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Big Shoulders, Deep Pockets, Tightened Belts

Forty-five million Americans have no medical insurance - and the fallout for academic medical centers is jeopardizing the entire health-care system.

by John Howser

Cover FeatureFall 2007  |  Share This  |  E-mail  |  Print  | 
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Last winter Shane Thurman, a 42-year-old construction worker from Crossville, Tenn., became one among an estimated 45 million Americans without health insurance when he was dropped from the rolls of TennCare, Tennessee’s state-run Medicaid insurance program. Thurman’s employer didn’t provide health insurance, and his income wasn’t sufficient to meet his other basic needs and pay for medical insurance.

On Jan. 10, 2007, a few weeks after he lost his insurance coverage, Thurman was working on the roof of an old building in Crossville, helping to demolish it, when his body came into contact with an electrical transformer attached to a power pole. In a millisecond, the high-voltage electrical current grabbed his body and held him in its deadly grip for what felt like forever. When Thurman finally broke free from the current, he was thrown from the roof to the ground 30 feet below.

Thurman sustained critical electrical burns to 40 percent of his body. The fall broke most of his ribs and several vertebrae in his back. He was flown by Vanderbilt’s air ambulance, LifeFlight, 110 miles to the Vanderbilt Regional Burn Center where he spent the next 52 days.

“I wasn’t even aware I was alive for 48 days,” Thurman says. “I had eight or 10 skin grafts and four or five back surgeries.”

The accident left Thurman a paraplegic, paralyzed from the torso down. “I’m lucky to even wake up each morning,” he says. “The doctors told my family on several occasions that I was going to die. But I fooled them.”

Total charges for Thurman’s lifesaving care during the 52 inpatient days he spent in Vanderbilt University Hospital: $919,587.76.

Thurman’s will to survive certainly helped, but the real reason he’s still alive is the comprehensive and highly specialized medical care he received, without consideration of cost.

Vanderbilt opted to write off Thurman’s nearly $1 million in medical bills. “That tickled me to death,” he says, “because I have enough else to deal with.”

During fiscal year 2007, Vanderbilt University Medical Center provided $240 million worth of uncompensated medical care to patients.

Across the country, treating patients like Shane Thurman is becoming an ever-greater challenge for academic medical centers that are struggling with unprecedented growth in the numbers of uninsured patients.

“The increase in uninsured patients is placing the entire health-care system in jeopardy, and academic medical centers are especially vulnerable,” says Dr. John Sergent, BA’63, MD’66, professor of medicine and vice chair for education in the Vanderbilt University School of Medicine. “Our emergency departments are usually the major sources of emergency care for our communities. And we often are the sole providers of critical services.”

In addition to caring for patients like Shane Thurman who face immensely complicated courses of treatment, Vanderbilt University Medical Center each year provides uncompensated care to thousands of other medically uninsured or underinsured patients, young and old, whose health problems span the spectrum of illness and injury.

To put $240 million worth of free medical care into context, this dollar amount represents approximately 7.4 percent of the medical center’s $3.2 billion in gross patient revenue for the current fiscal year.

“Teaching hospitals end up bearing a disproportionate share of the cost of treating the uninsured because they are typically the only providers in a marketplace for trauma services, burn services, organ transplantation, and limb amputation due to mismanagement of diabetes,” says Paul Keckley, executive director for the Deloitte Center for Health Solutions in Washington and one of the nation’s leading experts on health-care economics and policy. Keckley helped establish, and is currently a professor in, the Owen Graduate School of Management’s Healthcare MBA Program.

“This type of care happens largely in the world of academic medicine,” Keckley says. “And the care of these patients represents one-half the impact of the nation’s total uncompensated care pool.”

“About 6 percent of VUMC’s patients have no form of health insurance,” says Warren Beck, VUMC’s vice president of finance for the clinical enterprise. “Another 1.5 percent may have insurance but cannot pay their portion of the balance after insurance.”

A Growth Industry

Middle Tennessee’s health-care industry is enormous–by most measures Nashville has evolved into the nation’s third-largest aggregation of health-care companies.

For the health-care market in which VUMC operates–competing with other nonprofit and for-profit hospitals for its patients–Vanderbilt provides more free care than all other Metro Nashville hospitals combined, including Baptist, St. Thomas, Centennial, Metro General, Summit, Skyline, Tennessee Christian and Southern Hills.

Vanderbilt University Hospital and the Monroe Carell Jr. Children’s Hospital at Vanderbilt operate at nearly 90 percent patient occupancy year-round. “One of our primary missions is to provide those unique and essential medical services that no other health-care facility in Middle Tennessee is willing to provide,” says Dr. Harry R. Jacobson, vice chancellor for health affairs. “Affording patients access to these services based strictly on someone’s ability to pay would be contrary to our philosophy and our mission.”

