Federally Qualified Health Center Feasibility Study for Berks County, Pennsylvania

Transcription

1 Federally Qualified Health Center Feasibility Study for Berks County, Pennsylvania Presented to Berks County Community Foundation by Drexel University School of Public Health September 2010

2 Acknowledgements The Drexel University consultants wish to express our sincere thanks especially to the following individuals and the organizations they lead for the help we received in doing this study. It has been a rewarding and enlightening experience to interact with, and learn from, so many fine individuals. Richard Mappin, BCCF Robert Paul, The Reading Hospital Richard Mable, The Reading Hospital Pat Giles, United Way of Berks County John Morahan, St. Joseph s Hospital Fran Malley, Berks Counseling Center Bruce Weidman, Berks County Medical Society Michael Baxter, MD, Berks County Medical Society Jim Kelly, SouthEast Lancaster Health Services Susan Adams, SouthEast Lancaster Health Services Bruce Riegel, HRSA Regional Health Administrator Final Report to the Berks County Community Foundation Page 1

3 Federally Qualified Health Center Feasibility Study for Berks County, Pennsylvania Introduction The Drexel University School of Public Health (Drexel) is pleased to provide this assessment of the need for a Federally Qualified Health Center (FQHC) in Berks County, and an evaluation of the merits and feasibility of the most effective model for delivering FQHC services. The purpose of an FQHC in Berks County would be to provide a comprehensive set of primary care services, related enabling services, and, as appropriate, direct or referral access to specialty care services, to the uninsured and otherwise underserved populations of the County. For this study, Drexel completed the following tasks: Collected and analyzed current health insurance, health status, economic and demographic data to determine the scope and scale of unmet health care needs in Berks County that could be addressed by an FQHC; Interviewed the CEOs of The Reading Hospital and Medical Center and the St. Joseph s Medical Center concerning the needs for and potential viability of an FQHC; Interviewed other key contacts in Berks County, identified to Drexel by the project sponsors, who have expressed interest in or concerns about establishing an FQHC in Berks County; Analyzed outpatient hospital utilization and financial data shared with Drexel for this project; Assessed options for a site location for an FQHC, including the preliminary analysis of data that would position the FQHC to receive a federal Health Center program grant; Identified and described the advantages and disadvantages of different organizational models of an FQHC; Assessed the challenges and opportunities posed by several different organizations which might choose to sponsor, oversee or carry out the development of an FQHC; Developed a summary business plan showing the financial requirements for implementing a most preferred FQHC option for Berks County, for consideration by the Foundation, its partners in this project, and the other members of the Access to Care Steering Committee. Developed a summary action plan to guide the next steps in carrying out the preferred alternative. Final Report to the Berks County Community Foundation Page 2

4 Methodology For the purpose of this study, an FQHC is a non-profit corporation that: meets the requirements and receives a federal Health Center grant under sections 329, 330, 340 or 340a of the Public Health Service Act, meets the requirements to receive a Health Center grant but receives funding from such a grant under a contract with a Health Center grantee, or is deemed to meet the Health Center grant requirements without direct or indirect receipt of the grant itself (referred to as a look-alike FQHC); provides primary care and enabling services to patients from areas designated as medically underserved areas (MUAs); accepts all forms of insurance; has a sliding fee scale in place to discount care to low income users (defined as those with family unit incomes below 200% of the federal poverty level) who are without health insurance coverage; receives cost-based payment for services provided to Medicare, Medicaid and Children s Health Insurance Program (CHIP) beneficiaries; could be staffed by National Health Service Corps (NHSC) professionals, and is governed by a community board whose majority membership must be users of the health center. In addition to interviewing the leadership and designated representatives of this project s sponsors, along with the CEOs and leadership of the two Berks County health systems, Drexel also met with: the Regional Health Administrator of the Health Resources and Services Administration (HRSA) to discuss future health center funding opportunities and the relative advantages and disadvantages of different approaches to establishing an FQHC in Berks County; the Executive Director and key staff of SouthEast Lancaster Health Services; the Director for Statewide Strategic Growth for the National Association of Community Health Centers; the Associate Vice President for Provider and Community Affairs, AmeriHealth Mercy Health Plan; the Executive Director of the Berks Counseling Center. Final Report to the Berks County Community Foundation Page 3

