Grady on guard

This is the final entry in a three part series on the past, present, and future of Grady Memorial Hospital.

In 2011, more than 600,000 patients visited the Grady Health System. Across the Atlanta superstructure’s 16 floors and the institution’s six neighborhood health centers, 5,300 doctors, nurses, and staff members do everything from refill prescriptions to resuscitate lives. With more than 950 beds, Grady is the state’s largest hospital. For Fulton and DeKalb counties’ uninsured residents, the safety-net facility isn’t simply a mammoth infirmary — it’s a lifeline.

Six years ago, Grady nearly closed its doors. Although the 121-year-old hospital has experienced a recent turnaround, it’s not out of the woods yet. For this three-part series, CL spoke with more than 50 doctors, patients, administrators, politicians, advocates, and others to learn about the fall, rise, and uncertain future of one of Atlanta’s most important institutions.

Grady CEO John Haupert’s office overlooks Jesse Hill Jr. Drive, a bustling four-lane artery that runs through the heart of the hospital’s campus. Ambulances zip toward the emergency room on the street below his second-floor suite. Haupert sits at a polished wood conference table and speaks with cautious optimism about Grady’s future.

The public hospital is projecting a $20 million profit for 2012 — a far cry from the $60 million debt facing the health care institution just five years ago. Haupert says he’s committed to sustaining Grady’s mission to care for the poor. But the financial reality of doing so more than 120 years after the hospital’s founding is becoming increasingly difficult, despite the institution’s recent shift into the black.

“Health care organizations have to be more careful going forward,” he says. “Part of health care fixing itself, particularly public health care, is that regardless of the future, we know there will be less federal, state, and local support for funding health care.”

The problems Grady faces — costly medical bills, exorbitant pharmaceutical profit margins, rising equipment costs — are shared by public hospitals throughout the nation. One in six Americans is uninsured; in Georgia, it’s one in five. Those unable to afford prescription drugs tend to bypass preventive care. As a result, poor patients often wait until the last minute to seek treatment. Safety-net hospitals provide help to those that need urgent care, and it’s expensive.

Grady again finds itself at a turning point that could make or break it, with its fate primarily in the hands of policymakers at the county, state, and federal levels. Earlier this year, state lawmakers approved the “bed tax,” thanks in part to some semantic sleight of hand. The tariff on hospitals’ net profits garners Georgia federal funding that is redistributed to the hospitals. Axing the state’s bed tax would have meant a nearly $700 million shortfall in Georgia’s Medicaid program and forced lawmakers to make cuts to the state’s budget.

Republican leaders gave the tax alternative names such as “Medicaid assessment fee” and “provider fee.” Gov. Nathan Deal even created a situation in which state lawmakers didn’t have to vote directly on a tax hike. Instead, they passed a measure that gave the Department of Community Health the authority to extend the provider fee. In doing so, state Rep. Sharon Cooper, R-Marietta, says Deal “helped the medicine go down a little better” on what might have been an unpopular vote. In the end, the bed-tax renewal prevented Grady from losing $36 million in funding.

Still, more than $100 million remains up in the air, between Deal’s obstinate resistance to statewide Medicaid expansion under the Affordable Care Act and the expiration of the Fulton-DeKalb Hospital Authority’s long-standing contract with Grady.

“A signature on a piece of paper in Washington or under the Gold Dome can completely knock you off course,” Haupert says.

In addition to dealing with concerns about whether Grady can pay its bills, Haupert is also working to rebrand and expand the medical facility to attract more paying patients. Today, the hospital, which had a 2011 operating budget of $898 million, goes beyond serving the indigent to offer specialty treatments unavailable at other hospitals. It also trains 25 percent of the state’s medical professionals. It is the backbone of Georgia’s health care industry.

“Grady is essential not only to Atlanta but the region. When you look at its trauma capabilities, they’re unmatched in the state of Georgia,” says Atlanta Mayor Kasim Reed. When asked if he’ll be there if Grady needs help, Reed responds, “No question.”

