healthsignals new york

Shocked I tell you! Shocked!

Here's Bill Hammond on Dennis Rivera and the politics of New York's budget process in yesterday's New York Daily News:

No matter how tight the state budget is, Albany lawmakers always find a way to do a favor for Dennis Rivera, the incredibly influential leader of the health care workers union.

This year, at Rivera's request, the Legislature quietly slipped $80 million into the Medicaid program for nursing homes north of Westchester County, which must use the funds to increase salaries, improve benefits or provide extra training for their direct-care workers.

OK, $80 million over three years, that's interesting enough. But sad to say it's not as if New York doesn't already throw those sorts of numbers around. In New York's budgeting $27 million a year is just a bit above a rounding error. But here's the most telling part:

Lawmakers even bent their own rules to make this happen. The $80 million never appeared in the budget resolutions adopted by the Assembly and Senate, nor was it mentioned during public negotiations.

Now why would they have done it that way? Did they think we wouldn't find out? Perhaps the legislative reform process has a ways to go yet.

Any bets on whether this is one of the items the Governor item vetoes next week?

National healthcare job growth

The Times reports that:

The economy added 112,000 payroll jobs in November, far fewer than the month before and not enough to keep up with average increases in the adult population, the Labor Department reported on Friday. The gain was well below Wall Street forecasts, and employment in manufacturing was flat for the third consecutive month.

One quarter (28 thousand out of 112 thousand) of the seasonally adjusted job increase from October to November was in healthcare. Within healthcare, the increase was split roughly evenly between hospitals, nursing homes and other residential facilities, and ambulatory and home healthcare. Here's the BLS release. 

 

Lots of new healthcare jobs in NYC

Jobs report from mid-November showed that New York City unemployment dropped to a three-year low (6.1% in October from 6.9% in September). One-quarter of the gain was in healthcare. From the New York Daily News:

The city's private sector added 36,700 jobs in October from a year ago, slightly above September's pace. Professional services and health care led the hiring surge, largely mirroring national trends. Accounting, computer consulting and company management added 17,300 new positions during the month. Over 9,000 were hired in health care, about half of those in home health services. (Emphasis added.)

One-quarter of the increase in jobs ... but, I'll bet that the vast majority of the home health jobs pay barely more than minimum wage.

1199 Gets ripped off

District 1199/SEIU's pension and benefit fund was the victim of a substantial fraud, just short of $800,000. Here's the story in the New York Sun.

At the Manhattan DA's site, look for People v. Indera Vieira on July 9, 2004.

More on the 1199 strike

Lots of coverage. Some tentative settlements, mostly tied to the licensed agencies that subcontract to the VNS of NY, the largest certified agency. Check here and here.

As I guessed yesterday, it appears that some of the later years are contingent on new State funding. More later.

A bit of historical background to the 1199 strike

One of our readers noted that there is likely overlapping overhead in the two-tier structure of home health agencies in New York and asked how that came to be. Here's some history.

Going back 25 years or more New York had home health agencies, such as Visiting Nurse Services (VNS) that were Medicare certified. Because of that status, they were also certified to bill Medicaid directly. By practice, and shall we say cultural bias, they were all not-for-profit. By law, for-profit corporations, whose stock was publicly traded could not be certified because New York policy requires that the character and competence of corporate governing persons (such as stockholders) be assessed before certification. As a practical matter that works for closely held corportions, but not for those whose stock is constantly changing hands.

However, there was no legal prohibition against operating for-profit home care agencies. They simply couldn't bill Medicare or Medicaid directly. During the 1970s, many small, mostly "mom and pop," for-profit agencies emerged. They served many private clients directly and many contracted for specific services with counties to serve Medicaid clients. The counties did the direct Medicaid billing and subcontracted for these services, primarily aide services.

While there was no legal prohibition against the operation of these agencies, neither was there any State oversight. In fact, the State didn't even know how many such agencies existed.

In the late 1970s, the State wished to dramatically expand home care. At the same time, it was nervous about the operation of totally unregulated agencies and wished to have at least some minimal knowledge of their operations and oversight of the quality of their care.

Yet culturally and politically there were two very different organizational types. The first were the old-line nurse dominated, not-for-profit, certified agencies, mostly VNSs. The second type were young, entrepreneurial, aide focused agencies. The not-for-profits wanted the new ones regulated, but didn't want new certified competition. The newer for-profits wanted to be able to seek certification. The structure of the political compromise to come was obvious. It was codified in Article 36 of the Public Health Law.

All agencies would require some form of regulatory oversight.

For profit agencies would not be barred from seeking certification, but while there would be a dramatic increase in system capacity the total expansion of that capacity would not be open-ended. Thus, only a portion of the for-profits would be able to become certified.

This was accomplished by maintaining the certification requirements and adding a less demanding set of licensure requirements. For example, licensed agencies would not be required to meet the "public need" requirements of the certificate of need law. They could just do their own market assessment and take the risk. They were required to file cursory financial disclosure documents, but not Medicare/Medicaid cost reports. (Their cost reporting requirements were expanded last year.) They were not subjected to the OASIS requirements imposed later on certified agencies. At the same time, no one would be legally able to operate a home health agency without at least being licensed.

