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By RICHARD KRIEG

Illinois' urban health care dilemma

This is the second in a series of articles on the health care system in Illinois. The first was on rural health care in Illinois, published in the April magazine.

Approximately 1,200 babies were born in East St. Louis last year. Three-quarters of them were delivered at financially distressed Centerville Hospital, the area's only obstetrics facility. St. Mary's Hospital, which houses the only local trauma center, considered shutting down due to financial losses last year. The third and last hospital in the area, Gateway Community, did go out of business last year. A beleaguered public health system was unable to pick up the slack.

Urban health systems across the state often fail to meet the needs of local residents. The system has become fragmented and structured to meet commercial needs instead of the needs of a local community. The problem is especially severe in metropolitan areas with concentrations of low-income people because access is often denied to the uninsured and underinsured. Local health care systems often provide acute care for the broad urban population but fail to serve the basic needs of poorer residents who may be living in the shadows of urban hospitals. They need primary health care, adequate diagnosis and follow-up, drug treatment and chronic care. If that type of primary and preventive care were available and accessible, demand for acute care would decrease. Too often a city's poorer residents are also at higher risk of disease than more affluent city residents who enjoy immediate access to health care facilities.

Health system deficiencies are apparent in other parts of the country, but they are especially severe in Illinois. Over many years, Illinois state government has allowed the health care system to erode. Relative to other states, there has been a profound lack of creative policy development, targeted financing and goal-oriented planning. The state's failure to adequately fund its health service programs has been the biggest obstacle to reform. In tandem with underfunding, weak state leadership has forced both public and private systems of care to the brink of collapse.

Despite the existence of both rural and urban reform plans for Illinois, health system improvement has stayed on state government's back burner. In fact, had state policy been to intentionally undermine the system, a better approach could not have been found. The state's Medicaid program suffers from a lack of quality control and an unfortunate reliance on inpatient and institutional services over primary health care. This outlook has

Over many years, Illinois state government has allowed the health care system to erode. Relative to other states, there has been a profound lack of creative policy development. . .

stymied innovative approaches on the outpatient front. Years of lackluster policymaking have numbed reform-minded constituencies. The loudest voices continue to come from the hospital and medical lobbyists, leading many to conclude that health system reform is only a parochial battle for state funding annually by these associations.

At risk from miserly levels of state reimbursement are the institutions that serve as the cornerstones of community-based health care. They are often inner city facilities serving low-income community residents. These cornerstone providers sometimes anchor a broader set of local organizations through doctor referrals, shared staff arrangements and diagnostic services, and they are critical in solving the state's urban health problems. But years of state underfunding have bled many of these facilities dry.

While critical to the solution, state government can't shoulder all the blame for deteriorating urban health care. Like their rural counterparts, Illinois' urban health care networks often function as "nonsystems" of care, The public and private health providers are generally separated

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by a wide gulf. "System" components don't articulate, their services may not match needs, and their top administrators don't talk to each other.

While individual facilities may attain a high degree of internal communication due to technological advances in data systems, these same improvements can hinder information flow between health providers. Medical and financial records from one facility are often incomprehensible at another. Each organization uses its own system for coding medical records and entering utilization and billing data. From one provider to the next, information may be as unintelligible as a foreign language.

Services are often duplicated in the urban setting. Basic medical procedures may be absent while there is an oversupply of lower priority elective procedures. Despite recent improvements, not-for-profit community health centers offering critical primary health care services may not be adequately linked with the private hospital system.

Communication may not exist. For example, at a recent meeting in Chicago, the director of St. Basil's Free Peoples' Clinic, a community health facility serving the inner city poor, stated that it was difficult to set future goals. Why? Policy decisions made down the street at the University of Chicago Hospitals and Clinics have a significant impact on St. Basil's clinic. Yet, the clinic director admitted not knowing the name of the hospital chief executive officer or the level of services available at the $300 million University of Chicago complex.