5 Throughout the process, Drexel drew on the extensive experience and in-depth program knowledge of Mr. Stuart Pullen who consulted on this project. Mr. Pullen is the Director, Health Center Operations, for the Pennsylvania Association of Community Health Centers, and, for more than thirty years, he was the Executive Director of the York Health Corporation, the multisite community health center in York, Pennsylvania. Through the first-hand knowledge of another consultant on this project, Ms. Mary Duden, Drexel also drew on the health center experiences of Delaware Valley Community Health, the parent organization for the Norristown Regional Health Center, and of the Community Health and Dental Care Center in Pottstown. The experiences of these health centers one grant funded, the other a look-alike health center are case studies of the risks, challenges, and opportunities posed by establishing a health center presence in areas without prior FQHC access. The summary business plan created for this project also drew on the extensive financial experience of DudenAnderson LLP consultants. Drexel explored the feasibility of four structural approaches to establishing an FQHC: 1) A community health center (CHC) created by a new community corporation that that would meet all the requirements for and seek federal grant funding as a new access point (NAP) from HRSA. 2) A community health center created by a new community corporation that would that meet all the requirements for and seek federal approval as an FQHC look-alike health center, without competing for and receiving a HRSA grant. 3) A satellite site of an existing FQHC from either Montgomery or Lancaster Counties, supported in part by federal grant funding from HRSA as a new access point. 4) A satellite site of an existing FQHC from either Montgomery or Lancaster Counties, without additional HRSA grant funding at the current time, accomplished through a procedural change in scope of project by the existing FQHC, with the potential for growth supported by HRSA grant funding, at a future date, for expanded medical capacity. Drexel collected and analyzed demographic, income, health insurance coverage and selected health status data to assess the chances of a Berks County organization receiving a new access point grant. In making an assessment of need Drexel applied the community need criteria used by HRSA in its current Health Centers New Access Points grant announcement (HRSA , issued August 9, 2010). Final Report to the Berks County Community Foundation Page 4

6 Needs Assessment An FQHC applicant must document need and potential community impact, and meet health services, management, finance and governance requirements established in federal law, regulations and HRSA policy. First, a prospective FQHC must demonstrate the need for services in a community based on geographic, economic, and demographic factors; the availability of other resources; and the health status of the population to be served. The prospective FQHC must serve those most in need within a designated, rational service area, including low-income individuals from all ages, the uninsured, minorities, pregnant women, the elderly, and, where appropriate, those with special needs (e.g., the homeless). In any County, invariably there are poverty pockets in which residents lack access to primary care resources due to geographic, financial or linguistic/cultural barriers. But to establish an FQHC, the community to be served must also be designated (in part or all) as a Medically Underserved Area (MUA). The designation of an area as medically underserved is based on an initial determination that the area in question is a rational service area as specified in federal law. A rational service area is one that is a contiguous grouping of census tracts whose populations share similar racial, ethnic, demographic and economic characteristics. Twelve contiguous Reading census tracts (1, 2, 10, 11, 13, 14, 17, 19, 21, 22, 23, 25) are designated as MUAs (see Appendix A), although the data underlying this designation is more than a decade old, and the designation score is relatively high (58). No other parts of Berks County are designated as MUAs, and it seems unlikely that any other parts of the County could be so designated. Drexel did not attempt to complete a full, county-wide assessment of medical underservice as part of this project. Instead, the focus of the project was on establishing an FQHC that could enhance access to medical services in the City of Reading itself since (1) a large part of the City is already designated as medically underserved, and (2) the rates of Reading residents living in poverty and those without health insurance coverage are significantly higher than for the County as a whole. The federal Health Center program makes grants to FQHCs through a competitive application process. In the past, when health center grant funding opportunities were very limited, a community would need to have an indexed MUA score (or present data similar to that used to calculate the MUA score) that demonstrated significant unmet health service needs in a geographic area or among vulnerable population groups (the lower the score, the greater the Final Report to the Berks County Community Foundation Page 5

7 unmet need). However, in the current NAP grant announcement, MUA score is not directly considered as a scoring criterion. At this time, HRSA defines the need for FQHC services by applying need for assistance criteria designated in the current NAP grant announcement (HRSA , pages and 73-79). HRSA divides the Need for Assistance (NFA) assessment into three component parts. The first NFA component consists of four Core Barriers to access. Applicants must provide data on three of the following four Core Barriers: a. Population to One FTE Primary Care Physician b. Percent of Population at or below 200 percent of poverty. c. Percent of Population Uninsured d. Distance (miles) OR travel time (minutes) to nearest primary care provider accepting new Medicaid patients and/or uninsured patients Points are assigned based on the severity of the barriers as defined by formulas for each core barrier. The first three core barriers apply to Reading. The following points would be assigned based on data for the 12 Reading census tracts designated as MUAs, for the entire City of Reading, or for all of Berks County, as available and appropriate. Population to One FTE Primary Physician <4110 (actual value = 3499 to 1 FTE in 12 census tracts) Points 18 (of a possible 20 points) Percent of Population at or Below 200% of Poverty >53 (actual value = 63.4% for the City of Reading) Points 20 (of a possible 20 points) Percent of Population Uninsured <16.2 (actual value = 15.2% for Reading) Points 12 (of a possible 20 points) The total, preliminary score of 50 points (of a possible 60) is then supplemented by scores for the other two component parts of the Need for Assistance assessment. Final Report to the Berks County Community Foundation Page 6

