1. Financial Performance and Managed Care Trends of [Community] Health Centers
Brian C. Martin, Ph.D., MBA
East Tennessee State University
College of Public Health

2. Central Mission
To increase access to community-based primary health care services and to improve the health status of medically vulnerable populations, treating patients without regard to insurance or ability to pay.

3. Overview of Health Centers (HCs)
Since 1960s
Medically vulnerable populations
Inner city & rural areas
Commitment to treat uninsured/underinsured
Provide:
Comprehensive, coordinated, and integrated health care services
Many centers provide expanded services

4. Overview of Health Centers
In 2004 HCs included 1000 organizations nationwide
Delivering services to approximately 13.1 million patients (2004)
Governed by community
Safety Net providers

5. Financial Challenges
HCs face have been challenged by their dependence on external funding
According to 2000 IOM report, Health Center’s missions are threatened by:
Increased uninsured clientele
Proliferation of Medicaid managed care
Decreased subsidies for charity care

6. Funding Trends
: Increase in proportion of uninsured patients and decrease in Medicaid patients
Half of HCs report operating deficits
2000: Clinton administration establishes Community Access Program (CAP) grants
2003: Bush Administration provided expansion grants (prevention and primary care)

7. The good news … The bad news …
After 13% drop in 1997, grant revenues rise to 25% of operating revenues by 2002
The bad news …
Impact of state fiscal downturns
Overall declines in federal grant dollars since 1985
Particularly challenging for HCs in rural areas

8. National Medicaid managed care enrollment:
9.5% 1991
55.8% 2000
63.0% 2004
HCs less able to fund uninsured on their own
Affect on mission?

9. Purpose of Study
Examine costs, productivity, and overall financial health of HCs
Identify trends and predictors of financial performance of HCs

10. Data Source
Nationally represented secondary data from Uniform Data System (UDS)
Measures:
Financial characteristics
Center characteristics
Predictive center characteristics

11. Financial Measures Revenue sources Revenue share Cost Productivity
Grant revenue
Service revenue
Medicaid revenue
Revenue share
Medicaid collection
Medicare collection
Self-pay collection
Private pay collection
Cost
Encounter cost
Personnel cost
Medical personnel cost
Productivity
MD productivity ( MD – physician)
MLP productivity ( MLP – mid level practitioner)
PCP productivity ( PCP – primary care physician)
Performance
Self sufficiency
Net income

12. Center Characteristics
Rural vs urban
Managed vs non-managed
Old vs new
Measures of selected health care services:
Enabling services FTEs
Chronic disease encounters
Prenatal care patients

13. Results: Managed Care
We used 2 indicators (revenues and enrollees) to define HCs on a continuum of managed care involvement:
Type
Volume
Revenue
HVHR
>10 %
> 5 %
HVLR
> 10 %
0-5%
LVLR
0-10 %

14. Results: Center Characteristics
Financial stability
Self-sufficiency
Grant revenue
Service revenue – direct/ third party payments
Net income
Financial efficiency
Average cost per encounters
Average personnel costs
Average medical costs
Average administrative costs
Provider productivity
Number of encounters per MD or MLP or PCP

15. Descriptive Variables and Trends
Mean
Std Err 98 99 00 01 02 03 04
04-98
% ∆
Grant
Revenue
0.43
0.01
0.40
0.42
0.38
-11.63
Service
0.57
0.60
0.58
0.62
8.77
Medicaid
0.26
0.22
0.23
0.24
-7.69

16. Revenue – Rural vs. Urban

17. Descriptive Variables and Trends
Mean
Std Err 98 99 00 01 02 03 04
04-98
% ∆
Medicaid
Collection
330.84
12.55
345.14
12.81
360.97
9.57
388.57
15.83
403.13
22.66
422.42
17.21
468.53
16.85
41.62
Medicare
251.64
9.53
274.78
9.66
280.90
9.62
324.50
15.26
324.35
12.57
310.24
8.40
337.36
9.02
34.06
Private
133.64
5.46
154.50
156.44
6.82
163.70
6.19
189.48
19.19
189.02
9.20
196.12
7.22
46.75
Self-Pay
71.81
3.18
75.58
4.28
79.50
4.57
87.19
4.70
90.32
5.15
90.42
3.75
99.07
3.90
37.96

18. Collections – Rural vs. Urban

19. Descriptive Variables and Trends
Mean
Std Err 98 99 00 01 02 03 04
04-98
% ∆
Encounter
Cost
91.97
1.56
94.41
1.46
105.70
1.90
110.77
1.49
120.97
2.38
130.11
3.22
132.85
2.06
44.45
Medical
81.49
1.25
84.21
91.56
1.63
96.70
1.26
105.44
1.93
113.43
2.92
115.88
1.58
42.20
Personnel
63,781.51
1,541.76
66,887.61
1,578.26
72,218.29
2,136.63
72,881.12
1,136.84
74,736.63
1,541.41
77,029.48
1,195.98
79,910.96
1,025.21
25.29
118,101.58
2,139.85
122,375.88
2,261.34
129,884.28
2,436.52
134,096.32
1,824.61
139,309.87
2,534.47
147,914.91
2,320.96
153,986.51
2,346.53
30.38

20. Encounter Cost – Rural vs. Urban

21. Descriptive Variables and Trends
Mean
Std Err 98 99 00 01 02 03 04
04-98
% ∆ MD
Productivity
4,277.26
192.21
4,103.19
131.52
4,262.69
231.16
3,804.12
46.81
3,691.03
53.39
3,645.06
41.16
3,716.75
62.92
-13.10
MLP
2,569.85
49.60
2,643.83
51.23
2,555.63
2,565.81
41.40
2,540.14
38.40
2,565.54
36.74
2,595.36
35.69
1.00
PCP
4,252.98
174.38
4,059.07
114.32
4,053.87
155.06
3,805.58
45.67
3,688.22
52.72
3,642.16
41.11
3,697.64
60.16
-13.06

