A recent Health Affairs study on hospital profitability has been garnering national press attention for finding that seven of the “Top 10” most profitable hospitals were non-profits. These findings will likely reverberate in states where policymakers are currently revisiting the standards used to award non-profit hospitals with tax-exempt status. However it would be a mistake to interpret the findings of this study as bolstering arguments in favor of revoking the tax-exempt status of non-profit hospitals.

We support better public oversight and community benefit standards for non-profit hospitals, particularly around issues facing low- and moderate-income consumers with regard to hospital billing and collections practices. But the focus on non-profits here buries the lead. For one thing, a deeper dive into the data shows the non-profits present in the Top 10 actually buck the trend: for-profit hospitals tend to dominate when it comes to making money off of patient care. Even more importantly, the study found that more profitable hospitals—again, disproportionately for-profits—appear to be more aggressive when it comes to charging patients higher prices.    

The Findings: Markups and Market Share Drive Profitability

The study looked at a variety of factors—market share, prestige, markups, ownership type, system affiliation, uninsured rates, Medicare rates, and more—to determine whether they impact a hospital’s ability to net a profit from patient care. (Interestingly, the authors found that even hospitals that don’t turn a profit from pure patient care can usually make themselves whole from other income streams, such as parking fees, investments, charitable contributions or public subsidies.)

Hospitals routinely establish a “list price,” also known as “gross charges,” from which they negotiate payment rates with payers, including insurers and self-pay patients. The authors mined Medicare Cost Report data for each hospital’s “cost-to-charge” ratio to understand how different hospitals set their prices for services and what impact a higher cost-to-charge ratio has on a hospital’s bottom line. The higher the cost-to-charge ratio is, the bigger the markup is from the hospital’s cost, as defined or “allowed” by Medicare, of providing the services in question. They found the following:  

  • The median cost-to-charge ratio for hospital care nationally is 3.7, or a markup of 370 percent from Medicare’s allowable costs. Highly profitable hospitals use an average cost-to-charge ratio of 5.2, or 520 percent of Medicare’s allowable costs.
  • “Extremely profitable” hospitals—those in the top 2.5 percent of profitability from patient care—use markups pushing 600 percent of cost. And, perhaps tellingly, almost 80 percent of these hospitals are for-profits.

The authors also found hospitals that turned a profit on patient care generally owned a bigger corner of the hospital market in their region and/or were part of a system, instead of a stand-alone facility. While the study itself doesn’t directly unpack the relationship between market share and prices that get passed on to patients, it would seem that hospitals that can command higher prices from patients and payers will do so, absent other restrictions in the marketplace.

Hospital Pricing: Profit or Profiteering?

While a bill for a hospital’s full charges may lead only to head-shaking for people whose insurers have negotiated a much better rate, high hospital prices can mean months of scrimping and saving or—worse yet—months of calls from collectors for patients who are un- or underinsured. The question the study leaves unexplored is what regard, if any, profitable hospitals pay to the surrounding community’s ability to absorb higher markups when calculating charges?

We’ve heard hospitals and policymakers—even other advocates—claim that high hospital charges don’t really get passed on to patients. The assumption’s been that uninsured and underinsured patients who would otherwise get socked for full charges will either qualify for the hospital’s financial assistance policy or negotiate some type of discount. The findings that higher markups do, in fact, have some bearing on hospital profitability put another nail in the coffin of that argument: someone’s making money off of higher patient charges, and it isn’t the patients.

Enforce and Expand Limitations on Charging

It’s also worth keeping in mind that in most states and under current federal law, for-profit hospitals have no standing obligation to limit what they charge patients for care, use reasonable collection tactics, or have a financial assistance policy for un- or underinsured patients. And their fiduciary obligations lie primarily with their investors and shareholders, not the communities they serve.