When the new law took effect, Health Department staff had to scour every phone book in the state to even find all of the agencies that were operating. There were over 500.

So this is the structure that's been in place for a bit over 25 years. Certified agencies bill Medicare and Medicaid directly. Mostly, they provide the assessment, oversight, case management, nursing and rehab services. Most, but not all are still not-for-profits. Licensed agencies include many more for-profits, though some certified agencies have not-for-profit licensed subsidiaries. They primarily provide the aide services, but also some nursing services, especially under subcontracts to certified agencies.

Yes, this means extra overhead. However, to some unknown degree this is offset by the lesser regulatory and reporting requirements that apply to licensed agencies (no certificate-of-need, less financial reporting, no OASIS reporting, etc.). I'm not sure that anyone knows where the balance point is.

The more modest cost structure of licensed agencies also means that they can contract directly with private pay patients and charge them lower fees without runnign afoul of Medicare and Medicaid certification requirements that no one pays less than they do.

I continue to think that the inability to spread overhead costs horizontally (for example, geographically) is probably at least as important as the extra overhead that comes from having two organizations vertically.

Even if the overhead costs balance out, there may still be a hidden disadvantage to this two-tiered structure. That is that it's even harder to integrate the aides into the care teams and to require that they participate in care planning. Even if aides are part of the same organization, they may not play these roles in a meaningful way. But their being in different corportions makes it even more challenging to integrate them and their roles in patient care.

Nurse staffing and outcomes

Here's a new summary from AHRQ of how nurse staffing makes a difference in hospital outcomes. There's a particular emphasis on "Nursing-Sensitive Outcomes."

Five studies found at least some association between lower nurse staffing levels and one or more types of adverse patient outcomes. Among the study's principal findings:

In hospitals with high RN staffing, medical patients had lower rates of five adverse patient outcomes (UTIs, pneumonia, shock, upper gastrointestinal bleeding, and longer hospital stay) than patients in hospitals with low RN staffing. Major surgery patients in hospitals with high RN staffing had lower rates of two patient outcomes (UTIs and failure to rescue).

Higher rates of RN staffing were associated with a 3- to 12-percent reduction in adverse outcomes, depending on the outcome.

Higher staffing at all levels of nursing was associated with a 2- to 25-percent reduction in adverse outcomes, depending on the outcome.

Pneumonia rates were found to be especially sensitive to staffing levels.

All adverse events studied (pneumonia, pressure ulcer, UTI, wound infection, patient fall/injury, sepsis, and adverse drug event) were associated with increased costs. Do the math. (Remember quality is free?) Higher staffing levels may save money for the hospital and risk, pain, and aggravation for the patient.

Can the capital grant bill be used to bail out 1199's benefit fund?

So hospitals (mostly) and nursing homes want New York to borrow a billion and then give it to them. We starting talking about what the they would use it for, information technology, consolidation and a grab bag of miscellaneous stuff. What might the miscellaneous include?

I may have over-interpreted the langauge of the draft, but the way I read it, the money could be used to help bail out District 1199's short-funded benefit funds. Here's what I saw in section 10 of the draft bill:

$28 million to "help protect critical health care providers whose ability to continue to provide appropriate services are threatened by financial and other challenges ... Funding may be made available ... to help meet the costs of a turnaround plan ... including grants that may be made directly to a health worker union or labor/management committee."

So if a hospital has not been paying their benefit contribution and they're now preparing a "turnaround plan" one component could be direct payment to a union or labor/management committee. Now there are some words between those phrases relating to training, etc. and it could be that the "union or labor/management committee" might not legally include a benefit fund, but when I read this section, I immediately wrote a margin note: "1199 benefit fund."

Absent an explicit prohibiition that would actively prevent the use of the funds for this purpose, I would expect that that exactly how they would be used. (I'm not the only one who thinks so.) It's certainly consistent with history and current circumstances.

There's a related question: What are the non-financial "other challenges" that they're referring to and why and how will money help? I have no idea.

The 1199 collective bargaining agreement

A couple of twists on the collective bargaining agreement between the League of Voluntary Hospitals and District 1199/SEIU.

First, as one wag put it:

Hospitals that are supposed to be on the verge of bankruptcy (and looking for $1 billion handout from the state) give their workers 15% over four years, which is more than what DC 37 and CSEA got. They continue providing their employees with FREE health coverage (and bail out the 1199 benefit fund) and guarantee no layoffs. And the headline is 1199 gave up 1 percentage point in the first year?

You've got to hand it to Dennis Rivera. He managed to spin a slam-dunk victory as a sacrifice on the part of his members.

What must the CSEA and DC 37 members think? What will they think when the State puts up the money to support this deal?

