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Narrative Matters

Politics And The Public Hospital In Our Capital

PREFACE: Public general hospitals like Bellevue (in New York City), Philadelphia General Hospital, and Boston City Hospital were once staples of urban America. Bellevue remains active today, but Philadelphia General closed more than twenty years ago, and Boston City has melded into the quasi-private Boston Medical Center. The expense, complexities, and "marketization" of health care have combined to cause cities to consider alternatives to the public management of large medical centers. Protracted debate over the closing of D.C. General Hospital in the nation’s capital is the latest high-profile battle over a public hospital. Paul Offner, a former health care finance commissioner, writes of his skepticism about the public hospital as the best buy for local taxpayers—a position that seems to have influenced subsequent events in Washington. As the CEO of Denver Health and a thirty-year veteran of public hospitals, Patricia Gabow writes from a very different vantage point. Civic will and clinical commitment, she argues, are the key ingredients to making a public hospital work. Where they exist together, public institutions can be powerhouses of service, education, and research.

The first priority was to control spending. The D.C. Medicaid program was paying private hospitals 40 percent above cost as a result of mistakes made when the diagnosis related group (DRG) system was implemented. Even hospital leaders realized that reductions were needed. We then found that as a result of a computer malfunction, more than 20,000 ineligible persons were on the Medicaid rolls. These were people who had left the District or were no longer eligible for other reasons. My staff and I pursued all of these opportunities to cut costs, and there were lots of them. By 1997 Medicaid spending was actually declining.

We then shifted our focus to coverage. If the District’s health outcomes were to improve, we would have to increase services to the uninsured population, which at the time numbered about 80,000. By mid-1998 Medicaid was running a surplus, and I argued that the money should be used to expand coverage, starting with children. Congress had recently passed the State Children’s Health Insurance Program (SCHIP), which increased funding for this population, but our surplus was so large that we were able to cover their parents as well. By 1999 the District guaranteed health insurance to all families with incomes under 200 percent of the poverty level, offering one of the broadest coverage policies in the nation.

Left uncovered, however, were single people and childless couples, many of whom had substance abuse and mental health problems. Because of the high number of these individuals, health insurance for them could not be financed by extracting further savings from Medicaid; other funds would have to be found. After surveying the landscape, I decided that the logical place to look for savings was D.C. General, Washington’s 200-year-old public hospital.

Sacrificing A Dinosaur For A Good Cause

 
In its heyday in the 1950s D.C. General was a vibrant institution with 1,000 beds and the major provider of care for the District’s indigent residents. But as Washington’s population dropped and managed care reduced hospital use, the hospital experienced declining admissions, rising costs, and budget deficits. D.C. General also has an out-of-date physical plant that the U.S. Public Health Service says would cost $110 million to renovate. More than two-thirds of D.C.’s uninsured go elsewhere for hospital care.

On looking into the matter, I discovered a startling fact: The services that D.C. General provides to the uninsured could be purchased at half the cost from private hospitals and clinics. In fact, along with City Hall budget analysts, I figured out that if we took all the subsidies going to D.C. General and combined them with the District’s disproportionate-share hospital (DSH) payments and the other funding for the indigent, we’d have enough money to cover all of the uninsured. Moreover, the newly covered people would be able to obtain care close to home instead of having to go to the southeast corner of the city, where D.C. General is located.

By the beginning of 1999 Mayor Marion Barry had been replaced by Anthony Williams, who had been elected on a reform platform. Early in Williams’s term, my colleagues and I showed him our plan to expand insurance coverage, and he liked it. The private hospitals would lose their DSH funds and D.C. General would lose some of its subsidy payments, but since virtually every D.C. resident would have insurance, there was less need for such payments. When the mayor presented his first budget, our plan was included.

D.C. General supporters were outraged. For them, the hospital is a testament to the city’s struggle for local self-determination, having survived several congressional efforts to close it (Congress has the final say on District matters). It is also a symbol of racial pride, being owned, managed, and staffed almost entirely by African Americans. The hospital’s backers don’t trust the private institutions to treat the District’s most disadvantaged residents, and if D.C. General is closed, they say, private hospitals and clinics would immediately jack up their rates, eliminating any potential savings.

In this highly charged environment, it was hard to get agreement on even the most basic facts. I remember a meeting of the mayor’s health reform commission in City Hall. The tenth-floor auditorium was filled with public hospital employees wearing "Save D.C. General" buttons that had been produced by the local union. Hospital CEO John Fairman strode triumphantly up to the lectern and assured commission members that there was nothing to worry about. "We’re in the black," he declared. A week later the Washington Post reported that the hospital had accumulated a deficit of more than $95 million.

I was counting on support for the mayor’s plan from the private hospitals, many of which were half-empty and would experience increased admissions if health coverage were expanded, but I was wrong. Leaders of these institutions worried that if D.C. General closed and they inherited its clientele, District funding would dry up and they would be left holding the bag. They had lived through the 1995 crisis when the D.C. government fell behind in paying its bills, and they were wary of a repeat performance. The next time D.C. got into financial trouble, they reasoned, it would be a lot easier to cut the funds going to a group of private hospitals than to lay off public employees, whose families vote in local elections.

The mayor campaigned hard for our plan, but to no avail. Reform advocates, like supporters of the community-based clinics and members of the District’s Primary Care Association, were no match for the bankers, lawyers, and real estate people who sit on the private hospital boards, or the community activists in the D.C. General support network. The battle was emotional and bitter. With the exception of the mayor, the participants only seemed interested in their small piece of the health care puzzle. At a rally in the D.C. General auditorium in May 1999, hospital leaders demanded that the mayor fire me. Williams took to referring to me as his Velcro Medicaid director; unlike Ronald Reagan, the Teflon president, all of the criticisms seemed to stick to me.