Under the Affordable Care Act and in some states, non-profit hospitals face stricter requirements for disclosing what they offer in financial assistance and limiting what they charge financially needy patients for care. Stripping hospitals of tax-exempt status would, ironically, leave patients in the affected communities less protected from overcharging and medical debt. Rather than rush to judgment on non-profit hospitals, let’s enforce the laws that exist to fairly limit charges to financially vulnerable patients and expand them, where necessary, to address the loopholes for-profit facilities are currently sailing through. 

Last year, the Robert Wood Johnson Foundation launched a joint initiative with Community Catalyst called the Value Advocacy Project (VAP). The project is supporting consumer health advocacy organizations in six states in their non-lobbying advocacy efforts to pursue local and state policy and health system changes that increase the value of health care by improving health outcomes and lowering health care costs, especially for populations that have disproportionately poor outcomes. Building on the Center for Consumer Engagement in Health Innovation’s recently released Consumer Policy Platform for Health System Transformation, we will be highlighting our state partners working on issues outlined in the policy platform and encouraging them to share how their work can translate to advocates across the country.

Health Access, California Pan-Ethnic Health Network (CPEHN), Consumers Union and other consumer groups have teamed up in an effort to improve health and health equity for California consumers using the opportunities provided through our existing work on transparency, benefit design and Medi-Cal (Medicaid in California) reforms. The Medi-Cal program covers low-income individuals including families, seniors, persons with disabilities, children in foster care, pregnant women and childless adults with incomes below 138 percent of the federal poverty level. Through our Value-Based Health Care initiative, Health Access and CPEHN are building on the state’s success in implementing the Affordable Care Act (ACA) to ensure that reforms to our health care delivery system lead to better health and health care and improved health equity for all Californians. As one of the most diverse states in the country with strong market reforms, California’s progress in these areas could be a potential model for other states and nationally, as well.


California has come a long way in implementing and improving on the ACA through consumer protections, a robust exchange and a promising start on delivery system reforms (learn more here). Together with Medi-Cal, Covered California, the state's ACA marketplace, has been successful in covering more than half of the uninsured and reducing premium costs. Going forward it plans to step up its “active purchaser” role to ensure enrollees are getting the right care at the right time and place through standardized benefit designs, delivery system reforms and transparency initiatives scaled for market-wide impact.

The state’s Medi-Cal 2020 waiver renewal also sets an ambitious agenda aimed at better care, lower costs and quality improvement - the “triple aim” - for beneficiaries. Approved on Dec. 30, 2015, Medi-Cal 2020 will bring a new emphasis on whole-person care and an enhanced focus on health disparities reduction. Additionally, county-level health systems will have incentives and resources to find efficiencies in delivering care and to reorient their indigent care programs to provide primary and preventive care outside of hospital systems (learn more here).

In California people of color, immigrants, Limited English Proficient (LEP) and LGBTQ communities face significant disparities that may impede the state’s ability to achieve the triple aim unless the reduction of health disparities is explicitly addressed (learn more here). The project therefore adds a fourth dimension to the triple aim, equity, to keep the focus of triple aim initiatives on opportunities to track and reduce disparities by race, ethnicity, income, sexual orientation, gender identity (SOGI) and other key demographics.

With that background, the project focuses on three key areas:

