As members of the North Carolina House and Senate consider and debate vastly different budget proposals, I urge our citizens to look at the negative impact the Senate’s budget proposal may have on your local hospital and other health care providers in your communities.

Hospitals and health systems are safety nets in the community. We provide care for all; we help those who are in need; and, like the members of the community, we support our local businesses.

We are here for you — 365 days of the year, 24 hours a day, seven days a week.

FirstHealth of the Carolinas is a huge contributor to our communities, employing more than 4,600 people in our service area. We provide essential and life-saving services people depend upon, and we serve as the hub of programs for wellness, cancer care support and many other community health programs vital to caring for the most vulnerable among us in our communities.

The Senate’s budget proposal threatens to eliminate sales tax refunds for not-for-profits, turn over the Medicaid program to large for-profit insurance companies and eliminate the Certificate of Need program.

FirstHealth, as well as other North Carolina not-for-profit hospitals and like all charitable nonprofits across the state, is concerned about the repercussions of the Senate’s tax proposal.

Our state government has supported our mission to care for all people through the sales tax refund program. Because we provide care to those who cannot afford it and provide community benefits in our service area, FirstHealth is granted a not-for-profit status. The Senate’s plan to reduce our sales tax refund threatens key building blocks that support communities and jobs, and will set off costly consequences.

Our facilities in Montgomery, Moore, Richmond and Hoke counties provide care for thousands of patients every year. Nearly 81 percent of those patients are government program beneficiaries, meaning they are covered by Medicare, Medicaid or Tricare or are uninsured.

In 2014 alone, FirstHealth provided just short of $10 million in financial assistance (free care for those who qualify). Also in 2014, the cost to FirstHealth for bad debt expense was nearly $17 million. One of the means that hospitals use to afford uncompensated care is through savings from the sales tax exemption that the Senate proposal reduces. The impact on FirstHealth would be $4.5 million, which is a substantial portion of our net income.

FirstHealth, like many health systems, is using all the resources we have to care for our population. Each dollar of the small profit margin we gain is reinvested into services and capital needs. These capital needs are not fancy offices and buildings, but replacement equipment including hospital beds, IV pumps, monitors and lab and imaging equipment that each and every patient needs.

Furthermore, pharmaceutical costs are growing at a shocking rate. The average cost for existing generic drugs is 23 percent higher for FirstHealth today than just one year ago. These generics are drugs we use every day in the hospital and that have been around for many years. Drug prices are set by the pharmaceutical companies and are not negotiable, so these types of price increases are not sustainable – certainly not if we lose the sales tax exemption and if our Medicaid payments continue to decline.

As you can see, reducing sales tax refunds would negatively affect FirstHealth as well as all other North Carolina hospitals. And taxing our “large” nonprofits will have a cascading effect. Your doctors, and maybe neighbors, could be affected through a loss of services and jobs.

Hospitals already face extreme financial pressures from costly federal government mandates and reductions due to the Affordable Care Act as well as increasing volumes of charity care and bad debt. With more than two-thirds of our state’s hospitals operating at or below a 2 percent margin, the additional cuts resulting from the Senate budget as written will likely result in higher insurance premiums and continued increases in health care costs for small businesses that pay for health care.

The proposed budget also puts the Medicaid program in the hands of for-profit insurance companies to manage the Medicaid population after many hospitals across the state, including the FirstHealth hospitals, were steered to believe reform would be provider-led, not payer-led. We have all invested substantial dollars in population health resources — both human and in information technology — to ensure that we can care for patients in the least costly manner and focus on the vulnerable who consume most of these resources.

When a Medicaid pilot program was run by insurance companies in North Carolina, the result was less care, reduced coverage and increased emergency room visits. Some private providers may close their doors, and patients may lose local access to care and be forced to travel for the most basic of services. With this proposal, the legislature is washing its hands of the Medicaid program and putting a vulnerable population at risk.

A provider-led model would put care management in the hands of doctors and nurses, not insurance companies. Who would you rather take care of you or your loved one? A for-profit insurance company or the physicians and nurses you know?

The third concern about the Senate’s budget is the elimination of the Certificate of Need program. Legislators say the program limits competition and drives up prices. This simple economic and competitive argument plays well in the media and in talking points, but it leaves out the true economics of health care.

A recent report analyzing the CON debate by Ascendient, an independent health care research group, concluded that any move now to deregulate North Carolina’s health care system by reducing or eliminating the CON program would be premature and put already vulnerable hospitals at much greater risk as new entrants pick off their best patients without taking up the burden of indigent care.

I have worked in states with no CON laws and limited CON laws and neither created a free-market health care economy or a more cost-effective health care delivery system. FirstHealth and hospitals across the state support competition if it is fair. Hospitals are the only entities required to care for those unable to pay and the very sick and expensive to treat. That is not free-market competition.

It is no secret that cost-shifting exists in health care. We can make a dollar on heart surgery, but lose more than that by operating a neonatal intensive care unit. We make money on some orthopaedic procedures, but lose money every day in the emergency departments we operate seven days a week, 24 hours day. That is health care economics.

We didn’t create the system, but we have to operate in it and deliver the highest quality of care to every patient we see regardless of his or her ability to pay.

Our communities have continually shown support and gratitude for FirstHealth as a first-rate provider of medical care, as a business partner and as a community resource. They have chosen us to provide quality, exceptional care for more than 80 years. We want that tradition to continue, and we trust and believe that is what everyone in our communities wants to see happen.

As the House and Senate begin their budget negotiations, we hope you will take time to call or email your state legislators and encourage them not to tax not-for-profit organizations, or hand over Medicaid to insurance companies, or eliminate CON. Tell them to stand up for patients, hospitals and our communities.

David J. Kilarski is chief executive officer of Pinehurst-based FirstHealth of the Carolinas, which operates FirstHealth Richmond Memorial Hospital in Rockingham.

David J. Kilarski
CEO
FirstHealth of the Carolinas
https://www.yourdailyjournal.com/wp-content/uploads/2015/08/web1_fDavid-J.-Kilarski-2.jpgDavid J. Kilarski
CEO
FirstHealth of the Carolinas

David J. Kilarski

Contributing Columnist