As major funding issues again rear their heads, the question isn’t whether Grady will remain open, but if it can continue to fully care for the indigent. Haupert has plans to make Grady the nation’s “leading public academic health system,” but they’ll require political and financial support. Whether he can garner both this year will determine whether Grady thrives or merely survives.

When president Barack Obama signed the controversial Affordable Care Act (ACA) into law in March 2010, the statute enacted sweeping reforms to the United States health care system. It was the largest American health care overhaul since President Lyndon B. Johnson created Medicaid and Medicare in 1965.

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Originally, the ACA required states to expand their Medicaid eligibility to individuals and families making up to 133 percent of the poverty level — an annual income of about $31,000 for a family of four. The money would’ve worked like this: Each state would get $33 billion over the course of a decade from the feds. During the first three years of expansion, Georgia wouldn’t pay a dime. After that, the federal government would cover 90 percent of the expansion’s remaining costs. Estimates of the total cost to the state over a decade range from $2.5 billion, according to the Kaiser Family Foundation, to $4.5 billion, according to Deal.

Since more people would be Medicaid-eligible, the federal government planned to phase out approximately half of its Disproportionate Share Hospital (DSH) adjustment payments, money used to reimburse hospitals that provide uncompensated care. Grady has long relied on DSH payments to stay afloat. Matthew Hicks, Grady’s vice president of government relations, says that DSH payments will be reduced from $91 million to $45 million between now and 2018. The federal cuts are guaranteed, but the effects were supposed to be minimized with the Medicaid expansion.

Last June, however, the U.S. Supreme Court struck down the ACA’s Medicaid expansion and left states with the choice to opt in. Two months later, Deal announced his opposition.

Deal, who denied multiple requests to be interviewed for this series, told reporters at the Republican National Convention in Tampa last summer, “I think that Medicaid expansion is something our state cannot afford. And even though the federal government promises to pay 100 percent for the first three years and 90 percent thereafter, I think it is probably unrealistic to expect that promise to be fulfilled in the long term, simply because of the financial status that the federal government is in.”

Since August, Deal has remained adamant that the state shouldn’t spend more when it’s already strapped for cash. He also continues to believe that the federal government, currently mired in sequestration cuts, can’t hold up its end of the bargain.

“The expansion is a burden on the state. ... People who think the feds are going to keep paying 90 percent are living in la-la land,” Deal spokesperson Brian Robinson said in an email.

Initially, other red states across the nation also were steadfast in their opposition. Following the U.S. Supreme Court ruling, 31 Republican governors all refused to expand Medicaid. Their combined “No” added up to $258 billion in federal money and 9.2 million uninsured Americans. But in recent months, Govs. Jan Brewer (Arizona), John Kasich (Ohio), Rick Scott (Florida), Rick Snyder (Michigan), and Chris Christie (New Jersey) have changed their minds and accepted the expansion deal. Brewer’s supporters have even gone so far as to call Arizona’s revised decision “fiscally conservative.”

Bruce Siegel, CEO of the National Association of Public Hospitals, says Deal’s rejection has forced Grady “between a rock and a hard place.”

“Safety-net hospitals are being held as hostages in this debate,” he says. “On one side, you have forces who oppose the Affordable Care Act and oppose Medicaid expansion. On the other side, you have forces who support the Affordable Care Act and see the DSH cuts as incentive for states to expand Medicaid. When hospitals are held hostage, patients suffer.”

Due to the combination of last year’s Supreme Court decision and Deal’s subsequent rejection, the now-broken policies may devastate public hospitals. In Grady’s case, nearly $45 million hangs in the balance. “The Affordable Care Act could be one of the greatest things to happen to Grady, or it could be one of the worst,” says Hicks. “It all depends how it is implemented.”

If Deal and national lawmakers don’t come up with a solution to address the public hospital’s financial burden, service cuts will most certainly follow. Mental health care will likely be first on the chopping block.

