundation to sell its share of hospital group
- State receives grant to serve 'dual eligibles'
- Budget troubles continue for Medicaid
- A new forum for tracking reform implementation
- Federal technology guidance is an opportunity for Colorado
- Study examines how MLR regulation affects broker compensation
Headlines of the week
An article in the June 17 edition of Health Law and Policy Update referred imprecisely to the history of the creation of HCA-HealthONE, LLC (the Joint Venture) and some subsequent developments. The Colorado Health Foundation has forwarded to CCLP its summary of the history and its statement on the ownership interest in the Joint Venture. We present that below:
In 1995, HealthONE, a non profit hospital system and HCA, an owner of for profit hospitals in Denver, each contributed their hospitals to form HCA-HealthONE, LLC. The HealthONE hospitals were Presbyterian St Luke's, Swedish Medical Center and Aurora Pres. The HCA hospitals were Rose Medical Center, North Suburban, and Aurora Medical Center. Since 1995, Sky Ridge has been added to the system. HCA-HealthONE LLC entered into a management agreement with HCA to manage the hospitals and the LLC governing board was made up of 8 representatives from HealthONE Alliance (Now named The Colorado Health Foundation) and 8 representatives from HCA.
Although HealthONE Alliance obtained a 50% voting interest on the LLC Board, it owned approximately 40% of the LLC and participated in 40% of the distributions. It continues to own approximately 40% of the LLC.
Colorado Health Foundation to sell its share of hospital group
The Colorado Health Foundation announced Wednesday it will sell its share in HCA-HealthONE LLC joint venture to Hospital Corporation of America (HCA). The $1.45 billion transaction is significant because it will form the largest charity in the state while shifting control of a large hospital group.
"Because of the size of the transaction, there certainly ought to be a level of public explanation if not public scrutiny," Colorado Center on Law and Policy Special Counsel Ed Kahn told The Denver Post. "It (Colorado Health Foundation) will likely be larger than all the other health foundations in Colorado put together, and that's a pretty unique status."
CCLP receives funding from the Colorado Health Foundation. Kahn and others will be reviewing the transaction during the next several weeks to determine if it is in the public interest and meets statutory and common-law requirements. CCLP has a history of reviewing hospital transactions, and Kahn played a role in creating the state's hospital conversion law in the 1990s.
"This is great news for the people of Colorado," Anne Warhover, president and CEO of the Colorado Health Foundation, said in a prepared statement. "By diversifying our funding, we can help ensure a strong future for the Foundation with confidence in our ongoing ability to provide millions of dollars in health-related grants to the people of Colorado for generations to come. Through this transaction, the Foundation can focus on what it does best - increase the number of Coloradans with health insurance, ensure they have access to quality, coordinated care, and encourage healthy living."
In 1995 and 1996, Columbia-HCA (now HCA) acquired Denver's Rose General Hospital and several other Denver-area hospitals, including Presbyterian St. Luke's, Swedish Medical Center, and several others. The acquisition of Rose was a purchase, and the proceeds were placed in a then newly created foundation, Rose Community Foundation.
The acquisition of the other Denver-area hospitals was by the creation of a joint venture in which HealthONE Alliance (HOA), a successor to one of the existing hospital foundations, became a partner with HCA's Denver designated operating subsidiary, HealthONE. The joint venture assumed some debt, obtained a 50 percent voting interest, and a similar economic interest. The joint venture entered in an agreement with HealthONE to allow it to operate the hospitals. Over the years, HOA changed its name to the Colorado Health Foundation, and continued to obtain about 50 percent of the net profits of the joint venture. After the debt was largely paid off, the Colorado Health Foundation expanded its grant-giving to community organizations, in addition to sponsoring graduate medical education and continuing to support some small charities it had supported for a long time.
From time to time, the Colorado Health Foundation, a tax exempt entity, considered selling its interest in the joint venture, and this week it announced its decision to do so. Together with the existing portfolio of assets the foundation has accumulated, the sale will increase its asset base to more than $2 billion, making it the largest philanthropic organization in Colorado.
CCLP is reviewing the proposed transaction to determine whether it is subject to the Colorado Hospital Conversion Statute, and whether the transaction is in the public interest. CCLP expects to reports its conclusions to the public, the Colorado Health Foundation and the Colorado Attorney General. The attorney general has common-law authority to review the statute, and if the hospital conversion statute applies, extensive powers under it as well. Under the conversion statute, the Attorney General may approve, impose conditions on or wholly disapprove a sale or transfer.
The Colorado Health Foundation has offered to cooperate in the CCLP review, making documents available and answering questions. It is not possible now to say how long the review will take, but the Colorado Health Foundation hopes to close the transaction in about 60 days.
State receives grant to serve 'dual eligibles'
Colorado received a $1 million grant last month from the federal government to study how to do a better job of integrating the delivery of care to persons eligible for Medicaid and Medicare, known as "dual eligibles."
According to the Colorado Department of Health Care Policy and Financing (HCPF), about 85 percent of Medicaid clients are served thorugh a fee-for-service model (as opposed to some form of managed care), and there is significant variation in spending on dual eligiles among counties. The Centers for Medicare and Medicaid Services (CMS) has given states an opportunity to tackle the problem of integration of services for dual eligibles through demonstration projects. Colorado's grant positions the state to submit a proposal to launch one of those projects. HCPF proposes to center the state's approach to managing care for dual eligibles around its recently launched Accountable Care Collaborative Program. Advantages of the proposal include access to Medicare claims data, creating links between long-term care services and support systems, and better coordination of physical and behavioral health. The grant timeframe includes submission of a proposal to CMS in January 2012 and enrolling dual eligibles in the program in October 2012.