In municipal areas across the state, health maintenance organizations (HMOs) and physician groups operating within the space of a few city blocks rarely interact. Physicians providing prenatal care in public health clinics often lack visiting privileges in nearby hospitals. This type of fragmentation breeds a system resulting in poor care at high expense. In the case of obstetrics care for low-income women, physicians from public health clinics are often not allowed in hospital delivery rooms. Too often, patient records are not transferred prior to the delivery. The result could be $100,000 paid out of the state's Medicaid program for a baby's first month of life.

Why is it so hard to achieve coordination among health care providers? A key reason is that the lion's share of health care resources is lodged within the private sector. Outside of payment system incentives, private facilities are largely immune to public control. They "call the shots" when it comes to their service mix, program priorities and community responsiveness. Private hospitals in metropolitan Chicago receive well over $8 billion annually in gross patient revenues. That amount is equivalent to the combined GNP of Costa Rica and Panama and dwarfs the aggregate budgets of the Chicago metropolitan area's public health facilities.

Hospitals, however, are highly dependent on both federal and state subsidies. Those serving the urban poor have been forced into a posture of husbanding their severely depleted resources. The single largest source of hospital patient revenue in Illinois comes from the federal Medicare program. Between the mid-sixties and mid-eighties, Medicare was a cash cow for hospitals because it reimbursed at or above the cost of patient expenses. With the implementation of a series of expense controls (including diagnostic-related group, or DRG, payment), the percentage of costs paid by Medicare to hospitals dropped sharply. Conference committees of the U.S. House and Senate recently approved an additional $34 billion in cuts to Medicare providers in the new federal budget, with hospitals across the country expected to absorb $16 billion of the cuts over a five-year period.

While Medicare has been a contributor to the precarious condition of many Illinois providers, Medicaid funding lies at the root of the problem. The state's Medicaid program in 1983 picked up about 90 percent of hospital expenses for low-income patients but, according to the Illinois Hospital Association, now covers only an estimated 79 percent. State spending for Illinois' Medicaid program increased by 76 percent over the 1980s, compared to a 134 percent average increase for all other states, according to the Chicago Assembly's Paying for Health Care in Illinois (published by the University of Chicago Center for Urban Research and Policy Studies in January). Per capita spending for Illinois' one million Medicaid recipients is 27 percent lower than the national average and lower than the other midwestern states (U.S. Census Bureau, Government Finances in 1987-1988).

In municipal areas across the state, health maintenance organizations (HMOs) and physician groups operating within the space of a Few city blocks rarely interact

To absorb financial losses from uncompensated care, hospitals have historically shifted costs to insured patients. However, most employers, especially big business, have become prudent buyers of health care coverage for their employees. In Illinois as elsewhere, employers are moving away from traditional indemnity plans to managed care options, which through HMOs, preferred provider organizations (PPOs) and other networks pay on a discounted rather than a full-cost basis.

Losses to Illinois hospitals resulting from Medicaid, Medicare and uncompensated care have been excessive, and the greatest loss by far has fallen on Illinois' urban hospitals. Statewide, uncompensated hospital care was $300 million in 1983; today it is $600 million. Since 1985, 24 of Illinois hospitals have shut down, leaving 220 statewide, 140 of them urban hospitals. The vital role played by community hospitals in indigent health care is demonstrated by the fact that these facilities provide acute care for 84 percent of Cook County's Medicaid patients, leaving 16 percent at public hospitals in the county.

Two radically different approaches to the Illinois Medicaid program are now being debated. The Illinois Hospital Association recently introduced a plan to convert the program into a payment system keyed to individual patient

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diagnoses. Modeled on the Medicare payment system, it would reimburse hospitals for 97 percent of hospital patient expenses. An income tax increase would be needed to pay for half of the estimated $300 million price tag, with the rest coming from federal matching funds. In endorsing the approach, the Chicago Tribune on March 5 called previous state Medicaid policy "shameful," predicting that its defeat would lead to more hospital closures.

