Identifying Health Care Cost Drivers

Local health care providers and activists say New Mexico hospitals could better serve patients by switching to global budgeting systems. It’s just one of the efforts members of the Health Security for New Mexicans Campaign is pushing to combat soaring hospital expenses.

Coalition members convened Sunday afternoon to discuss their goal—a statewide system of guaranteed affordable health care coverage—in conjunction with Santa Fe NOW and the local NAACP’s presentation of the film American Hospitals: Healing a Broken System.

Rising hospital expenses, the film argues, have one major root: Despite about 48% of hospitals in the United States being “nonprofit” institutions, they accrue revenue using for-profit models, which depend on the hospitals submitting claims to commercial and public insurance payers.

“This film begins to explore out-of-control hospital costs…it begins to ask how we can incentivize the hospitals to provide the highest quality care, with the lowest affordable cost to the community,” Doris Page, chair of the local NAACP’s health committee, told attendees.

Page, a retired family physician who has been working with the campaign, began a panel discussion after the film by explaining the group wants “a health care system that truly focuses on improving the health of our patients and the communities without the pressure of our profit-driven system.”

The current system, where Medicare and Medicaid pay less in claims from hospitals than commercial insurance companies do, results in hospitals that serve higher percentages of low-income and uninsured patients making less money and being more likely to close or consolidate with other hospitals. Global budgeting could thwart that risk, advocates say.

A reform first tested in Maryland that saved $1.4 billion in Medicare spending at Maryland hospitals between 2014 and 2018, the alternative model pays hospitals a fixed amount based on operating costs. For example, if 60% of the population a hospital serves is typically insured through Medicaid, then Medicaid would be responsible for 60% of its budget.

The steady stream of revenue would mean hospitals would not need to rely on what makes them the most money—expensive procedures, emergency room services and filling beds, to name a few.

“This global budget that Maryland has decided to follow is hopefully something that will eventually trickle down to the rest of our country,” Page said.

This year, New Mexico’s legislature appropriated $575,000 to the Legislative Health and Human Services Committee to hire a contractor to develop solutions to the key drivers of rising health care costs, and switching to a global budgets system was number one on its list.

The committee also called for stabilizing hospital costs by reducing administrative burdens of hospital billing systems that interfere with patient care and frustrate health professionals; and lowering drug prices by participating in an existing multi-state drug purchasing consortium.

Mary Feldblum, executive director of the Health Security for New Mexicans Campaign, described all three issues together as being “like a jigsaw puzzle.”

“In that puzzle, there are all of these pieces that are inter-connected, so when you solve the hospital price problem, you also have to solve the impact on health professionals and patients, and you cannot separate all of these,” Feldblum said.

As the committee develops a plan to promote switching hospitals to global budgeting, Feldblum says a major issue is deciding whether to make participation voluntary or mandatory for hospitals. In states like Pennsylvania, in which hospitals can choose whether or not to participate, Feldblum says, “there’s a problem with the big, out-of-state controlled companies that don’t want to participate.”

In New Mexico, she says, some of the larger private hospitals oppose the idea and “we need public support to make it mandatory.”

When asked by an audience member how the public should mobilize in support of the effort, Feldblum says, “All politics is local, and right now, what we’re doing is we’re saying, we’ve got to continue funding this cost drivers project.”

While the project is funded for this year, Feldblum says, the $575,000 budget runs out in June 2024, and the Legislative Health and Human Services Committee will seek $800,000 in funding next year.

Simesha McEachern, the associate director of children’s services at Presbyterian Medical Services, said educating the public will be the most important factor in pushing for global budgeting and other health care cost solutions.

“Without that education, guess who you’re closing out? All of the people that this impacts,” McEachern said. “I think we pretty much all go to the doctor at some point, so this impacts every last one of us, but we don’t know who to hold accountable.”