Recently, many Republican leaders — including Deal, Rep. Edward Lindsey, R-Buckhead, and state Sen. Josh McKoon, R-Columbus — have tossed around mental health reforms as a way to quell calls for gun control in the ongoing national firearms debate. Considering that Grady Health System is the state’s second-largest mental health service provider, Timothy Sweeney, the Georgia Budget and Policy Institute’s director of health policy, says the governor could use the program to bolster his agenda on issues such as criminal justice reform. “The Medicaid expansion could give us the resources to actually have a real mental health system,” he says.

Unfortunately, Siegel thinks that negative repercussions, perhaps a hospital closure or major service cuts, will need to happen before either the White House or Congress feels compelled to fix the policy gap left by the U.S. Supreme Court’s ruling. “Congress has a hard time acting on anything today, in case you didn’t notice,” he says. “Anything to do with the Affordable Care Act is doubly radioactive.”

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Between Deal’s political maneuvering on the bed tax and his adamant opposition to the Medicaid expansion, numerous sources close to Grady speculate that the governor is merely pandering to conservatives as he sets his sights on re-election in 2014. Only then, they say, will Deal consider changing his mind.

If that’s the case, Deal appears to be more concerned about saving face than sustaining health care. “In a conservative state, it’s good politics to be thumbing your nose at this law, to be thumbing your nose at Washington,” says Jonathan Cohn, a senior editor for The New Republic who has covered health care policy for the better part of two decades.

Deal can expand Medicaid any time he wants. But because the program is front-loaded, the longer the state waits, the more money gets left on the table. Health care advocate Cindy Zeldin, who oversees Georgians for a Healthy Future, says that Deal’s stance will prevent a quick legislative fix. More importantly, Georgia risks falling behind as national politics subside and more states expand. Despite those concerns, Zeldin says that the state could still benefit from the program years down the road — even if Deal wins re-election and doesn’t leave office until 2018.

Deal’s decision, whatever it may be, will undoubtedly affect how Grady’s other contributors fund the safety-net hospital moving forward. “I think Deal recognizes the consequences of the tough decisions he has to make,” says Hicks.

Most private hospitals treat some uninsured patients. But unless lives are on the line, they don’t have to unconditionally treat them — doing that would kill the hospitals’ profit margins. Because of Grady’s size and mission, other metro Atlanta hospitals rely on it to shoulder the weight of indigent care.

Fulton and DeKalb counties financially support Grady in its efforts to treat their impoverished residents, according to the terms of a 1953 contract with the Fulton-DeKalb Hospital Authority, a politically appointed board once charged with overseeing the hospital’s operations. But the 60-year agreement expires this year.

“Without the contract, the ability to negotiate or receive federal and state funding from another public entity is critical,” says State Rep. Lynne Riley, R-Johns Creek, a former Fulton County commissioner.

Between 2007 and 2012, the two counties halved their contributions to Grady from $126.1 million to $63.3 million. Currently, Fulton County pays for 80 percent of the care its indigent patients receive, while DeKalb ponies up a mere 40 percent. Fulton County Commission Chairman John Eaves says the commission has budgeted $50 million for Grady in 2013 — close to its proportionate share.

“We give almost the amount of money that we should give,” he says. “DeKalb does not, but they’re just not in the financial position to support the hospital.”

DeKalb County Commissioner Larry Johnson says that the county’s lack of funding isn’t an indication of its wavering commitment. Instead, it’s a reflection of DeKalb County’s declining housing values in a predominantly residential county. Hicks notes that the county upped its funding by $500,000 in its 2013 budget. “It’s not a lot, but it’s a good direction,” says Hicks. “DeKalb County is saying they need to support Grady more than they do.”

Around 5 percent of Grady patients come from outside Fulton and DeKalb. Riley says the original FDHA agreement was based on the notion that “the center of all patient care was really the city of Atlanta.” But over the years, the city’s low-income residents have spread out across the metro area, diluting the amount of patients from the two counties.

