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Conservatives are targeting the wrong things to bring down health care costs, says hospital system CEO

June 26, 2017 at 6:35 PM EDT
Every major hospital group has criticized the health care bill crafted by Senate Republicans, especially for deep reductions in Medicaid spending for the poor and those with disabilities. At the Spotlight Health Conference at the Aspen Institute, Judy Woodruff talked to Kenneth Davis, president and CEO of the Mount Sinai Health System, to get his take on the health care bill and more.
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JUDY WOODRUFF: As we have heard, a number of patient groups and major players in the health care industry have opposed the Senate bill. Every major hospital group has criticized it. They say they are especially worried about deep reductions in Medicaid spending for the poor and those with disabilities, changes that include new limits like spending caps or block grants that would eventually cut the number of people on Medicaid.

Hospitals say they will end up paying the difference by treating the uninsured.

While I was in Colorado for the Aspen Spotlight Health Festival last week, I spoke with Kenneth Davis. He’s president and CEO of the Mount Sinai Health System, which includes seven hospitals and more than 140 ambulatory centers and practices in New York.

Dr. Ken Davis, thank you very much for talking with us.

You were quoted recently as commenting on the House version of the Republican overhaul of the Affordable Care Act. You said it would have a fairly devastating effect on the country.

Is that the way you feel about the Senate version too?

DR. KENNETH DAVIS, President and CEO, Mount Sinai Health System: Absolutely.

I think, if anything, there are aspects of the Senate bill that can be even more problematic. Particularly, the glide path to per capita or block grants is going to produce a lower reimbursement for the states than was even in the House bill.

JUDY WOODRUFF: What about the effect on hospitals?

DR. KENNETH DAVIS: Well, there are a number of things that impact hospitals.

All of them collectively, particularly for hospitals that have a reasonable number of Medicaid patients, are pretty difficult. There are substantial cuts. For instance, the public hospitals — the Health and Hospital Corporation in New York City, they can’t possibly sustain these cuts to the Medicaid budget.

Other hospitals that have a large number of Medicaid patients have a very tiny margin. That margin evaporates with this bill.

JUDY WOODRUFF: And is that — even with tweaking, you’re saying there’s literally no way around?

DR. KENNETH DAVIS: Well, fundamentally, this bill is about decreasing Medicaid and decreasing what states receive for Medicaid and decreasing, in the House case, those who have the extended benefits or the eligibility that they previously didn’t have.

The bill isn’t that much around tweaks to Obamacare. It’s a little bit. It’s a bit to tweak the exchanges, but the money’s coming from Medicaid. And unless they take a completely different approach to Medicaid, I don’t see that tweaks are going to help.

JUDY WOODRUFF: So, there are observers of the health care system who look at all this, and they say hospitals are a big part of the problem. They’re consolidating. There are mergers. Doctors are cutting deal with hospitals. Everybody’s making more money. Hospitals are charging more.

What could hospitals do that they aren’t doing now to get some of these costs down?

DR. KENNETH DAVIS: Well, let’s remember all hospitals are not alike.

In many cases, geography is destiny in hospitals. So if you’re in a system like ours, in which the vast majority of our payments are either Medicaid or Medicare, that’s fixed. And the size of our hospital system isn’t going to change how much Medicaid reimbursement or Medicare reimbursement we get.

Additionally, as some systems have increased in size, they have done so in order that they can move away from fee-for-service medicine to what’s called value. To do that, to be a system that can take risk and value, you have to be large enough so that patients don’t escape your network. And that’s part of the thing that is driving consolidation.

JUDY WOODRUFF: Is enough being done, you think, to be mindful of costs?

DR. KENNETH DAVIS: Well, the margins in many hospitals are so small that, if you are not fixated on costs, you are bankrupt.

And in New York state, we have seen 30-plus hospitals go bankrupt in recent years.

JUDY WOODRUFF: So the lesson is?

DR. KENNETH DAVIS: The lesson is, we are focused on expenses. We have to be fixated on expenses. But what we really need to do — and we were trying to do this previously — and hopefully we can continue to do this — is ask, how can we deliver health care in a different, more efficient, cost-efficient way?

The system is failing us. The macroeconomics of health care are such that the government can’t afford it, the states can’t afford it, the employers can’t afford it, and the employees can’t afford it. What we have got to ask is, what’s wrong with the system and how do we change it so that it’s more efficient for everybody?

JUDY WOODRUFF: You brought up Medicaid. You were saying how much of this legislation is around Medicaid.

There are many who say that the Medicaid expansion that was part of the Affordable Care Act originally, which I know you were strongly for, the critics say this was simply throwing money at an inefficient program, poor-quality care, people on Medicaid don’t get the same level of care that others do.

And they point to studies showing that, even with the expansion of Medicaid, that that care is not getting much better. How do you respond?

DR. KENNETH DAVIS: Well, those studies or study doesn’t take a very long perspective.

You can’t see the difference in things like mortality for quite some time. If you’re lowering people’s hemoglobin A1c or better controlling their blood pressure, it can take sometimes years before you see an extension of a lifespan in those patients.

But what we did find, what was reported was an improvement in mental health. And it seems like people have forgotten that. The largest provider of payment for addiction services is Medicaid. Twenty percent of all Medicaid recipients, at the very least, have mental health problems.

To take that out of the equation is very, very destructive. And to think that we’re not having a positive influence — because the only thing we really directly affect and that we can measure short-term is improvement in mental health — is a little demeaning to our psychiatrists.

JUDY WOODRUFF: Let me go back to the mega-question about our whole — our health care system.

What conservatives are arguing, among other things, is that when you have health care, rising costs of health care driving at least a sixth of the economy, that something’s really out of whack, that the whole system is too expensive, too out of control. Government participating in it is helping to drive up those costs.

Do they have a point?

DR. KENNETH DAVIS: Not really.

We lose money on every Medicaid patient who walks through our door, whether it’s inpatient or outpatient. That’s the cost of health care. If they were truly interested in the question of why is our system so expensive, this would be a bill about how we move away from fee-for-service medicine, in which physicians and hospitals get paid for everything they do, and moving more toward value and risk, in which patients, providers are all aligned, such that everyone wants you to stay well and out of the hospital.

We would have more incentives for readmission penalties. We would have incentives for shorter stay. We would have more incentives to bring care to a less expensive place, like the ambulatory setting. But those issues aren’t being addressed in this bill.

JUDY WOODRUFF: And your point is conservatives may make that argument, but they’re not promoting…

DR. KENNETH DAVIS: If they are truly interested in changing the cost structure, making it more efficient and less expensive, they have got to deal with reforms that actually affect those metrics. And these don’t.

JUDY WOODRUFF: Dr. Ken Davis, we thank you very much.

DR. KENNETH DAVIS: Thank you.

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