Resolution

Top Sacrificing A Dinosaur For... Resolution Other Communities A Brighter Picture

 
What would have happened to D.C. General if the mayor’s plan had passed? It’s hard to say. Under the right leader, it might have been able to lower costs and focus on services for which it had a comparative advantage. Carrying this off would have been a struggle, because of the public unions and the inefficient plant, but it was possible. What we do know is that continuing the old policy did not save the hospital. By the middle of 2000 D.C. General was losing $2 million a month. A spate of audits and newspaper reports told of nonfunctioning information systems and nonexistent financial records. In June 2000 Fairman was fired, and one-quarter of D.C. General’s 2,000 employees were laid off. Last April, the decision was made to transfer the hospital’s inpatient services to Greater Southeast Community Hospital, a private institution located in the same D.C. quadrant. By August, trauma care will also move to Greater Southeast. D.C. General will continue to provide outpatient services, although on a reduced scale.

Washington is unlike other American cities in that it runs its own Medicaid program. Elsewhere Medicaid is a state responsibility. But D.C.’s experience illustrates why health care reform at the local level is so difficult. The problem is not so much a shortage of resources as it is a lack of trust. Many community leaders don’t have faith that private hospitals will serve the poor, and the private hospitals don’t trust the city to fund them adequately if they assume this responsibility. So an inefficient system is perpetuated, millions of dollars are wasted, and thousands of poor people go without the services they need.

Underlying this distrust is the issue of race, which affects almost every public discussion in the District. When I got tangled up in a payment dispute with one hospital, its CEO wrote council members that most of its patients were black, and "Offner obviously does not understand the medical needs of this patient population." Much of the argument for preserving D.C. General is based on race. And the problem is that arguments over race are intractable, making it harder for local officials to come to a consensus on needed reforms.

The contentious environment is not hard to explain. For years local officials have fought a frustrating and losing battle to obtain self-governance for the District. To this day, local decisions are subject to ratification by Congress, a body in which local citizens have no vote. Still, distrust is not a sound basis for policy. The argument that the private hospitals can’t be trusted to look after the uninsured, for instance, ignores the fact that two-thirds of the hospital services for the uninsured already are provided by these institutions. And for the Medicaid population, that figure rises to 90 percent! In other words, when the District’s poor are given an insurance card and told they can get their care wherever they want, almost all of them choose private hospitals. These providers are only too happy to see them as long as their services are paid for.

Other Communities

Top Sacrificing A Dinosaur For... Resolution Other Communities A Brighter Picture

 
Research on other cities whose public hospitals have closed yields little evidence of a decline in access to care for the uninsured. Recently the Washington, D.C.–based Urban Institute looked at five such cities and found that efficiency had increased, primary care was given greater weight, and "virtually no one...thought indigent care was worse after privatization." As for the concerns of the private hospitals, the same study found scant evidence that public funding has been reduced. To be sure, no one can predict the future. The study emphasizes that we may yet find public funding declining in the years ahead. But Washington’s inefficient public system and dismal public health record make the risk worth taking. Elsewhere it may not be.

And that’s the basic point: The best strategy for covering the uninsured differs among communities. Until this nation adopts a policy of universal coverage, state and local officials will have to take the lead in this area. In some places the preferred option may be to provide direct subsidies to particular providers of care. An insurance or purchasing strategy may make more sense somewhere else. What works will depend on how many people are uninsured, the resources available to serve them, and other factors.

In April 2000 the Institute of Medicine (IOM) issued a report that recommends direct federal subsidies to hospitals and clinics like D.C. General that admit all comers. Given the rising number of uninsured, additional resources are certainly needed. But even if it were passed, it’s not clear that the IOM proposal would work, because it would circumvent the local officials who bear responsibility in this area.

Whatever strategy is adopted at the local level, we are likely to see a continuation of the friction between advocates of the insurance strategy, on the one hand, and of public hospitals, on the other. In the District, after all, we have the best-case scenario: State and local governments are rolled into one, and the local officials who oversee Medicaid also supervise the public hospital system. Elsewhere Medicaid is run by state governments, and public hospitals are typically managed by cities or counties, thus increasing the opportunity for conflict. Improving relations between advocates of the insurance strategy and advocates of public hospitals will take an exceptional effort on the part of governors and other local officials.

A Brighter Picture

Top Sacrificing A Dinosaur For... Resolution Other Communities A Brighter Picture

 
In November 1999 I left the district government after four contentious years. Despite setbacks, the Medicaid cost spiral has been halted, insurance coverage has expanded, and we now have a mayor who is committed to restructuring the health care system. While D.C. still has a long way to go, the fiscal picture has improved, allowing the city to consider further coverage expansions. So the future looks bright.

Working for the District government was a full-contact sport, to be sure. I came out bruised, but with no small degree of hope about the prospects for real improvements in urban health. If progress can happen in Washington, it can happen anywhere. So I’m glad Mayor Barry put through that call back in the summer of 1995.

Editor's Notes

 
Paul Offner, <po2{at}georgetown.edu>, is a professor at Georgetown University. From 1995 to 1999 he served as the District of Columbia’s commissioner of health care finance. He holds a doctorate in economics from Princeton University.

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