Doing the Texas "To-Do" Steps - Texas healthcare delivery system

Healthcare Financial Management, June, 2001 by Jeff Eppinette

The Texas healthcare delivery system faces problems similar to those that concern healthcare consumers, regulators, providers, and payers nationwide. Indeed, many of these problems are more acute in Texas, leaving the state with a long list of difficult issues that must be addressed to ensure the stability and effectiveness of its healthcare delivery system. Examples of "to-do" steps on this list are addressing the nursing shortage, adjusting to declining Medicare payment, guarding against potential payer defaults, improving the effectiveness of claims processes, addressing the healthcare needs of the uninsured, and shoring up inadequate healthcare infrastructure in medically underserved areas.

The Nursing Shortage

The Texas Hospital Association (THA) and Texas Nurses Association (TNA) estimate that between 1996 and 1999, the number of graduates from Texas schools of nursing declined by 16 percent. [a] They project that to address the current nursing shortage, Texas will need to increase the number of nursing school graduates from the current 5,000 per year to 10,000 per year by 2007.

These two associations have worked on a request to the Texas legislature that $53 million be added to the 2002-03 state budget to be used to improve facilities, add new faculty to nursing programs, fund loan-repayment programs, increase student recruitment efforts, and improve data collection to better predict supply and demand. [b]

Changing Medicare Payment

Texas has been affected significantly by the recent legislative changes to the Medicare payment structure. The THA estimates that the Balanced Budget Act (BBA) of 1997 will reduce Texas healthcare providers' revenue by $5.8 billion over five years. [c] The Balanced Budget Refinement Act of 1999, however, is expected to reduce the revenue cuts by about $684 million, and the Benefits Improvement and Protection Act of 2000 is expected to restore another $667 million in payments. Even so, the remaining BBA cuts will take their toll.

Texas hospitals and health systems have had difficulty adjusting to these significant funding changes. Health systems have found it particularly difficult to adjust to the payment reductions for acute rehabilitation, skilled nursing, home health, and outpatient services. The uncertainty about payment for ancillary services has led many systems to divest or eliminate these services over the past year.

Payer Issues

HMOs in Texas continue to lose money. According to the Texas Department of Insurance (TDI), the combined total losses for multiservice HMOs operating in Texas was $573 million in 2000. [d] Poor financial performance by some Texas HMOs has led the TDI to undertake dramatic actions. In January 1999, the TDI placed WellChoice HMO under receivership when the HMO closed its San Antonio-based operations--the first such action by the TDI in years. [e] Coverage for the HMO's roughly 17,000 members was transferred to PacifiCare of Texas, Inc. In December 2000, the TDI temporarily placed PacifiCare of Texas under administrative oversight primarily because of ongoing losses and a significant volume of complaints relating to timely claims payment. [f] PacifiCare of Texas was released from administrative oversight on April 20, 2001, following its commitment to significantly upgrade its claims-processing system and create policies and procedures to ensure timely payment of claims as required by Texas law.

Another factor affecting about 200,000 Texans participating in the Medicare Choice program has been the withdrawal of several HMOs from counties throughout the state. Although some urban counties still provide a choice of programs, many rural counties no longer have access to a Medicare Choice program.

In an effort to address the growing number of complaints against HMOs, last year, the TDI published a final rule requiring insurance companies to pay clean claims within 45 days of receipt and limiting the time that insurance companies are permitted to withhold payments pending medical review. [g] Moreover, if a claim includes an item that requires medical review, insurers are permitted to withhold only the amount relating to the item in question.

Although the rule has been in force for several months, providers have continued to express dissatisfaction with the claims-resolution process, prompting the TDI to create a provider advocacy team within the department. The team will perform three basic functions:

* Facilitate communication between providers and the TDI about complaints regarding payers;

* Provide analysis of complaint data to identify possible trends; and

* Find ways to expedite the complaint-resolution process.

The TDI encourages providers and consumers to thoroughly investigate the background of any potential insurer by providing on-line access to information on more than 2,700 insurers and third-party administrators licensed to conduct business in Texas. This information includes company names and addresses, years in business, company administrative officers, financial information, and complaint data.