Though 5 percent may seem like a paltry number, it amounts to more than 30,000 patients each year. Some are flown in by helicopter or diverted from other hospitals across the state. Haupert says those counties should carry their weight. “Do Cobb and Gwinnett and Henry counties benefit from having a burn center and level-one trauma center here? Yes,” he says. “Are they contributing to that? No.”

To ensure that Fulton County taxpayer dollars would only serve its residents, commissioners added provisions to its arrangement with Grady, requiring proof of treatment to receive funding. Eaves says the hospital has become “very aggressive” to make sure it collects payments from those that have insurance. “That was a big and valid conversation five years ago,” he says. “That’s not as nearly as much of an issue as it was before.”

With the Medicaid expansion up in the air, the counties’ involvement in Grady’s future may vary based on federal and state policy decisions. Hicks says the best-case scenario would be for the state to expand Medicaid. If that happens, Grady could wean itself off of county funding. Otherwise, the safety-net hospital may need Fulton and DeKalb counties more than ever.

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If Deal refuses to act on Medicaid, deferring contract negotiations may be necessary. “It puts the support of the counties into focus,” says Hicks. “If the feds say no and the state says no, the only place we can turn is back to the counties.”

Grady Memorial Hospital Corporation chairman A.D. “Pete” Correll has witnessed the hospital’s evolution from debt-ridden monolith to profit-making health care institution. Today, he’s far less concerned about the hospital’s future than he was six years ago. “Grady will be there, no matter what people decide, for another 10 years,” Correll says.

The hospital’s financial turnaround came about as corporate business leaders and public facilities banded together to prop up the institution. “What happened with Grady is one of the most remarkable public sector stories in the U.S.,” says Reed. “The community came together to provide a $250 million cash infusion to its largest public hospital. ... You walk in Grady now, you’re really in a best-in-class facility. I’m going to support that.”

But unless Reed can persuade Deal, who has stood by him for both the new Falcons stadium and the Savannah Port, Grady’s future as a safety-net hospital may be out of his control. The mayor hasn’t entered the ring on the touchy issue yet. If he were to stick his neck out for Atlanta’s iconic infirmary, Medicaid expansion proponents say it would be justified.

Zeldin says that expanding Medicaid not only helps Grady and its patients, but it can also be a “good investment for the economy.” She points to Georgia State University health care economist Bill Custer’s recent study, which found that, over 10 years, the Medicaid expansion could create about 70,000 new jobs and have an $8 billion economic impact across the state. It could also bring 25,900 new jobs to metro Atlanta, give the city a $3.3 billion boost, and generate an estimated $276 million in state and local tax revenue.

When all is said and done, Cohn says states such as Georgia will eventually realize that Medicaid expansion is too good of a deal to pass up. “When you turn away that Medicaid money, you’re really sticking it to your own hospitals,” Cohn says. “Hospitals tend to have a lot of influence. They’re big economic players, big employers, they provide a vital public function.”

At his annual state of the city address in February, Reed preached that Atlanta needs to move past “a posture of near survival.” After talking about the city’s tourism corridor, backlogged infrastructure repairs, and new Falcons stadium, Reed closed his remarks with a simple request: that Atlantans “always be in the posture of choosing the future.”

Reed’s comment was delivered in the context of the controversial stadium deal, but Haupert thinks that same sentiment should be applied to Grady. He says major metropolitan areas, including Atlanta, Dallas, and Charlotte, are vying to attract employers. To do so, metropolitan areas need the right infrastructure to convince families and business to relocate.

“Grady, to me, is part of that infrastructure,” Haupert says. “You want to know that there is a world-class trauma burn center, you want to know that there’s good schools, you want to know there’s good roads and infrastructure.”

Like roads, schools, parks, or sewers, Haupert says the health care institution needs continued support to remain Atlanta’s lifeline for years to come. Grady needs Atlanta as much as Atlanta needs Grady.

“You’ve got to be able to be a viable, healthy community in order to grow and thrive as a community,” Haupert says. “Atlanta needs that and all these big cities need that. That’s where the essential nature of Grady comes in — no one else fills or will fill that role.”