22. Productivity – Rural vs. Urban

23. Descriptive Variables and Trends
Mean
Std Err 98 99 00 01 02 03 04
04-98
% ∆
Self-
Sufficiency
0.71
0.01
0.80
0.81
0.79
0.85
19.72
Net
Revenue
869,889.61
84,618.12
1,653,801.78
126,999.97
1,834,552.75
128,350.51
2,044,645.08
126,571.12
2,127,980.46
138,513.37
2,413,327.65
154,624.53
2,809,096.21
189,507.17
222.93

24. Sufficiency – Rural vs. Urban

25. Eight general estimation models were run using annualized data:
Predictors of Financial Performance
Eight general estimation models were run using annualized data:
Encounter cost
Medical encounter cost
Personnel cost
Medical personnel cost
MD productivity
MLP Productivity
Self-Sufficiency
Net Revenue

26. Location Predictors Urban location Larger center
Higher personnel cost ( p<0.05)
Greater self-sufficiency ( p<0.001)
Higher net revenue ( p<0.01)
Larger center
Greater personnel costs ( p<0.05)
Greater MD Productivity (p<0.001)
Greater MLP productivity (p<0.01)
Greater Net revenue (p<0.001)

27. Managed Care Predictors
Large centers (HVHR)
Higher Encounter costs (p<0.05)
Lesser MD productivity (p<0.05)
Lesser self sufficiency (p<0.001)
Lesser Net revenues (p<0.001)
Medium centers (HVLR)
Lesser self-sufficiency (p<0.05)
Lesser net revenues (p<0.05)
Small centers (LVLR)
Lesser net revenues (p<0.01)

28. Managed Care Experience Predictors
Centers in their first year of managed care experienced greater costs:
encounter (p<0.001)
medical encounter (p<0.001)
Personnel (p<0.001)
Medical personnel (p<0.001)
Net revenues (p<0.05)
They also experienced lesser:
MD productivity (p<0.05)
MLP productivity (p<0.001)

29. Enabling Services Predictors
Centers providing enabling services experienced greater:
Encounter costs (p<0.001)
Medical encounter costs (p<0.05)
They also experienced lesser:
Personnel costs (p<0.05)
Self-sufficiency (p<0.01)

30. Service Use Predictors
Centers that had more chronic disease encounters experienced:
Greater net revenues (p<0.01)
Lesser encounter costs ( p<0.05)
Centers that had more chronic disease encounters had greater:
Encounter costs (p<0.001)
Medical encounter costs (p<0.001)
Self-sufficiency (p<0.01)
Net revenues (p<0.01)

31. Grant Revenue Predictors
Centers receiving grant revenues had greater:
Encounter costs ( p<0.05)
They also had lesser:
MLP productivity ( p<0.001)
Self-sufficiency ( p<0.001)
Net revenues ( p<0.01)

32. Provider Productivity Predictors
MD productivity was associated with lesser:
Medical encounter costs ( p<0.05)
It was also associated with greater:
Personnel costs ( p<0.05)
Medical personnel costs ( p<0.05)
MLP productivity was associated with lesser:
Encounter costs ( p<0.001)
Medical encounter costs ( p<0.001)
Net revenues ( p<0.05)
Medical personnel costs ( p<0.001)

33. Discussion: Grant Revenues
Grant revenues from all sources decreased
Medicaid revenues decreased
Costs increased
Physician productivity decreased
Net revenue increased

34. Discussion: Grant Revenues
As the percentage of grant revenues increased:
Encounter costs increased
MLP productivity decreased
Net revenues decreased
Self sufficiency decreased

35. Discussion: Effects of Grants
With more grant revenues:
Service intensity and delivery may have increased (e.g., MLP provided more comprehensive services)
Enabling services may have increased
Funds may have been used for non-clinical activities
If these effects are true, they highlight the importance of operating revenues to overall financial health of HCs

36. Discussion: Managed Care
Play or lose Medicaid market share
Decreased net revenues
In all HCs except those in 1st year of managed care experience
Decreased reimbursement
Increased administrative costs
Collective efforts by HCs may make policy changes in their favor

37. Discussion: Enabling Services
Increased costs
Decreased personnel costs
Finding a balance between offering enabling services and financial sustainability is important

38. Discussion: Provider Productivity
Physician productivity associated with decreased medical encounter costs, but also with increased personnel costs
MLP productivity associated with decreased costs, but also with increased medical personnel and decreased net income
Productivity must be tempered with financial ability of centers to provide services

39. Discussion: Positive Financial Performance
Center characteristics:
Urban
Larger number of enrollees
Patient types:
More chronic disease patients
More prenatal care users
Importance of having an adequate number of clients with ample revenue streams

40. Conclusion Study appears to support the concerns stated by IOM in 2000
Increasing uninsured population continues to overwhelm that ability of HCs to manage scarce resources
Medicaid managed care contributes to financial problems in HCs by:
Decreasing charity care subsidies

41. Limitations
Managed care reimbursement and participation levels are changing and should be monitored
This study is based on secondary data, and HCs to vulnerable populations are likely to be influenced by other factors
Negative financial findings related to managed care participation do not suggest HCs are abdicating their missions
Some centers may dropped out during the study period

42. Questions?