8 The second component part is a listing of 31 Core Health Indicators, divided in turn into six categories. Data for one Core Health Indicator must be provided by the grant applicant in each of the following six categories: Diabetes, Cardiovascular Disease, Cancer, Prenatal and Perinatal Health, Child Health, and Behavioral and Oral Health. The HRSA grant announcement provides national benchmark and severe benchmark data for each Core Health Indicator within these six categories. Grant applicants receive four points for each category response if it exceeds the corresponding national benchmark and an additional one point if the response also exceeds the corresponding severe benchmark. The following table depicts how a Reading, Berks County, grant applicant could score on this needs assessment scale when the reported rates exceed the national benchmarks. The data shown below for Reading/Berks County/Pennsylvania are drawn from several sources, identified in Appendix B. CORE HEALTH INDICATOR CATEGORIES National Benchmark 4 Points Awarded Severe Benchmark 1 Additional Point Awarded Berks County/PA Data 1. Diabetes SCORE = 4 points 1(a) Diabetes Short-term Complication Hospital Admission 46.7 per 100, per 100, (b) Diabetes Long-term Complication Hospital Admission per 100, per 100, (e) Age Adjusted Diabetes Prevalence 6.5% 7.8% 7.3% 1(f) Adult Prevalence 23% 24.5% 24% (Berks) 2. Cardiovascular Disease SCORE = 5 points 2(e) Proportion of Adults reporting diagnosis of high BP 24.8% 27.7% 32.2% (Berks) 3. Cancer SCORE = 5 points 3(a) Cancer Screening Percent of women 18 and older with No Pap test in past 3 years 13.8% 16.0% 22% (PA) 3(c) Cancer Screening Percent of adult 50 and older with No Fecal Occult Blood Test within the past 2 years 75.9% 78.3% 81% (PA) 4. Prenatal and Perinatal Health SCORE = 5 points 4(a) Low Birth Weight Rate (5 year average) 6.0% 9.8% 7.6% 4(d) Late entry into prenatal care (entry after first trimester) (Percent of all births) 16% 20% 22.6% (Berks) 5. Child Health SCORE = 4 points 5(a) Pediatric Asthma Hospital Admission Rate per 100, per 100, / 100,000 (Berks) 6. Behavioral and Oral Health SCORE = 4 points 6(b) Suicide Rate 11 / 100, / 100, / 100,000 Berks) The total score for component two is 27 points (of a possible 30). Final Report to the Berks County Community Foundation Page 7

9 The third component part of the Need for Assistance assessment is a listing of 12 Other Health Indicators. Grant applicants must provide data for at least two of the twelve Other Health Indicators. Grant applicants receive five points for any one data entry that exceeds the corresponding national benchmark. The following table shows four indicators on which the County (or Reading) rates exceed the national benchmarks. OTHER HEALTH INDICATORS National Benchmark 5 Points Awarded Berks County/Reading Data (d) Adult Asthma Hospital Admission Rate 98.4 per 100, per 100,000 (g) Three Year Average Pneumonia Death Rate 1 per 10, per 10,000 (h) Adult Current Asthma Prevalence 7.6% 8.8% (l) Waiting time for public housing where public housing exists 9 months 1 to 1.5 yrs (in Reading) The total score for all three components of the Need for Assistance assessment would be 82 ( ) of a possible 100 points. Since it is a competitive grant process, it is not possible to predict how well this needs assessment score, if taken alone into account, would position a Berks County applicant to receive a new access point grant which in turn could be considered a very sound operational definition of need for FQHC services in Berks County. But the needs assessment score itself represents only 20% of the overall evaluation criteria to be used by a HRSA objective review committee in reviewing the need for a new access point and the technical merits of a health center grant application. In fact, the need for assistance score of 82 points is converted via another scale to conform to the overall scoring for the grant application. The need for assistance score of 82 would garner 17 of a possible 20 points allowed by HRSA for this criterion. HRSA will separately credit need with another 10 points based on how well the grant applicant describes the unique characteristics of the target population within the proposed service area that affect access to primary health care, health care utilization and/or health status. In fact, Need for FQHC Services, as scored based on both data/indicators and the narrative description, is just one of eight criteria used by HRSA to evaluate the complete grant application on a 100 point scale. I. Need for FQHC Services 30 points (20 points, as noted above, of which a Berks applicant might receive 17, PLUS 10 based on the narrative description of need) II. Response to the Need 20 points III. Collaborations 10 points Final Report to the Berks County Community Foundation Page 8

10 IV. Intra-organizational Evaluative Measures 5 points V. Impact 5 points VI. Resources/Capabilities 10 points VII. Reasonableness of Support Requested 10 points VIII. Governance 10 points HRSA will further adjust the scoring to reflect the agency s funding priorities by adding a predetermined number of points. The NAP funding opportunity, HRSA , has three funding priorities, but only one would apply to a Berks County grant applicant: High Poverty Application (1-5 points): In order to be considered for this Funding Priority, a grant applicant must demonstrate that the percent of population at or below 100 percent of poverty exceeds 30 percent in the entire area to be served by the proposed New Access Point. When determining whether the service area meets the funding priority for High Poverty, the entire, defined service area for the application must be considered in whole (e.g., all of the census tracts for the entire service area, not just a specified few census tracks within the proposed service area). Grant applicants requesting consideration for this funding priority must provide documentation from the Census Bureau indicating that the percent of population for the entire service area at or below 100% of poverty exceeds 30 percent. For the 12 census tracts comprising the MUA and the presumed service area for a prospective Reading/Berks County FQHC, the percent of population whose family unit income is at or below 100% of the federal poverty level is 34.6% (which exceeds the rate for the City as a whole, at 32.9%, and the County, at 10.5%). Percent of Population at or Below 100% of Poverty 12 Downtown Reading Census Tracts Priority Points Received >30% - 42% 34.6% 1 Finally, it is a goal of HRSA to expand the current safety net on a national basis by creating new access points in areas not currently served by federally funded health centers. Accordingly, HRSA plans to consider geographic distribution and the extent to which an area may not currently be served by a federally funded health center when deciding which grant applications to fund, irrespective of the evaluation scores assigned by the objective Final Report to the Berks County Community Foundation Page 9