  • Medi-Cal Reforms to Focus on Equity, Population Health and Consumer Engagement: We will use the implementation of Medi-Cal 2020, the recently renewed waiver, as a platform to advance equity, quality, coverage and improved outcomes. As the overwhelming majority of beneficiaries in Medi-Cal, communities of color have the most to gain from initiatives aimed at improving the quality of care, as long as there is an explicit, data-driven focus on reducing health disparities (see link). Diverse communities have a greater incidence of preventable illnesses, and social and environmental factors play a decisive role in determining who gets sick, who gets care and who benefits from treatment. As the single largest purchaser in the state, Medi-Cal should be a model for reducing disparities through data collection and meaningful use of data, population health measures and a patient centered medical home model of care. Additionally, just as the last Medi-Cal waiver connected uninsured patients to a medical home, we will work to ensure the new waiver facilitates access to comprehensive care for the remaining uninsured.
  • Transparency: Advocates will help to shape and highlight state efforts to collect and analyze provider claims, consumer complaints information and other data to ensure that enrollees in Covered California, Medi-Cal and/or commercial coverage are getting the right care at the right time and place and that that care is equitable. The project will also focus on strengthening knowledge and access to consumer complaint mechanisms for diverse communities to ensure quality, equitable care is provided
  • Value-Based Benefit Design (VBD): This initiative will provide data and evidence to refine and promote standardized benefit designs in and out of Covered California to simplify plan choices; limit cost sharing, for example by minimizing the use of co-insurance; track problems that result from excessive cost sharing or poorly designed transparency initiatives or wellness programs; and support consumer-friendly VBDs such as lower cost sharing for primary care with the goal of improving population health and eliminating disparities in health outcomes.

Through these team efforts, CPEHN and Health Access will learn what it takes to keep consumers - at the heart of delivery system reforms so the health care system works better for all - including communities of color and the remaining uninsured. As one of the largest, racially and ethnically diverse states, California’s success in advancing greater transparency and health equity through delivery system reforms could be a model for the rest of the nation.

Authors: Judi Hilman, Director of Special Projects and Cost/Quality Initiatives, Health Access, and
Cary Sanders, Director of Policy Analysis and Having Our Say, California Pan-Ethnic Health Network

We know that as the energy in the health care world turns to reinventing health care delivery systems, social and economic determinants of health and the role they play in community health are front and center. Studies have uniformly shown that social, economic, environmental and behavioral factors play a larger role in determining health than genetics and health care combined (as illustrated by the County Health Rankings and Roadmaps program infographic below). 

However, we know that addressing any of the social and economic determinants of health requires robust partnerships between health care systems and providers, as well as numerous others in the community, many of whom may have never worked together in a formal way. The intersection between health and human services and housing is well-documented by the Kresge Foundation and Policy Link in their Healthy Communities of Opportunity: An Equity Blueprint to Address America’s Housing Challenges.

Over the past year, I had the opportunity to contribute to one such effort here in Boston related to the intersection of health and housing. These initiatives offer some good insights into how these partnerships might work to support vulnerable families accessing the health care system to gain access to secure, safe and affordable housing that is essential to their overall health.

The Boston Foundation (TBF), in collaboration with the Kresge Foundation, the John D. and Catherine D. MacArthur Foundation, the Blue Cross Blue Shield of Massachusetts Foundation, and Partners HealthCare, is funding opportunities to create and sustain health and housing partnerships in greater Boston. This program, the Health Starts at Home initiative, seeks to improve health outcomes for children and their families by ensuring families’ housing needs are addressed in conjunction with their health and other social service needs. Each project is approaching the intersection of health and housing differently, each with a variety of partners, including hospital/health centers, social services agencies, housing providers, legal services, and/or homeless programs.

As diverse partners come together, there is incredible synergy and opportunity—yet there are challenges and important lessons for others as they plan and collaborate to address safe, secure, affordable housing as one of the individual needs necessary to maintain and/or improve health for children and families.

Tracking Families Is at the Center of the Work.

When working with three different agencies in three different, yet connected, domains, tracking families is vital. The families in the Health Starts at Home program are housing insecure – they may be in and out of shelter, placed in shelters far outside the Boston area, and/or difficult to contact. Combine that with the variety of challenges they face—from food insecurity to employment volatility—and the number of agencies providing services, and you have a difficult time getting a clear picture of where they are in the housing process.

Establishing a workflow and a tracking process means families receive robust services, everyone is on the same page, and families don’t slip through the cracks or get lost in the process. This is a complex undertaking.

All Partners Have a Role.