Second, a some years ago I was discussing the economics of the wages/benefits tradeoff with a high level union rep. She told me that they never discussed it - and therefore there was no tradeoff. It was purely additive. I stuck with economic theory, but kept my mouth shut. But of course there's a tradeoff (registration required). Here's some of what I wrote in 1998:

For the next five minutes, I want you to imagine something that many of you will probably think is nuts. What I want you to imagine is that health benefits don't cost employers anything. Yup, that's right, nothing, nada, zip.

Pretend, if you have to, that while employers sign the checks, it's employees who bear the cost.

Instead of coming out of the bottom line, let's assume that all of the costs of health benefits come out of the employee's pocket. Workers may not be aware that they're the ones whose pockets are being picked, but they're the ones paying.

How? Instead of coming out of the employer's bottom line, health benefit expenses are just another compensation cost.

Another way of looking at this is to ask whether reductions in aggregate employer contributions lead to increased profits or surpluses. Over the long term, there's no indication that this is the case. As a result, health benefit costs are traded for wages and other benefits. Increasing health benefit costs are accompanied by stagnating or reduced wages or reductions in other benefits.

Now, what if what we're pretending is actually true? ...

OK, you can stop pretending now--or maybe you can't. The problem is that Mark Pauly, one of the nation's preeminent health economists, makes a very strong case that what you've just been pretending is actually true.

Well, in this deal, they've made the tradeoff between wages and benefits explicit. District 1199 is giving up wage increases for low wage workers in return for health benefits with no employee contribution. When only 20-25 percent of workers with health insurance nationwide make no financial contribution, it's a rather curious choice given the degree to which 1199 complains about the low wages their workers receive. Nationally, employees contribute just short of 20 percent of health benefit costs and in New York it's about 17 percent. For employees that amounts to about $500 for individuals and for employees plus one dependent that equated to over $1,000 per employee in both the US and in New York.

Of course there are potential tax consequences since wages are taxed and health benefits are not, but at these wage levels, that can't amount to much.

Third, when you think about healthcare workers giving up wages to get zero contribution health benefits, it conjures up the image of a dog chasing its tail or some crackpot scientist pushing a machine that generates more energy than it consumes. Where does it end?

Lastly, since 1199's health benefit fund is in trouble because some hospitals and nursing homes haven't been making their payments, what's the tie-in to this deal? Is the trade-off to help keep the fund afloat? Will continuing to offer very rich benefits contribute to increasing fund deficits? And what's the tie-in to the capital bailout bill that we've been talking about. That's the subject of the next post.

Home care wages & agency payments

SEIU District 1199 has been threatening to ratchet up their offensive in home care for some time and, probably as much out of frustration as anything else, they've done it. Yes, many New Yorkers would consider it more than a bit ironic that 1199 is frustrated by anything - given their ability to get money and favored legislation out of the State.

However, what they're not getting in many instances is actual wage increases. So they've begun advertisements that name managers of specific agencies and publicize their compensation. Here's today's New York Times article "Seeking Better Wages for Difficult Work."

It's so much more fun to put management on the hot spot without resorting to the most basic tool of organized labor, strikes. Bad press that targets individual managers also means that the patients continue to get care.

New York has a two-tiered structure for home health care. Certified agencies are paid directly by Medicare and Medicaid. Most aide services however, are provided by licensed agencies which are subcontractors of the certified agencies. Typically the certified agencies are paid about $17 per hour for aide services. By the time it trickles down to the aide, what's left is about $7 per hour. Much of the $10 difference is legitimate but there's got to be a way to do better.

The best wages in New York are typically paid by the contractors of VNS of NYC. Yet VNS has low unit costs. VNS is much larger than its competitors. That should give us a hint about one of the barriers to resolving this while making the system more efficient.

New York State policy established and maintains a significant barrier to consolidation of home care agencies. Certificates are granted on a county-by-county basis and an agency must have Health Department approval to expand into each additional county. Of course, the agencies operating in target counties oppose expansion of others into their market areas. Thus, the vast majority of agencies are much smaller than they should be to operate with the economies of scale that would enable them to be efficient and effective. This State policy has been reinforced by a moratorium on certificates of need that has been in place for years.

Every agency has a CEO, CFO, Director of Nursing, etc., etc., etc. The State should get out of the way here. It would actually save it some money and create the potential for the hands-on workers to get a bigger share of the pie.

In addition, the two-tier structure of certified and licensed agencies is the historical residue of the system that was in place in the early 1980s when New York first required oversight of all home health care. It may be time to encourage (note encourage, not require) certified agencies to hire aides directly and skip the second level of overhead. Frankly, I've been puzzled that more aggressive managers haven't gone ahead and done this on their own. It might make them more competitive in the private market (which admittedly is still small). But more importantly, it would make it much easier to fully integrate their care teams. The one barrier to this is probably that keeping the low cost care out of the certified agencies enables them to offer prices lower than Medicare and Medicaid without running afoul of federal law.

Full disclosure: A family member is President of the Home Care Association of New York and represents the majority of home care agencies in New York. What you read here is my opinion and not necessarily hers, much less that of the agencies she represents.