Over the last 12 years, the significant role VUMC plays supporting TennCare, and its commitment to providing care for the uninsured, has positioned Vanderbilt as Nashville’s charity hospital and Tennessee’s largest provider of Medicaid services.

The Decline of Employer-Sponsored Health Insurance

While TennCare has presented a significant challenge for Vanderbilt as it copes with a growing population of uninsured patients, it’s not the only factor. Compounding the problem are three significant trends that are producing huge numbers of patients unable to pay their medical bills: a decline in the number of employers who provide health benefits; more workers who carry modest health insurance on themselves but not for family members; and an influx of millions of uninsurable immigrants.

As more Americans struggle to find a way to access affordable health insurance, changes in the insurance industry and in employer-based insurance programs are causing more of the cost for health care to be shifted to enrollees. The percentage of Americans who are uninsured keeps rising largely because the percentage of people with employer-sponsored coverage continues to decline.

And therein lies the fundamental systemic flaw in our nation’s health insurance delivery, says Keckley–our dependence on employers to provide health insurance. “Only the U.S. and a few other nations such as New Zealand have similar systems of employer-sponsored health insurance. But there is no law in our country that says employers must provide health insurance.”

Approximately 60 percent of U.S. employers now provide health insurance. The 40 percent that do not offer insurance tend to employ large numbers of hourly workers and have substantial employee turnover.

As health-insurance costs keep rising, so does the number of employers that offer health insurance only for the employee but not for the employee’s family. The average health-insurance premium for a family without employer-provided coverage is about $1,000 per month.

No wonder half of all the nation’s involuntary bankruptcies are the result of medical bills, says Keckley.

“Horrible traumatic accidents most often happen to the working class,” says Dr. Jeff Guy, director of Vanderbilt’s Regional Burn Center and a member of the team of physicians and nurses who saved the life of Shane Thurman. “Unfortunately, it’s people like Mr. Thurman who are in that abyss and ineligible for health insurance through their employer, or through any other form of assistance.”

As access to various normal avenues to health insurance has dwindled over the last several years, Guy’s burn program has been left to cope with more highly resource-intensive patients with no insurance.

Guy oversees the only dedicated burn-care facility in Tennessee, and the largest burn center in several adjoining states. Burn care is so expensive that many hospitals–including every health-care facility in the state of Mississippi–have backed away from providing this service. Even one patient can make a huge impact on the bottom line, and Guy is forced to deal with the economic challenges of treating several Shane Thurmans each year.

At the same time more employers are opting out of offering health insurance, some states, like Tennessee, are aggressively working to control their Medicaid spending through measures such as denying insurance coverage or capping reimbursement fees.

“We’re at a point where Medicare and Medicaid are now paying less than the cost of care for the lives they cover,” says Keckley. Reimbursement providers that may not match the cost of care include Medicare, Medicaid, Worker’s Comp and SCHIP (State Children’s Health Insurance Program).

Charging Peter to Treat Paul

“That shortfall in reimbursements, in combination with the growing number of uninsured individuals, is forcing doctors and hospitals to try to make up the difference on the backs of employers who do provide a benefit,” Keckley says. “What we are facing is a perfect storm, a meltdown.

“We are asking a third of the people who use the system and who have insurance to pay for the other two-thirds, either in full or in part.”

Shifting costs to paying patients is undeniably a part of the budgeting strategy for medical centers like Vanderbilt. But, fortunately for all Vanderbilt patients, recent unparalleled growth has allowed it–so far–to combat major changes in Tennessee’s health-care policy.

In fiscal 2007, VUMC’s hospitals recorded 50,716 inpatient discharges, its emergency departments treated 98,107 patients, and 1,095,559 outpatients were seen in its clinics. Demand for services remains so high that in January, VUMC embarked on a $235 million construction project to erect a third inpatient tower on Vanderbilt University Hospital. The new tower will add 141 inpatient beds, new operating rooms, procedure rooms and intensive care units.

“For the last two years, we have been dealing with near double-digit volume growth across all major indicators,” says Warren Beck. “Whether it is inpatient admissions, outpatient visits, surgery or emergency-department visits, this growth has allowed us to meet our obligations and improve our ability to conquer diseases like cancer, diabetes and heart failure. If we hadn’t had this growth, we would be in a horrible situation.”

Managerial oversight during the past five or six years also has helped Vanderbilt to cope with a huge increase in uninsured patients. Efforts to add inpatient and outpatient capacity–through new clinic space and the recruitment of new faculty, for example–have allowed new growth. More patients overall means more paying patients to help offset those who cannot.