In each of these projects, there are a diverse set of partners, each with a distinctive role as it relates to health and housing. For example, the hospital can conduct assessments and make referrals for needs, including housing, through a coordinated case management program. Legal services can provide legal representation to housing-insecure families, or provide education to families living in homeless shelters. Homeless shelters can help families navigate early education and child care subsidies as well as host training and educational programs that help residents understand the resources available to them. While everyone has a role, those roles overlap and intersect, demanding a high level of communication among partners and a shared mission and set of values.

Understand Capacity and Bandwidth.

An unfortunate reality of partnerships is that many organizations lack staff capacity and resources—especially social service agencies, as outlined in a recent article in Health Affairs. Collaboration among agencies, like that in the Health Starts at Home Initiative, can result in greater efficiencies. However, there are several challenges to forming strong partnerships across agencies such as finding a regular time to meet, identifying roles within the group and how they fit into the culture of the agencies. Cultural shifts require commitment and leadership to improve how different partners work together across health and human services to support consumers.

How Do You Know it Worked?

The Boston Foundation, in partnership with Health Resources in Action (HRiA) and outside evaluators, established an evaluation process to measure the efficacy of the proposed interventions. An additional $200,000 in funds is dedicated annually to evaluate the partnerships and the work the organizations are doing together, with the goal of understanding what works and share that with others who want to try these kinds of collaborations.

These are challenging yet important conversations. Advocates are increasingly engaged in discussions about how to move the needle on population health; they have a valuable contribution to make as health and human services stakeholders and decision makers design and implement pilots and initiatives that attempt to embed deeper connections across social determinants and health outcomes. Vehicles for this work span the full continuum of care from screening to treatment to maintenance as evidenced in forward thinking accountable care communities. We look forward to supporting advocates in these ongoing conversations with new partners.

Stay tuned for another blog about the development of a key position in this new work aligning health and housing —the community health worker.

Katherine Fukumoto
Intern with the Community Catalyst Alliance for Children’s Health

Recently, Community Catalyst hosted a national learning community webinar called Health and Housing 101: Understanding the Intersections.  We will be continuing this webinar series in the coming months with additional webinars and calls featuring national, state and local partners who are engaging in work to address health and housing issues. To be included in future emails to learn more about this work, please contact Michele Craig.

This post was originally published on the First Focus Voices for Kids Blog. 

Starting today, May 16, 2016, California begins to finish the job of ensuring that 100 percent of children in our state get enrolled in health coverage. Today is the day the Department of Health Care Services begins enrolling low-income children, regardless of their immigration status, into Medi-Cal under the landmark expansion authorized by Senate Bill 75, authored by State Sen. Ricardo Lara, D-Bell Gardens, and signed into law by Gov. Jerry Brown last fall. 

California is not the first state to make the smart investment to extend health coverage to undocumented children (California joins Illinois, Massachusetts, New York, Washington, D.C., and Washington), but we are the largest. Revised state budget estimates released last Friday project that 185,000 children will enroll in the #Health4AllKids expansion of Medi-Cal in the coming fiscal year. 

Because Medi-Cal is the cornerstone of California kids’ health care, it already covers over half of all California kids, and we know that kids with Medicaid have positive educational, health, and achievement outcomes into adulthood. So, it makes sense to expand children’s coverage through Medi-Cal. This is important because starting today, eligible undocumented children will be able to enroll in full-scope Medi-Cal coverage and receive the comprehensive benefit package that includes regular preventive and primary care, dental care, mental health services, and the relatively recent addition of behavioral health treatment (BHT) for children with autism.

Especially for a population that has for the most part only had limited access to emergency-only services (or restricted-scope Medi-Cal), we knew that there were bound to be many questions from local communities about the changes and a need for reliable, coordinated outreach and enrollment assistance. To that end, a broad coalition (including children’s, immigrant rights, health care, and other advocates) collaborated to develop and curate health4allkids.org – a collection of resources specifically about the expansion that includes basic information for families about how to enroll their children, enrollment events, and a free toolkit for community-based organizations and enrollment assisters that has even more detailed information, strategies, and expert presentations about the expansion to help communities enroll eligible children.