11 review committees if funding decisions based on those scores alone did not accomplish this national goal. Based on information reported by health centers in Lancaster, Montgomery and Chester Counties via the Bureau of Primary Health Care s Uniform Data Set (UDS), only 56 Berks County residents accessed health services at an FQHC in the most recent year for which such data is available calendar year In addition, the following are very relevant factors in defining need: there are 12,340 residents of Reading who are uninsured, based on West Chester University s Berks County Health Needs Assessment study from 2006 and almost certainly more, now, given the higher rate of unemployment at the present time; more than 9,000 of the Reading uninsured were without coverage for more than a full year, and 68% of Reading households reported at least one member of the household was uninsured during the preceding year; there are 35,152 residents of Reading who are on Medical Assistance or CHIP, also based on the West Chester University study and almost certainly more, now, because of the higher unemployment rate; In combination, those who are uninsured or who receive Medicaid/CHIP coverage comprise almost 60% of the City s population. Taking these facts and factors into account in combination, it seems clear that there is a practical need for establishing an FQHC presence in Berks County, and specifically in a location that could enhance access to health center services for the residents of the designated medically underserved area in the downtown section of the City. This conclusion is consistent with and supported by HRSA s funding priorities and health center grant review criteria that currently constitute the best working definition of community need for a new health center access point. Recommendations Drexel s overall recommendation is that The Reading Hospital and Medical Center begin a process of converting or transitioning the Reading Health Dispensary (838 Penn Street) from a hospital outpatient service unit owned and operated by the Hospital into a health center that is operated and governed by a new community-based not-for-profit corporation. This new organization would provide FQHC services (primarily) to the residents of the designated medically underserved census tracts of downtown Reading. Final Report to the Berks County Community Foundation Page 10

12 As noted above, Drexel staff met with the CEO of St. Joseph s Hospital to discuss the interests of that Hospital in sponsoring the creation of an FQHC at St. Joseph s Downtown Reading Campus (at 6 th and Walnut Streets), either independently or in collaboration with The Reading Hospital and Medical Center. As we did with Reading Hospital, Drexel requested an extensive set of information that would have enabled Drexel to estimate the financial implications of converting the St. Joseph s health center into an FQHC. Drexel did not receive the requested information in sufficient time to incorporate in this report, and so that option was not considered when preparing the following sections of this report. Drexel encourages continued consideration by St. Joseph s Hospital about its role in delivering FQHC services in Reading. Conversely, Drexel gave serious consideration to the keen interest expressed by the Executive Director of the Berks Counseling Center in that organization s sponsoring the establishment of an FQHC in downtown Reading, in some form related to, or part of, the parent organization. Drexel wishes to encourage Ms. Malley to continue pursuing this interest as her vision about integrating behavioral and primary/preventive medical care has immense merit and potential value to the residents of Berks County. Nevertheless, at this point in time, for the purposes of this project, Drexel does not consider the Berks Counseling Center s near-term potential for enhancing access to medical services for the 38,490 residents of the medically underserved areas of Reading as nearly equal to the potential to address that need posed by The Reading Hospital and Medical Center s converting the Reading Health Dispensary into a fully functioning, legally compliant FQHC. For that reason, Drexel has focused its recommendations on four options that each involve the Reading Health Dispensary as the core piece of the strategy for enhancing access to medical services in Berks County, and more specifically in Downtown Reading. As noted above, Drexel considered four options for addressing the need for an FQHC. One is recommended for implementation, one is recommended as an alternative for consideration, and two are described below but not recommended at this point in time. Option #1 [recommended for implementation] A new not-for-profit corporation should be established to govern and manage a health center that meets all the requirements for and seeks federal grant funding as a new access point. Specifically, Drexel recommends that the Reading Health Dispensary now owned and operated by The Reading Hospital and Medical Center be converted from a hospital outpatient service unit to a health center in full compliance with FQHC Final Report to the Berks County Community Foundation Page 11