Operations-improvement initiatives that began in the early 1990s and ongoing efforts to provide the best care in the most efficient manner (called “best evidence medicine” within the industry) have so far allowed the medical center to provide services and still finish each fiscal year in the black. Every year, though, the financial picture becomes more challenging. Changes with Tenn-Care in August 2005 increased uncompensated care by $87 million in fiscal 2006 and by an additional $45 million during fiscal 2007. That sort of growth in uncompensated care isn’t sustainable.

Virtually all of VUMC’s clinical programs, says Beck, have seen growth in the number of uninsured patients they treat due to changes TennCare made in 2005. Trauma and burn-care services, cardiology, orthopaedics and general medicine have all felt the impact, with the division of trauma and surgical critical care hit the hardest. But the medical center has made an effort to ensure that clinical programs shouldering a greater percentage of uninsured patients are not penalized for financial performance based on their predicament.

“In order to recoup a portion of lost revenue, we are placing an emphasis on growing higher-margin services and offering a broader menu of services that brings insured patients into the hospital,” Beck says. “We’ve learned that we’re far better off to have our margin spread across all our services rather than rely on just a few.”

The Road Ahead

“Clearly, one of our ongoing challenges is figuring out how to better manage the population of uninsured patients,” says Beck. “We need the state to develop a broader network of doctors and hospitals participating in TennCare so patients don’t have to travel long distances to come to Vanderbilt. Another initiative we have pursued is working with Nashville’s Emergency Medical System to make sure patient transports by Metro EMS are rotated from hospital to hospital–not just brought to Vanderbilt. But implementation can be slow and difficult to monitor.”

At the same time Vanderbilt is taking on an ever-growing number of uninsured patients, Tennessee’s state treasury is sitting on a huge budget surplus. A large pot of money in reserve probably means drastic changes to TennCare are unforeseen for the time being, Beck says.

“And, optimistically, this might indicate a possibility of some form of relief in the TennCare program–perhaps an expansion of benefits offered through TennCare’s new program for employees of small businesses called Cover Tennessee,” he adds. “Something like that might push excess reserve funds back to the hospitals and doctors that are bridging the gap for so many of the working folks who are uninsured.

“The clinical programs we want to provide are very expensive, high-acuity programs you don’t see in community hospitals. If we are the only provider in the region who offers them, then everyone needs to have access,” Beck says.

Jeff Guy likens his role and responsibility to that of a park ranger in a national forest. “We have to be good stewards of our resources so those resources will be around for all of us,” he says. “We have never denied anyone access to burn care based on their ability to pay, and we won’t.”

Until academic medical centers like Vanderbilt and their patients get some form of relief, says John Sergent, “virtually every doctor I know will continue to be an amateur social worker trying to help uninsured and underinsured patients get the care they need.

“Tax credits, medical savings accounts, purchasing pools for small businesses and other ideas have been floated,” he adds, “but it is unlikely that any of them would have a significant impact on the uninsured.”

Keckley says flatly, “There are no solutions that do not require us to think about funding some level of benefit for those 45 million people who are uninsured.”

Americans already spend more money per capita on health care than any other country, says Vice Chancellor Jacobson. But he doesn’t believe the entire responsibility should fall on the state or federal government. Better cooperation between health-care providers who are focused on patient care and insurance companies who are focused on the bottom line could help. “Eighteen percent of health-care costs goes to insurance companies getting their money, and 2 percent goes to the provider battling the insurance company.”

And more health-care providers need to step up to the plate, Jacobson adds. “Hospitals and doctors need to share more evenly the burden of caring for uninsured patients, rather than leaving it to the academic medical centers. If doctors were true to the Hippocratic Oath they took, they would take care of their fair share of Medicaid and TennCare patients and the load would be distributed more evenly.”

Small employers also should be asked to contribute to the solution somehow, says Jacobson. And patients themselves need to consider how their own behavior is driving up costs. “We overuse the health-care system. We run too many tests and give out too many prescriptions.”

“I don’t think anyone at Vanderbilt would want to say we have to start discriminating on trauma patients or premature babies based on their ability to pay,” says Beck. “Taking care of these patients is our mission, it’s our job, and the thing that keeps us coming to work every day.”

“It is our mission and our responsibility to heal people regardless of their ability to pay,” adds Jacobson. “For the moment, that means we have to work hard and be as efficient as we can be.”


© 2015 Vanderbilt University

Share Your VUpoint

Conversation guidelines: Vanderbilt Magazine welcomes your thoughts, stories and information related to this article. Please stay on topic and be respectful of others. Keep the conversation appropriate for interested readers across the map.

