Physician, Pay Thyself

"Uncompensated care' has become the latest ailment afflicting doctors in the private sector.



When Hurricane Katrina destroyed Dr. Kenneth Coignet's family medicine clinic, he did what many of his colleagues did in the weeks and months after the storm; he went to work in the emergency department of West Jefferson Medical Center.

'There were so many people showing up in the emergency room without doctors, without insurance," says Coignet, who has been affiliated with the West Jefferson system since 1988 and now works out of a clinic in Lafitte. For his patients, he was frustrated that the absence of insurance and lack of specialists in the area meant he would often stabilize someone only to find that 'there was no place to send people for follow-up."

Just as frustrating, says Coignet, is government's failure to pay doctors for treating uninsured and poor patients. 'For me, it meant it was difficult to make a living," he says.

Coignet is one of 381 West Jefferson physicians suing the state for reimbursement of services provided to uninsured and indigent patients after Katrina. The $100 million suit contends that West Jefferson doctors became uncompensated surrogates for the old Charity Hospital system.

In the two years since the downtown Charity Hospital was shuttered, physicians and staff at most area private hospitals have shared the pain of doctors like Coignet and others. 'There has been an increase in uncompensated care, moved from public to private hospitals," explains Dr. Joe Guarisco, chairman of the emergency department of Ochsner hospitals. 'It has placed a financial burden on all the hospitals in the area."

According to a Kaiser Family Foundation study, when Charity was still functional, about half its patient population was uninsured, and Medicaid covered only a third. Local private hospitals cared for only half the national average of uninsured patients who typically get care at private hospitals. Now, without Charity absorbing the uninsured and underinsured of the New Orleans area, the region's private hospitals must serve a very different population than they did prior to the storms " a population that does not have insurance or the means to cover private hospital or physician bills.

'Last year, in 2006, compared to before Katrina, we had uncompensated care running rampant," says Leslie Hirsch, president and CEO of Touro Infirmary. 'It was up 140 percent."

Louisiana has always had a higher proportion of uninsured residents compared to the rest of the country (which has an uninsured rate of about 15 percent), but the burden of treating that segment of the population has been especially high in the New Orleans area after Katrina. In one survey by the Kaiser Family Foundation, one in five local residents was uninsured. In Orleans Parish alone, one-third of all African-American adults reported having no health insurance.

Federal law prohibits emergency rooms, even at private hospitals, from turning away uninsured people in need of medical care. When patients come to Guarisco's emergency room, he says, 'We're completely blind to who the patient is. It's not just the law, it's the right thing to do."

At the same time, for physicians in smaller settings or with higher proportions of uninsured patients, 'It's difficult to make a profit when your salary is tied to a collection rate," says Coignet. 'You're basically working for free, at great risk." For example, doctors have to pay malpractice insurance, staffing costs, and material and facility costs regardless of who their patients may be. When large segments of a patient population cannot pay for care, private physicians and small clinics face enormous financial challenges. Unlike government, private doctors and hospitals can go out of business.

Federal law provides a pool of 'uncompensated care" funding through Medicaid, but the strings attached make the funds inaccessible to doctors like Coignet. Known as the Disproportionate Share Hospital (DSH) funds, the pool functions as a $1.05 billion financial safety net for Louisiana hospitals. The bulk of that money goes to the Louisiana State University Health Care Services Division (which runs most of the old Charity Hospitals in the state system), rural hospitals, graduate medical education programs and statewide psychiatric programs, leaving $120 million for private hospitals treating uninsured patients.

That $120 million has been a sticking point among physicians at private hospitals; they would like to see more money distributed for services.

'The DSH rules do not allow those funds to be spent on physician costs," says Dr. Roxane Townsend, secretary of the Louisiana Department of Health and Hospitals. 'It's a little bit of a disconnect."

The trouble with relying on DSH funds is that they cover hospital fees only " not doctors' fees. Thus, by way of example, when an uninsured patient goes to a private hospital for emergency care and requires an X-ray, the X-ray costs count toward the DSH funding calculations " but the radiologist's fees do not. The old Charity system, as well as its replacement, the LSU Hospital system, relied heavily on medical residents who earned $35,000-per-year salaries " a great deal less than the average salary of a specialist at a private hospital.