13 requirements, via (1) a careful legal and financial transition, (2) in a way that is respectful of community interests, and (3) as expeditiously as is practical for all concerned parties, to enable the receipt of a federal NAP grant within the next 24 months. Advantages: This option would be financially viable from the outset of the transition, given the assumptions noted in the next section of this report, including achieving a relatively modest local fundraising goal of $200,000 in year 1 (see Summary Business Plans, below). The combination of the following financial benefits make this so: As much as $650,000 annually in health center grant funding; Free malpractice coverage for health center employees (or direct contractors) under the Federal Tort Claims Act (FTCA); Enhanced (cost-based), prospective payment for all allowable Medicare, Medicaid and CHIP encounters. In addition, if the Patient Protection and Affordable Care Act is implemented in its current form in 2014, Medicaid eligibility will markedly expand, to all persons with incomes up to 133% of the federal poverty level who are without employer-based, group or other public health insurance coverage. Many of the currently uninsured in Reading/Berks County will receive coverage via the expanded Medicaid program in 2014 and the years after (rough estimates are provided in the next section). Private health insurers providing coverage through Pennsylvania s Health Insurance Exchange will also make enhanced payment for allowable encounters by their health plan members, beginning in 2014 (though the effects of this on a new FQHC in Reading would be much more limited than the effects of expanding Medicaid). In summary, if the Reading Health Dispensary were to transition to a health center operated by a new not-for-profit corporation that successfully competed for and received a new access point grant from HRSA, this new FQHC should prove to be a successful business venture and begin to expand access to a comprehensive array of primary and preventive care to the downtownarea population of Reading. (Expanding access to services through increased utilization is a requirement to receive a new access point grant.) These direct, tangible benefits would be complemented by the less tangible, but still real social benefit from increased community engagement of Downtown Reading residents who would both be users of, and in some cases, directors of, this new community-based asset. Disadvantages: To be a success, this option depends on the receipt of a new access point grant, requiring in turn the successful competition for such a grant. The implementation of this Final Report to the Berks County Community Foundation Page 12

14 option would also require careful timing to match future HRSA grant announcement and award cycles/schedules, though preparatory legal, planning and organizational work could begin at any time. As noted above, the new health center would also need to show growth in utilization to receive a new access point grant. Last, this option would require at least in the short term new staffing configuration (24 FTEs) to comply with the Department of Public Welfare productivity expectations for physicians (4,200 patient encounters per year) and for mid-level practitioners (2,100 encounters per year). Without a reduction in staffing, this option would not be financially feasible in the beginning (see next section for details). Option #2 [recommended for consideration] In the same way as with Option #1, a new not-for-profit corporation could be established to govern and manage a health center that meets all the requirements for and seeks federal approval as an FQHC Look-Alike health center, but without competing for or receiving a HRSA grant within the near future. In this case, Drexel recommends that the sponsors of this project and The Reading Hospital and Medical Center give consideration to converting the Reading Health Dispensary to a health center in full compliance with FQHC requirements, following careful legal and financial planning, and respectful of community interests in anticipation of the FQHC eventually receiving a federal NAP grant, perhaps in federal fiscal years Advantages: Work to plan for and implement this option could begin at anytime, without any of the time constraints posed in the near term by HRSA s grant funding cycles for health center new access points. In other words, this option could be a more gradual transition step for the Reading Health Dispensary since an application for FQHC look-alike approval can be submitted at any point in time when the applicant can show that it meets the health center requirements. At the same time, achieving FQHC look-alike status would position the health center well for successfully competing for a health center grant in the future. It would also bring to the FQHC the following important, immediate advantage (once approved as a look-alike): enhanced, prospective payment for all allowable Medicare, Medicaid and CHIP encounters. In addition, the health center would not be required to show growth in utilization as it would if it were to receive a health center grant (though it seems very likely that some growth in utilization would occur, in any event, since the entity governing the new FQHC look-alike would be directed by health center consumers and community representatives). Final Report to the Berks County Community Foundation Page 13

15 Disadvantages: By definition, a look-alike center receives no health center grant support, nor does it receive the benefit of FTCA malpractice coverage. Without the financial benefit of a health center grant and malpractice coverage, converting the Reading Health Dispensary into an FQHC look-alike would require a substantial amount of local financial support to be, and to remain, a financially viable business. An estimate of the financial support needed from local sources is described in the next section of this report. Option #3 [not recommended at this time] The Reading Hospital and Medical Center could seek to have the Reading Health Dispensary become a contracted satellite site of an existing FQHC from either Montgomery or Lancaster Counties, supported in part by federal new access point grant to that existing FQHC. Advantages: This option would not necessarily require the creation of a new not-for-profit, community-based organization that would direct the operations of the health center. It would require the transfer of control of the Reading Health Dispensary to the existing FQHC, and likely the lease of space (via a co-location agreement, for example), equipment and administrative staff and services. Staff could become employees of the existing FQHC, or could enter into individual personal service contracts with the existing FQHC requirements for FTCA coverage. As noted above, the site itself could be leased to the existing FQHC (as one possible option); but in any case, the existing FQHC would need to show that it provided a fair, arms-length negotiated payment to the Hospital for all leased services. In essence, the health center operation at the Reading Health Dispensary would become another service site of the existing FQHC which would be in full control of the health center, legally responsible for compliance with all FQHC requirements, and the billing agent for all services. The other financial advantages noted above for Option #1 would be applicable to this option, as well advantages accruing to the existing FQHC. Last, an objective review committee might look favorably on a new access point grant application from an existing FQHC to begin services at a satellite location because of the (presumably successful) track record of the existing FQHC in providing those services, especially in this instance in which the target community has no access to FQHC services at the present. Disadvantages: The conformance of this option to the Bureau of Primary Health Care s (BPHC) Affiliation policies is uncertain. The specific terms of the affiliation would need to be carefully reviewed against BPHC Policy Information Notice #97-27, and checked with BPHC for advice Final Report to the Berks County Community Foundation Page 14