Dan DeVore, BA’68 (Atlanta) says:

I found this article interesting but misdirected. Heath care in the U.S. is the best in the world thanks to facilities like Vanderbilt. The federal government is the worst place to put money decisions for my health care or anyone else’s.

As a small business owner, I offer medical insurance to employees. They choose if they want it. I pay 50 percent of the premium. It is available for families, if they choose. I pay competitive prices for coverage that is better than average. I price my product and services so that I can provide this medical insurance. I also pay worker’s compensation, state medical and federal medical taxes.

Nowhere in the article do you discuss the pricing of health-care products or services. Health care is the only U.S. industry I know of that is not controlled or influenced by competitive price technology.

I am sorry for the suffering of individuals injured because of negligence or stupidity or carelessness. To suggest that government should pay for medical services because someone does not have health insurance is wrong. The Hippocratic Oath is clear. Doctors who take that oath are aware of what it says. I do not ask a doctor to pay for my individual judgments. Why should he ask me to pay for his?

As a final point, you buried an item about “uninsurable immigrants” in the middle of the article. Prohibiting illegal immigration would reduce the burden on the health-care system.

Providing health care for less than 15 percent of the population by raising taxes and wages for medical professionals who chose the profession and reducing local control of the health system makes no sense.

Billy France says:

This hospital has been great too me,they strive every day to be the best.Great staff from top to lower in all departments.Number one to me in all the world Thanks Jesus


State-Provided Health Insurance

The Dream and the Reality Collide

How did Vanderbilt's uncompensated care more than double over a two-year period? To a large extent the answer lies with Tenn-Care, Tennessee's state-run Medicaid program.

Launched in 1994, TennCare's concept and mission were noble-- to allow more Tennesseans access to health care through affordable health insurance. TennCare's plan was to use state-approved Managed Care Organizations (MCOs), whose responsibility was to provide access to care but also carefully manage costs.

The first two or three years were brutal for the state's health-care providers. Payments from MCOs to the providers were low and frequently slow to arrive. Many physicians in private practice, and also some clinics and hospitals, did their best to minimize their participation. Some opted out of the program altogether. Across the state the number of health-care providers who would accept TennCare patients shriveled, leaving fewer participating clinics and hospitals to cope with a growing TennCare population. Several of the TennCare MCOs wound up bankrupt, leaving providers such as Vanderbilt to settle for cents on the dollar.

After the state and the remaining doctors and hospitals participating in TennCare struggled through the initial turbulence, problems began to even out for health-care providers--but not necessarily for the state.

The plan developed into a program that was overly generous in some aspects. Thanks to concessions made by the state as a result of lawsuits, patients had unlimited access to prescription drugs. Pharmacy costs skyrocketed.

And because anyone in Tennessee who was denied health insurance by an employer, or denied for medical reasons by commercial insurance carriers, could get TennCare, patient rolls grew tremendously. TennCare was no longer sustainable without drastic changes.

In 2005, Tennessee Gov. Phil Bredesen went on a mission to rein in the state's TennCare spending. His initial proposal called for a sensible allocation of resources including limits on prescription drugs, an insistence on generic drugs and, in some cases, limits on the number of hospital visits in a given period.

Bredesen's plan was vehemently opposed by advocates for the poor who insisted on a standard of coverage for Medicaid recipients that exceeded the norms for business health-insurance coverage. In the end the Bredesen administration agreed to their demands to cover their needs with a more generous program of health benefits--at the expense of the working uninsured like Shane Thurman.

The result was program reform that removed ("disenrolled") more than 200,000 citizens from TennCare's rolls, drastically curtailed the program's pharmacy benefits, and closed enrollment to new patients for most adult Tennesseans. That left the state's essential-access hospitals--a group of six or so key hospitals, including Vanderbilt, that provide the bulk of care to TennCare patients--to shoulder the financial burden.

There aren't fewer patients since TennCare's disenrollment--only fewer patients who now have any health insurance.

High-Ticket Health Care

A sample of 2006 data from Vanderbilt's Department of Patient Accounting and Department of Finance offers plenty of illustrations of highly specialized, highly expensive care provided to uninsured patients:

Feb. 4 to May 23:

A 44-year-old man critically injured in a car wreck Total charges: $935,504.50

April 4 to May 3:

A 57-year-old man critically injured in a car wreck Total charges: $830,183.69

April 30 to June 16:

A 24-year-old man critically injured by gunshot wounds Total charges: $566,886.68

May 14 to July 10:

A 23-year-old man critically injured by gunshot wounds Total charges: $639,948.69

July 17 to Nov. 11:

A 36-year-old man critically injured in a car wreck Total charges: $560,548.82

Because they incurred catastrophic charges, VUMC chose to write off the charges in each of these instances.

The uninsured patients met financial criteria based on federal poverty guidelines.

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