Rising costs of labor and utilities have compounded the problem of uncompensated care in the private sector. 'Our average cost of man-hour paid is up 20 percent," says Hirsch, who testified before the Congressional Committee on Energy and Commerce last March during a hearing on Katrina's continuing health-care effects. Supply and demand are such that, with the shortage of doctors and nurses in the area, private hospitals are constantly out-bidding each other for the same pool of labor to fill vacancies. 'And the incremental increase in the cost of utilities and insurance is up $4 million," adds Hirsch.

Beyond the lack of physician coverage, the DSH funds aren't even a dollar-for-dollar reimbursement of the hospital costs. The formula used to calculate how much a hospital can claim is based on what percentage of its patient population is uninsured. The more uninsured patients a hospital sees, the greater the percentage of hospital costs it can recoup " anywhere from 30 percent to 90 percent.

'It's a federal/state match," says Townsend of the DSH pool. 'The state has to put up $300 million." Because the other 70 percent comes from federal funds, the state must spend it within the parameters of federal rules. 'That money's not just sitting out there," says Townsend, adding that the state cannot legally move funds from the DSH to private physician fees.

The private, not-for-profit hospitals are not structured to handle this change in revenue sources any more than the Medicaid and DSH funds were designed for an emergency on the scale of what's happened in New Orleans. The new LSU hospital is expected to fill much of the void left by Charity, but the facility isn't projected to open until 2012. That leaves at least five more years without a dedicated urban hospital caring for the city's uninsured.

When asked about the interim plan for the city's uninsured and underinsured patients, Townsend has several suggestions for easing the financial burden on the private hospitals and clinics.

'Start by enrolling people in Medicaid," says Townsend. Different from DSH reimbursement, Medicaid does reimburse at least a portion of physicians' fees. Townsend says she would like to see an expansion of the state's Medicaid program as well as a change in standards that would allow broader eligibility. That way, private health systems and their doctors could recover some of the hospitals' and physicians' costs without relying on limited DSH funds.

Townsend also points to the medical home model as part of the solution. The state has already secured a $100 million block grant to distribute over the next three years to community clinics and primary health-care centers in the New Orleans area (see Gambit Weekly, 'We Asked, They Answered" Sept. 4). That money is separate from the DSH funds and can be applied to physician costs and primary care outside the hospital setting. Unlike the old Charity system, which attracted patients to an emergency room for many non-emergency matters, medical homes could become stable sources of primary care in low-income neighborhoods. Already some of this funding has been paid out to clinics like Common Ground and Covenant House.

Hirsch says these are steps in the right direction, but they still won't address the current financial burden on Touro or the area's other private hospitals. 'The issue with Medicaid is that we do not get full cost. At best, we get 70 percent," says Hirsch. 'That leads to a shortfall that still is a form of uncompensated care."

As for the community clinic block grants, says Hirsch, 'It's a positive thing, but the hospitals will receive little if anything. One potential impact downstream is if citizens find their way to better access to primary care, it might prevent improper use of emergency care."

Whatever turns out to be the solution, says Hirsch, 'We can't sit around waiting until 2012 for that to be dealt with."

South Louisiana has long been on the U.S. Department of Health and Human Services' list of 'Health Professional Shortage Areas." The designation goes to regions lacking adequate numbers of primary care, dental or mental health clinicians. This March, New Orleans was designated short in all three categories. The city continues to lose doctors even as the state offers moving bonuses and loan forgiveness to physicians who come here with the promise of treating uninsured and Medicaid patients. The disputes over fair compensation, moreover, aren't making it easy for private hospitals and clinics to recruit new doctors.

For now, though, 'we're all trying to make it despite the situation we're in," says Guarisco. 'Everybody's open."

Sammy Mack is a freelance writer and a graduate student at Tulane University School of Public Health and Tropical Medicine. She can be reached at

"It's difficult to make a profit when your salary is tied to a collection rate. You're basically working for free, at great risk." -  - Dr. Kenneth Coignet, West Jefferson Medical Center
  • "It's difficult to make a profit when your salary is tied to a collection rate. You're basically working for free, at great risk."

    Dr. Kenneth Coignet, West Jefferson Medical Center

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