16 and/or a ruling. In any case, this option presumes an existing, willing FQHC partner. The existing FQHCs nearest to Downtown Reading are the following: Welsh Mountain Health Center, New Holland, PA (Lancaster County) which serves a mostly rural population near the intersection of Lancaster and Berks Counties; SouthEast Lancaster Health Services, Lancaster, PA, which is a highly successful FQHC focused on serving the medical service needs of the City of Lancaster, and which is now undertaking a major expansion in providing primary care in conjunction with Lancaster General Hospital; Chespenn Health Services, Coatesville, PA (Chester County) which is a small, distant satellite site of Chespenn, a successful, longstanding health center serving Chester, PA, residents; Community Health and Dental Care, Pottstown, PA, which is new FQHC look-alike, still establishing itself in some fundamental ways; and Norristown Regional Health Center, Norristown, PA, a satellite site of the North Philadelphia based Delaware Valley Community Health which is not seeking to expand its operations beyond Norristown. Drexel cautions against pursuing this option at this time because of the complex business planning involved, and the many financial, management and clinical arrangements that would need to be negotiated assuming that a willing business partner from among the above, or other even less proximate, FQHCs could be identified. In general, Drexel sees no sufficient financial incentive for an existing FQHC to seek to expand operations into a Reading site location that is so distant and with a business partner with which it has no current relationship, nor past history of one. It could also prove distracting, disruptive, and perhaps ruinous if this option were pursued in parallel with efforts at implementing Options # 1 or # 2. However, if establishing a Berks County-based not-for-profit corporation and effective governing board for such an organization proves to be an insurmountable impediment, this option should be re-visited for consideration simply because it is possible -- if The Reading Hospital and Medical Center wished to pursue it and if a willing business partner were to be identified. By that point in time, however, the availability of new access point funding authorized by the Affordable Care Act might be coming to an end. Lastly, because the affiliation of the existing FQHC and The Reading Hospital and Medical Center might not comply, or appear to comply, with BPHC policy, there is the potential Final Report to the Berks County Community Foundation Page 15

17 for an objective review committee to look unfavorably at a new access point grant application to support this arrangement. Option #4 [not recommended at this time] The Reading Hospital and Medical Center could seek to have the Reading Health Dispensary become a contracted satellite site of an existing FQHC from either Montgomery or Lancaster Counties, without additional HRSA grant funding at the current time, accomplished through a procedural change in scope of project by the existing FQHC, with the potential for growth supported by HRSA grant funding for expanded medical capacity, at a future date. Advantages: This option presents the same advantages as Option #3, with one important additional one. A change-of-scope request can be submitted to the Bureau of Primary Care at any time, and can be effective from the date of the request. Disadvantages: All of the disadvantages identified for Option #3 also apply to this option, with one very important additional one. A change of scope action does not entail any additional federal grant funding to support the new satellite location. The lack of a new access point grant to support in part the operations of a satellite FQHC located at the Reading Health Dispensary would almost ensure that this option would not be financially viable without a substantial local financial contribution from one or more Berks County organizations, or until and unless the existing FQHC could apply for an receive an expanded medical capacity grant from HRSA. But as the name implies, this additional grant funding from an expanded medical capacity grant would also require an expansion in the scope and/or scale of health services then currently provided at the Reading Health Dispensary. In other words, the additional health center funding would have to pay for additional practitioners to provide services to additional patients. This would likely still leave the Reading Health Dispensary in a financially precarious position absent substantial fund raising from local contributors and likely obviating any incentive for an existing FQHC from another county to pursue this option. Summary Business Plans for Options #1 and #2 For business planning purposes regarding Options #1 and #2, data relevant to the location, organization and business operations of a prospective FQHC were requested and received from The Reading Hospital and Medical Center. Four models were developed using data for the Reading Health Dispensary (RHD), Pennsylvania specific FQHC data, and local information as Final Report to the Berks County Community Foundation Page 16

18 the basis for the assumptions that drive the models. The models considered the current situation in terms of expenses, FQHC productivity standards, and grant funded FQHC vs. lookalike status. The scenarios and options are: 1A FQHC Look-Alike at current RHD levels of staff, utilization and productivity 1B Grant funded FQHC at current RHD levels of staff, utilization & productivity 2A FQHC Look-Alike meeting FQHC standards for productivity and utilization (i.e., entailing a reduction in staffing) 2B Grant funded FQHC meeting FQHC standards for productivity & utilization (also entailing a reduction in staffing). Reading Health Dispensary - FQHC Analysis Option A Option B Scenario FQHC - Look-Alike FQHC - Grant Funded 1. Current RHD space, staffing and utilization Patient Service Revenue 1,828,140 1,828,140 Expense (3,205,631) (3,205,631) Net Income (1,377,491) (1,377,491) Total FQHC Benefit 0 857,632 Net Income after FQHC Benefits (1,377,491) (519,859) Fundraising Goal 200, ,000 Net Income after Fundraising (1,177,491) (319,859) 2. Current space and utilization meeting FQHC productivity standards Patient Service Revenue 1,828,140 1,828,140 Expense (2,765,883) (2,765,883) Net Income (937,743) (937,743) Total FQHC Benefit 0 805,507 Net Income after FQHC Benefits (937,743) (132,236) Fundraising Goal 200, ,000 Net Income after Fundraising (737,743) 67,764 Final Report to the Berks County Community Foundation Page 17