The state's answer came by way of Gov. Jim Edgar's $444 million fiscal year 1992 spending cut. The governor, whose instincts clearly lie with the underdog, was caught. He inherited a deteriorating health care system alongside of a state budget crisis. Diminution of federal support for both states and for health care will challenge this governor as none before him. If approved, Edgar's cuts would whack $181.7 million in one year from providers through a 5 percent across-the-board cut in fiscal 1991 medical provider rates and other rate reductions. More than $105 million would be trimmed by severely limiting Aid to the Medically Indigent and the General Assistance programs, and the state's disproportionate share hospital formula would be changed to produce a $40 million saving.

These unprecedented cuts will force most hospitals into a single-minded attempt to shore up their bottom lines. It will become increasingly difficult for low-income people to gain hospital admittance. The cuts will accelerate a marked trend towards development of hospital services that have better profit margins. This will stimulate service duplication and other redundancies across local systems. Provider collaboration developed in the context of government payment cuts will stress the preservation of each participant's market share not responsiveness to community health needs.

While critical to the solution, hospitals should not be considered the main answer to Illinois' urban health problems. According to the Chicago Assembly, Illinois ranks second among all states for the percentage of the Medicaid budget allocated to hospitals. With roughly one-third of current Illinois Medicaid reimbursements allocated to hospital inpatient care, the pressing need for additional ambulatory care often gets masked. In Cook County, for example, two million outpatient visits for the medically indigent are not made every year, according to the final report of the Chicago and Cook County Health Care Summit in 1990. The gap in noncare involves routine walk-in services, such as diagnosis and treatment of common illnesses and injuries; detection and treatment of communicable disease; prevention, rehabilitation and health maintenance services; and the management of chronic illness.

Hospitals and physicians usually are not interested in setting up primary health care practices for low-income people. Most often, the reasons boil down to inadequate return on investment and escalating medical liability insurance. Some hospitals lament the situation but still get involved in providing care for the poor often incurring considerable risk. Other hospitals stay uninvolved.

It is important to keep in mind that private hospitals naturally gravitate toward specialized services that maximize revenues and minimize costs. They have invested in diagnostic and treatment procedures that were inconceivable 15 years ago to pinpoint and solve medical problems that were previously life-threatening. However, the costs are steep: $2.5 million for a hospital cardiac angio laboratory, $2.5 million for one magnetic resonance imaging (MRI) unit and $1.4 million for a CATS scanner. Yet, investment in technology, often in duplicate by hospitals in the same urban area, can mean that low-and middle-income people suffer from these hospitals' reduced attention to basic medical amenities. The most advanced technology fails to meet the fundamental service needs of inner city residents, who need expanded outpatient services. While Illinois' private health care providers have developed creative outpatient options for insured patients, they usually are not available for those of lesser means because of chronic underpayment by government.

In sum, the lack of cooperation among providers, underpayment by government and a fragmented system of care produce a situation where many urban residents are denied core medical services. As a result, low-income patients often must devise their own "systems" of care, depending on the particular illness they face. A family might rely on a hospital emergency room for routine care, a public health clinic for maternal or pediatric services and a mix of hospitals, pharmacists and storefront agencies for the remainder.

'Access to primary and preventive services has reached crisis proportions in Illinois and is the biggest obstacle to improving health status in this state'

Even when services are available, inner city residents often lack access to the appropriate facilities. State Public Health Director John Lumpkin recently said, "Access to primary and preventive services has reached crisis proportions in Illinois and is the biggest obstacle to improving health status in the state. The problem is most severe in inner city and rural communities. ..."

Widely accepted as the best framework to improve health in the United States is the recent report published by the prestigious Institute of Medicine, titled The Future of Public Health. The report maintains that "states are and must be the central force in public health . . . states must guarantee a minimum set of essential services and support local service capacity. ..."