HCPF held its first stakeholder meeting about this grant this week. The meeting was attended largely by health care providers, some advocates and one self-identified dual eligible person. Many of the questions asked focused on the process for including clients and client advocates in developing the proposal, and suggesting dual eligible people ought to be at the center of the design of the program.
CCLP will watch the process closely. It is critical that Colorado does a better job of managing care to this population, which is among the most frail and most expensive to serve. It is also critical that it be done thoughtfully, that the program focuses on improving the quality of care, is well-designed and implemented, and that clients are engaged and consulted at every turn.
Budget troubles continue for Medicaid
At both the state and federal levels, Medicaid continues to be viewed as a source for trimming budgets by congressional negotiators. Amid considerable and successful opposition to Medicare and Social Security cuts, it appears increasingly likely Medicaid will be looked to as the source of entitlement spending cuts. Medicaid is the source of coverage for tens of millions of very low-income and vulnerable people. In Colorado, about 584,000 people are covered under the Medicaid program. State enrollment has increased by more than 100,000 since the beginning of the 2009-10 state fiscal year, demonstrating the critical safety-net function the program plays in periods of economic downturn.
State governments are also looking to Medicaid as a source of budget cuts. This week, 29 Republican governors sent a letter to Sen. Orrin Hatch, chairman of the Senate Finance Committee, asking for increased flexibility and relief from the law that precludes states from making changes to restrict Medicaid eligibility. Read more about the letter at Bloomberg and the Georgetown University Center for Children and Families blog.
State budgets remain tight, and adding to the difficulties is the looming expiration of increased funding for Medicaid that had been available under the 2009 American Recovery and Reinvestment Act. That law included $149 billion in health spending, of which $87 billion was for temporarily increasing the federal share of Medicaid costs. Colorado received more than $784 million since 2009, which was an incredible boost to the state budget during the recession. That funding helped ensure coverage for the additional millions of individuals who enrolled in Medicaid during the recession. However, as the funding sets to expire in just a few weeks, the number of people looking for work has increased. States are preparing for cutbacks in services while being faced with continued increased demand for services.
What's new
A new forum for tracking reform implementation
A new website from the National Academy for State Health Policy offers a detailed look at how states are progressing with implementation of the Patient Protection and Affordable Care Act. The site, http://www.statereforum.org/, says Colorado has completed 9 percent of implementation activities, such as designating a person to lead implementation efforts and beginning work on a health insurance exchange.
Colorado is farther along the road to implementation than most states, according to the website's accounting. The site says Maryland is in the lead with 14 percent of implementation activities completed. The site is intended as a forum where policymakers can share best practices and track their progress.
Federal technology guidance is an opportunity for Colorado
The Centers for Medicare and Medicaid Services has released updated guidance for states as they create information technology systems to support health insurance exchanges. The guidance is an opportunity for Colorado to "get it right" when deploying technology.
The guidelines set the foundation for a consumer-friendly application that operates seamlessly with other government applications so Colorado families and individuals can have timely and accurate access to health care information. The emphasis on data collection is underscored with the basic notion that the data can be used to report on the performance of the exchange, Medicaid, Child Health Plan Plus or any health program established by the state. In other words, half of the functionality of a database is the ability to report the data that have been gathered. To date, Colorado state agencies have struggled with current systems on that very basic level.
Because the guidelines set a standard of operability not currently seen in Colorado, state policymakers should consider options for the future integration of the Colorado Benefits Management System (CBMS), including not using it as a part of the infrastructure. CBMS is the software that manages many of the state's public benefits programs, and it has lacked essential functionality from the beginning. Continuing to build upon a system that doesn't meet basic criteria sets Colorado up for failure.
Advancing the debate
Study examines how MLR regulation affects broker compensation
A report prepared by a working group of the National Association of Insurance Commissioners (NAIC) found trends for the commissioners to consider as they debate how health reform implementation should account for insurance broker commissions.
A health committee of the NAIC on June 7 adopted the findings of the report carried out by the NAIC Health Care Reform Actuarial Working Group, according to the website Healthcare Exchange.
Broker commissions are important for implementing the Patient Protection and Affordable Care Act because the law says insurance companies must spend 80 percent to 85 percent of premium dollars on patient care, while the rest can go to administrative costs, advertising, profits and other expenses. The share of dollars spent on patient care is known as the medical loss ratio (MLR). Insurance brokers have argued their commissions should not be included in the MLR calculation, while consumer advocates note excluding the commissions would diminish the MLR as a measure of consumers' value for the money they pay.
The NAIC working group's study was designed to examine the effect the MLR already is having on broker compensation. Among the study findings reported by Healthcare Exchange:
- Several of the states with stricter MLR requirements report reductions in commissions over many years in their states.
- In 2011, a significant number of companies have reduced commission levels, particularly in the individual market. However, a significant number of companies (also) have not reduced commissions in 2011.
- States with higher MLR requirements have not observed any problems with consumer access to insurance or to producers.
Health Law and Policy Update is issued weekly by the health staff of the Colorado Center on Law and Policy. Subscribe by e-mail or read previous editions.
Health Care Director
Elisabeth Arenales
Health Care Attorney
Adela Flores-Brennan
Special Counsel
Ed Kahn
Communications Director
Perry Swanson
Released June 17, 2011