19 Note: the above estimates are based on current utilization rates and hours of operation, including continuation of the urgent care center after 4:30pm on week nights; but the health center grants are not intended to simply supplant existing funding or infuse new funding into an existing health service site. HRSA will require growth in utilization to qualify for a new access point grant. Drexel will present estimates for revenues and expenditures for a second year of FQHC operations if the project sponsors and The Reading Hospital and Medical Center choose to proceed with work on Option #1. Difference in Models The four models have consistent revenue assumptions, but expenses differ based on productivity and FTE s. The other driver of the models is FQHC grant funded status which allows offsets for certain expenses (and the addition of federal grant revenue). These benefits make operations more profitable, approaching break-even. Specifically, they include: Opportunity Benefit Federal Grant $650,000 Elimination of malpractice expense Federal Tort Claims Act Reduction of Pharmacy cost/better access 340(b) Pharmacy for patients Access to other federal, state and local Other Grants grant initiatives The first two benefits are available only to organizations receiving a Health Centers grant. The third and fourth may be available to an FQHC look-alike. Option 2B demonstrates that when the health center accrues the FQHC benefits noted in the chart above, and when FQHC utilization is optimized and productivity rates are met, the profitability of the organization approaches break-even assuming a local financial contribution, at least at the beginning. Assumptions When looking at potential revenue for these scenarios/options, Drexel started with data reported for the RHD: number of encounters (14352/yr 2008 figure); payer mix; staffing; and other expenses. (RHD did not include actual revenue or reimbursement rates as part of the data Final Report to the Berks County Community Foundation Page 18

20 submission.) FQHC data from HRSA (2007 Pennsylvania Uniform Data Roll-up) were also used to develop the revenue side of all 4 models, as shown in the following table: Payer Percent Rate Medicaid 54% $125 Medicare 22% $125 Private Insurance 11% $ 80 Self-Pay 13% $ 30 Revenue across the models is held constant in these models because the number of encounters does not change across the four models. The variable which did change most markedly was staffing costs in Scenario 2, reflecting a reduction in staffing to 24 FTEs to bring the encounters per provider into alignment with the FQHC productivity standards used by Medicare and by the Pennsylvania Department of Public Welfare in setting payment rates per encounter. Provider Productivity Physicians 4,200 Mid-levels 2,100 Expenses for the various models were developed using current figures from the RHD 2009 operating budget, as well as some common assumptions. An example of a common expenditure assumption is rent. Rent costs do not appear in the current RHD operating budget. An independent FQHC will have rent as an ongoing expense. A rate of $10/sq ft was used for the current 22,000 /sq ft facility. Staffing for the current" models (scenario 1) were based on the 27.5 FTE s currently employed at RHD. Salaries for the current models were derived from the RHD operating budget. Based on these figures and encounters and FTE s by personnel type, personnel expense was estimated, including fringe costs. The fringe benefit rate used was based on the average for Pennsylvania health centers: 25%. The FQHC standards models (scenario 2) are staffed at levels consistent with FQHC productivity guidelines and the 2008 PA State Roll-up. This change from the current models decreased the total number of FTE s, which in turn significantly reduced personnel costs. Final Report to the Berks County Community Foundation Page 19

21 Malpractice insurance for medical providers was included at a rate consistent with Pennsylvania averages, not at the hospital self insured rate since RHD would no longer be eligible for coverage via The Reading Hospital and Medical Center policy. All other expenses were assumed to be at the RHD 2009 operating budget amounts. If expenses were not included or missing, they were estimated at going rates and based on encounters (e.g. for labs and supplies). Long-term, Ideal Model As noted above, each of the four models depicted here assume that current utilization will be constant (at least in year 1) an unrealistic projection over time, for several reasons already discussed. The facility s clinical space (including 18 exam/treatment rooms) is currently underutilized, and hours of operation not optimized. If you assume that the demand for services from the residents of the 12-census tract service area will grow, both quickly and steadily, and if the facility exam space were used at full capacity, the following model depicts a financial scenario that is hypothetically possible. Reading Health Dispensary - FQHC Analysis FQHC At Full Capacity Patient Service Revenue 4,547,423 Expense (3,680,779) Net Income 866,644 Total FQHC Benefits 906,132 Net Income after FQHC Benefits $1,772,776 In short, the potential for operating a financially sound health center, receiving enhanced Medicare/Medicaid/CHIP funding, and optimizing the resources available at the 838 Penn Street site, is very good assuming that the health center is attractive to and patronized enthusiastically by the community it serves. In fact, the picture presented above could be even more appealing (perhaps over a decade or more), if the provisions for expanding Medicaid authorized by the Affordable Care Act do go into Final Report to the Berks County Community Foundation Page 20

