HARLINGEN, March 14 - When legislators from other parts of Texas visited the Rio Grande Valley in late January, Israel Rocha, governmental affairs director at Doctors Hospital at Renaissance, asked them to help hospitals in South Texas.

Speaking at the Regional Academic Health Center in Harlingen, Rocha told lawmakers on the Valley Legislators Tour that the impact of new federal legislation was having a destabilizing influence on the financial running of hospital systems. “There has been a dramatic change in health care in the whole country,” he said.

Since the RAHC event new legislation at the state level has been offered to address the instability, such as a bill from state Sen. Juan Hinojosa that would allow hospitals along the South Texas border to impose a fee on in order to generate sufficient local funds to draw down larger amounts of federal money to pay for uncompensated care.

The Valley Legislators Tour provided a rare opportunity to see and hear three top south Texas hospital executives discuss health care issues on the same panel. In addition to Rocha, the lawmakers heard from Manny Vela, president and CEO of Valley Baptist Health System, and Doug Matney, group vice president for South Texas Health System.

The event at the RAHC was organized by the Rio Grande Valley Partnership. Many legislators in the audience told the Guardian afterwards that they appreciated hearing an in-depth discussion on a range of healthcare and hospital issues.

The Guardian is posting the thoughts of Vela, Rocha and Matney in a three-part series. This, the second part, focuses on Rocha’s remarks. Here they are:

Rocha started by saying that the tranquility in hospital finances that has been in place for the past few decades is being replaced by instability.

“Healthcare for the longest time has been an industry that has been pretty consistent. You got paid a certain way and Medicare and Medicaid programs were pretty constant. However, that has changed dramatically in the last few years,” Rocha said.

Rocha said hospitals are now facing “incredible amounts of economic instability.” One of the reasons for the instability is a change in the Disproportionate Share Hospital Program, otherwise known as DSH. Through DSH, the federal government provides financial help for hospitals to compensate for the uncompensated care they provide indigent patients.

Rocha said that through DSH, Texas has relied on eight large hospital taxing districts to shoulder part of the financing of hospitals across the state. He said hospitals can usually cover 85 percent of their costs through their regular billing practices. He said with efficiencies, hospitals can make up the remaining 15 percent so that they basically break even. Traditionally, Rocha said, 60 percent of the funding of hospitals comes from Medicaid and 40 percent from DSH. However, this is about to change for a couple of reasons, Rocha said. One of the reasons is the 1115 Medicaid Waiver. The waiver is used by states to test new coverage approaches not otherwise allowed under Medicaid program rules.

Rocha said a change in the 1115 Waiver has given those eight large hospital districts more flexibility on whether to transfer money to the state in order to draw down federal funding. “Before, hospital districts could choose to invest in the DSH program and we would get money back and share it with rest of the state. Now, they (the large hospital districts) can keep it all in their community,” Rocha said.

Rocha said that when the DSH Program started, public hospital systems took care of 75 percent of the indigent poor in Texas. However, Texas has grown dramatically in the past 30 years, he pointed out. At the same time, the number of public hospitals has not expanded. “The people who have taken over that duty, 60 to 75 percent of indigent and Medicaid patients are taken care of by private hospitals,” Rocha said.

In South Texas, Medicaid is especially important, Rocha said, because one in four is covered by the Medicaid program and one in three is uninsured. “So, the payer mix in South Texas is really challenging,” Rocha said. 

Rocha told lawmakers that the Affordable Health Act has played into some of these changes. “One of the changes that has happened,  whether it is the 1115 Waiver putting pressure on the DSH program, which means less funding, or the Affordable Care Act reducing the DSH program starting in 2014, there will be instability,” Rocha predicted. He cited testimony from a Centers for Medicare and Medicaid Services official who warned Congress that 20 percent of hospitals could close. He said those most at risk are those hospitals that rely greatly on Medicaid funding. “That is almost everyone in South Texas,” Rocha said.

Rocha concluded his remarks about DSH and the 1115 Waiver by saying lawmakers have a “huge challenge” this legislative session. He said the healthcare landscape was changing fast, with DSH due to go away in 2014. “The bottom line is hospitals are facing an incredible problem. We want to work with you to create a long term, stable environment, not to make obscene profits but to stay in operation to see Medicaid patients,” Rocha told the lawmakers.

Rocha also touched briefly on the Valley’s fast-growing population and the ability of physicians to keep up with that growth. He said the average of age of a physician in the Valley is 55 so in ten years there will be a big problem. “Right now, for every six physicians that retire, two new ones coming in. They are alarmed by the payer mix and the Medicare and Medicaid reimbursement rates and they choose to work elsewhere,” Rocha said. This is why Doctor’s Hospital at Renaissance strongly believes in proposals for a medical school in the Valley, Rocha said.

“We have partnered with the University of Texas System and have put $60 million down over the next four years as our investment from Doctor’s Hospital at Renaissance to create four new residency programs and retro-fit our hospital to have a teaching facility to have 40 or 50 residents rotating every year,” Rocha said. Visiting lawmakers were impressed with this commitment.

After the panel had concluded, state Rep. Senfronia Thompson, D-Houston, asked the panelists to give their top three legislative agenda items. Vela, Rocha and Matney all responded. This was Rocha’s response:

“For us, it is being able to create resources to have more Inter Governmental Transfers available to bring down the federal programs. We talked about how hospitals are being destabilized because DSH has been an unstable account. This will hurt our hospitals,” Rocha said.

“Being able to create a consistency where we can have IGT funds to maximize what is available from the federal government, be it through the (1115) Waiver or DSH program or fully funding our base hospital rates. Somehow designing a mechanism that allows us to do that would probably be the most important thing.”

Until that happens, Rocha said, proposals such as Medicaid expansion or increased coverage really become difficult because a region like the Valley does not have the resources to increase funding to match the programs.

“Washington may be busy creating new programs that we can draw down or talking about Medicaid expansion but if we do not have those local dollars to put up to bring down the funding it really is a moot conversation,” Rocha said.

“For us, the most important thing is to be able to create more resources either through local provider fees or through bed fees or hospital fees or some sort of mechanism that allows local providers to participate in drawing down those funds to increase what is available to bring stability to hospital finance.”

Rocha said IGTs would help all the health programs. “It would help create resources and stability for hospitals to invest in emergency programs to be able to help the local region and have long term stability. So, to us it really starts with increasing that pool of funds.”

Editor's Note: This is the second in a three-part series about hospitals and healthcare in South Texas. Part One featured the remarks of Manny Vela, president and CEO of Valley Baptist Health System. Click here to read that story. Part Three will feature the remarks of Doug Matney, group vice president for South Texas Health System.