Without sufficient state resources and coordination in Illinois, the attempt to improve health care may be lost. Low-income state residents are the most vulnerable. In Chicago, for example, new programs were put into place to get substance abusing pregnant women into treatment. The waiting list for

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some state-funded drug clinics, however, can approach a year. Likewise, interventions designed to improve infant health are often overwhelmed by demand. It is not unusual for a woman to wait three months to be accepted into a prenatal care clinic. The state's fiscal crunch poses a direct threat to these individuals and to the functioning of local health care delivery systems.

The $40 million in savings tied to cutting the disproportionate share program to hospitals will do the greatest damage. The formula is weighted towards hospitals with higher volumes of Medicaid patients. The change would do exactly the wrong thing at the wrong time. Coupled with other extraordinary cuts in two other state programs serving health needs of the poor Aid to the Medically Indigent and General Assistance the formula change would drive many Illinois' urban poor to face nightmare contingencies when seriously ill. The state's low-income population can't be expected to carry the weight of health system reform. The impetus for change must come from others.

Reform of Illinois' health care system, in contrast to school reform, has not been historically perceived as a crisis among middle and upper income groups. Special interests at the local and state levels have not coalesced into an enduring health reform movement in Illinois. Various constituencies representing their own health care policy interests have on occasion banded together in the name of system reform. Even with public hearings and substantial media attention, health care reform has remained a surprisingly low-voltage affair. Groups that are interested in reform of the health care system must redouble their efforts. As each attempts to safeguard its own interests, it will be easy to lose sight of the need for fundamental system reform. The focus is now on stopping a "spending binge" in state government. Those hundreds of thousands of Illinois residents consistently lacking adequate protection for illness and injury must wonder where the binge was.

The following specific priorities should be considered in solving Illinois' urban health care problems.

Shore up trauma system before it collapses. One result of restricted access to and availability of health care is the mounting problem of hospital emergency room misuse. A separate but related problem is an emerging crisis in trauma care. The lack of primary care facilities, and in many cases lack of knowledge among low-income people regarding more suitable options to emergency rooms, causes excessive use of emergency rooms for routine care. In New York, Los Angeles and other cities medical gridlock is apparent in hospital emergency rooms. Seriously ill patients, sometimes with blunt or penetrating trauma injuries, may wait hours to be admitted to a hospital bed. This gridlock has not come to Chicago, yet Chicago ambulances regularly bypass hospitals that are full. Under such conditions, entire sections of the city may be without immediate care for trauma victims, essentially depriving thousands of people the assurance of rapid trauma care. Signs are evident that similar problems will increasingly occur downstate over the next decade, and they are already apparent in East St. Louis, Belleville and Granite City.

A $5 million allocation to Chicago's hospital trauma system should be retained in the state's fiscal 1992 budget. In the 12th hour of the 1990 legislative session, the General Assembly approved $5 million to buttress the hospital trauma system in Chicago. This allocation was based on a formula that took into account a trauma center's financial need and its low-income patient volume. Gov. Edgar has cut the funds from the fiscal 1992 budget. The lack of follow-through on this commitment presents an extraordinary threat to Chicago residents, especially those on the south side. The south side's closest trauma center is Christ Hospital, south of the city in Oak Lawn. Only six of the original 10 centers still operate in the trauma system, and odds are the system will fail without the state's ongoing contribution. The probability is high that without the state contribution another will drop out, either Christ Hospital or Northwestern Memorial (located about a mile north of the Chicago loop).

The entire basis of the relationship between the state and Chicago trauma systems should be reassessed, and Mayor Daley and Gov. Edgar should strongly pressure the federal government to expand federal funding to Illinois trauma centers. The Trauma Care Systems Act passed Congress last year, but it only authorized $60 million nationwide for federal fiscal year 1991.