22 effect in The Urban Institute estimates that Medicaid enrollment will grow by 27.4% nationally, reducing the number of uninsured persons under 133% of poverty by 11.2 million a 45% reduction in the number of persons in this income group who are currently uninsured. In Pennsylvania, the Urban Institute estimates a slightly more modest effect: a 21.7% increase in Medicaid enrollment, and a reduction in the number of uninsured by 282,000, or 41.4%. Applying just the estimated percentage increase in Medicaid in Pennsylvania (21.7%) to the revenue projections shown above for the Reading FQHC (which are based on 55% of RHD users being Medicaid patients, now) could mean an increase in Medicaid patient revenue of more than $300,000, annually. At a not distant future point in time, the new FQHC should also consider seeking a Service Expansion Grant from HRSA to provide funding to expand access to mental health/substance abuse and oral health services, either by direct service delivery or through collaborative partnerships with other community-based providers of these services in Downtown Reading (as one example, in collaboration with the Berks Counseling Center). Health centers are not required to provide these services directly; but they must arrange for their patients to receive these services via referral arrangements, from the outset. A Service Expansion Grant would be a natural and effective means for a Reading FQHC to acquire the resources to meet these service needs of its patients, and might be the means of building a collaborative network of care with other safety net providers. Next Steps Assuming that The Reading Hospital and Medical Center wishes to pursue Option #1 at this time, the following are among the key steps that need to be taken, or at least considered for planning purposes, as quickly as possible. The Reading Hospital should appoint a project director and taskforce team to begin the intra-organizational work necessary to make the transfer/conversion of the Reading Health Dispensary to a new not-for-profit FQHC organization. The Reading Hospital should continue with the legal counsel necessary to accomplish this transition. The Reading Hospital, Berks County Community Foundation, or some combination of interested organizations should begin the process of incorporating a new not-for-profit Final Report to the Berks County Community Foundation Page 21

23 organization to become the FQHC sponsor and HRSA grant applicant, including application to the IRS. This new organization should register now -- with Grants.Gov to enable submission of an application for a Health Centers New Access Point grant (HRSA , application due November 17 and December 15, 2010, awards to be made by August 2011), and for a Planning grant, as well (grant program announcement now pending). One or all of the above organizations should identify an advisory committee that could, in turn, select the members of the new FQHC Governing Board and appoint a project director for this initiative who might become the executive director of the new FQHC, at least on an interim basis. The project advisory committee should contact the Pennsylvania Association of Community Health Centers (PACHC) for receipt of technical assistance, both directly from the PACHC and by referral. The project advisory committee should invite the Regional Health Administrator of HRSA to discuss the plans outlined in this study and presentation, and to seek his advice and support. The Reading Hospital should validate the financial projections in Drexel s business plan, substituting its actual financial information in those instances when Drexel relied on PA health center averages or other revenue and expenditure estimates. An assessment of the St. Joseph Hospital s financial prospects for participation in the FQHC could also be undertaken if the Hospital wishes. If the key stakeholders in this project are committed to going forward with these recommendations, efforts to publicize the initiative in the community should be undertaken, as soon as possible, through individual contacts, community meetings, and news media attention. Once funded by HRSA, the new FQHC should also seek a Service Expansion Grant from HRSA to expand access to behavioral health and oral health services, either by direct service delivery or through collaborative partnerships with other community-based providers of these services in Downtown Reading (as examples, in collaboration with the Berks Counseling Center for behavioral health and with St. Joseph s Hospital for dental care). Final Report to the Berks County Community Foundation Page 22

24 The new FQHC could also seek either another New Access Point or an Expanded Medical Capacity grant from HRSA to expand medical service capacity at the St. Joseph s Downtown Campus, following receipt of an initial New Access Point to support FQHC services at the Reading Health Dispensary, if St. Joseph s Hospital chooses to become a service delivery site for the FQHC. Final Report to the Berks County Community Foundation Page 23

25 APPENDIX A Medically Underserved Area, City of Reading Final Report to the Berks County Community Foundation Page 24

26 APPENDIX B Data Sources Pennsylvania Health Insurance Survey, Market Decisions and 2009 Pennsylvania Uniform Data Set Roll-up 3. Behavioral Risk Factors Surveillance System: Behavioral Health Risks for Local Areas, Berks County Health Needs Assessment, Center for Social and Economic Research, West Chester University of Pennsylvania, August Berks County Health Profile Federally Qualified Health Center Community Assessment Worksheet, Naylor-Adams Consulting. 7. Healthy People 2010: Status Report. 8. Holahan, John and Headon, Irene, Medicaid Coverage and Spending in Health Reform: National and State-by-State Results for Adults at or Below 133% FPL, Urban Institute, May Medical Assistance Eligibility Statistics August 2010, Division of Statistical Analysis, Bureau of Program Support, Department of Public Welfare 10. U.S. Census: American Community Survey, Small Area Health Insurance Estimates, 2009 Population Update Estimates. Final Report to the Berks County Community Foundation Page 25

27 APPENDIX C - BERKS COUNTY Subdivisions Final Report to the Berks County Community Foundation Page 26

28 APPENDIX D -- BERKS COUNTY - Percent of Persons Below the Poverty Level, 2000 Final Report to the Berks County Community Foundation Page 27