To put the #Health4AllKids expansion in context, though, over the past 15 years, California has made steady progress – primarily driven by Medicaid and CHIP – in covering uninsured children. Over that time period, there were also many state and local efforts to extend coverage to undocumented children that helped “soften the ground,” for example: campaign promises from former Gov. Schwarzenegger during a high-profile election in 2003; legislative efforts in 2006-07 that failed to materialize because of fiscal constraints; a narrowly defeated tobacco tax voter proposition in 2006 despite strong public opinion polling in support of health care for all children; the proliferation of innovative, county-based, local coverage programs through public-private partnerships; and the commitment and patience of our state’s advocacy and philanthropic communities towards health for all children.

This experience with children’s health coverage has coincided with a growing equitability in California policymaking (such as the 2013 law giving access to drivers licenses for all California residents regardless of immigration status), and ultimately laid the groundwork for the bold political leadership of Sen. Lara, himself the son of immigrants, who has elevated immigrant rights policies and is championing the effort to achieve #Health4All.

Through this historic expansion taking effect today, California is getting much closer to finishing the job of covering all kids without exception. However, we must keep the momentum going to ultimately ensure that all Californians have the dignity of health coverage and access to health care. As Sen. Lara said at a San Francisco press conference to kick-off his #Health4AllKids enrollment tour, we’re not done: “We’re going to be able to take care of our abuelitos and abuelitas, our aunts and uncles….” Yes we are! Cheers to #Health4AllKids, #Health4All, and a healthier California.

Mike Odeh
Associate Director of Health Policy at Children Now

Recently, CMS’ Medicare-Medicaid Coordination Office (MMCO) released a new report on the progress of the Financial Alignment Initiative. Through this initiative, thirteen states are running demonstration projects focused on improving care for vulnerable Americans enrolled in both Medicare and Medicaid, sometimes referred to as "dual eligibles." In most states participating in the initiative, dual eligibles are enrolled in managed care plans responsible for all aspects of their care, while in two states, they are part of health homes responsible for coordinating their care.

The new MMCO report examined enrollees’ experiences in the demonstrations in seven early-launch states – California, Colorado, Illinois, Massachusetts, Ohio, Virginia and Washington – and was based on data collected in 2015.

Those of us who have been following these demonstrations for the last several years have been awaiting these sorts of results with baited breath. So, I dug right in.

For the most part, the results seemed pretty promising: most enrollees reported good (though not always quick) access to needed care and prescription drugs and had favorable views of their health plans or health homes.

However, one category of findings really stood out for me – those around care coordination. Care coordination is the lynchpin of the demonstrations, aimed at countering the system’s fragmentation caused by the separate financing and benefit structures of Medicare and Medicaid as well as the complex health needs of many beneficiaries. Yet only 30 percent of enrollees in managed care plans recalled receiving help from their health plan and/or providers in coordinating their care. And, only 54 percent of enrollees in Washington and 62 percent in Colorado (the two health home demonstrations) indicated that they were usually or always helped by someone on their care team to make a treatment plan or plan ahead to take care of their condition. These findings echoed reports over the past year from the Government Accountability Office, an Early Indicators Project in Massachusetts, a consumer survey in Ohio and our own survey of ACAP health plans. Similarly, new evaluation results of the California demonstration project released this week found that only 34 percent of enrollees reported having a care coordinator and 40 percent of enrollees didn’t even know they could get care coordination.  

We can do better, and not only in the context of these demonstrations. Care coordination, particularly for people with complex medical, behavioral and/or social service needs, must be at the heart of any delivery system reform. It should encompass comprehensive assessment, planning with the consumer and culturally-competent, team-based care.

By its very definition, any demonstration is a work-in-progress. Let’s take the learning shared in this and other evaluations, capturing the real experiences of dually eligible consumers, and find new ways to get more beneficiaries engaged in high-quality care coordination.