Reform of Illinois' health care system, in contrast to school reform, has not been historically perceived as a crisis among middle and upper income groups

Don't use the meat ax approach to cost-cutting. Medicaid payment cuts should be made selectively, minimizing cuts to specific health care facilities that might otherwise close. Thorough analysis should be undertaken to identify which hospitals are potentially threatened by the cuts as well as the adverse consequences to patients and the community. Special consideration should be granted to cornerstone health facilities whose existence would be seriously threatened by Medicaid payment reductions. State government will balk at this approach because it opens a Pandora's box of complications and debate. The hospital associations will also resist this approach since their dues' income derives from all hospitals. Given the sheer magnitude of prospective cuts, however, some individual providers may not be capable of absorbing such cuts. These facilities and their most vulnerable patients must be protected.

Fund the good guys. In order to beef up incentives to provide needed care, the Illinois Department of Public Aid should intensively examine the possibility of redirecting reimbursement to those providers (especially the cornerstone institutions) that have assumed inordinate risk in treating the inner city and rural poor. An increased share of current funds should be earmarked for facilities that treat the greatest number of poor people: community-based clinics, public health clinics and selected hospitals. Medicaid waivers should be granted to free-

May 1991/Illinois Issues/23


standing clinics to encourage them to be innovative in providing care to the needy.

Encourage cooperation among providers. Pilot systems that pool resources should be encouraged. One of the "Medicaid Partnership" demonstration projects funded in Chicago established a new provider network through Mount Sinai Hospital in conjunction with Bethany and St. Anthony hospitals. Women

. . . the short-run emphasis should be to minimize the damage by making cost-cutting more selective

and children are assured adequate primary, secondary and tertiary care through new contracts signed with city clinics, community health centers and physicians. Financial incentives are provided for coordination among hospitals, public health clinics, community health centers and private physicians.

Such a system coordinates care for low-income city residents and is designed to expand capacity to care for the medically indigent, providing the types of services they most need. This coordinative approach represents the best kind of investment the state could make with limited resources. Given the program's current incentive structure, however, only hospitals that have a deep commitment to the urban poor are likely to participate. The Illinois Department of Public Aid should examine how additional hospital support for these emergent networks might be stimulated through incentives and as a condition to receive Medicaid payment.

Restructure the payment system. Many believe that Illinois' health care problems have become too large to address without fundamental reform in the Medicaid system. The issue should not be framed in terms of the traditional tug-of-war between hospitals and the Illinois Department of Public Aid over payment levels. Basic change should be considered. Managed care approaches, including preferred provider arrangements, have proven useful in other states' restructuring of Medicaid. Single payer systems also provide an alternative model. In any restructuring, federal revenues should be maximized. The state could receive more federal matching Medicaid revenues if Chicago and Cook County (and other local governments) would pool their current health assistance expenditures, thereby allowing the state to claim the federal match. Such a plan was designed during the recent Chicago and Cook County Health Summit with Illinois Department of Public Aid participation.

Were the governor to establish a Medicaid reform panel, the short-run emphasis should be to minimize the damage by making cost-cutting more selective. Available Medicaid funds must be focused on the most vulnerable groups. The second step would involve looking at the costs, benefits and risks of reshuffling available Medicaid dollars among hospitals, physicians, long-term care facilities and other providers. The current service mix doesn't favor the types of care most needed by low-income state residents. Finally, a multiyear strategy to restructure the Medicaid program should be attempted. Whether incremental or a top-to-bottom overhaul, the intent would be to make the program more quality conscious while providing the best set of benefits for recipients. The governor's marching orders to such a group might include specific ground rules or assumptions regarding the total budget level as well as permissible annual growth rates.

Richard Krieg is executive director of the Institute for Metropolitan Affairs at Roosevelt University and Arthur Rubloff professor of public administration. Krieg has served as health commissioner for the city of Chicago under Mayor Richard M. Daley and as deputy health commissioner under former Mayor Harold Washington. He was cochairman of the Chicago and Cook County Health Care Summit.

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