If Grady Fails--The Crisis At Atlanta's Grady Health System Is A Symptom Of Bigger Problems In The U.S. Health Care System

Brian Klepper joins us again today this time with a post on Atlanta's Grady Health System. Grady is an inner city safety-net hospital now going to extraordinary lengths to remain open.

Brian makes the point that the Grady situation is by no means unique but instead represents a national issue as safety net hospitals struggle to maintain health care for the uninsured while being underpaid by their largest payers--Medicare and Medicaid. Here in the Washington area, in just the last couple of years we have seen the closure of a key inner city hospital and Prince George's Medical Center is currently struggling to remain open.

If Grady Fails
by Brian Klepper

In an extraordinary move last week, the politically appointed Fulton-DeKalb Hospital Authority, the governing body over Atlanta's Grady Health System, unanimously and voluntary stepped aside, to be replaced by a new non-profit corporation. Projecting a $55 million deficit this year, the hospital had just three weeks of cash on hand. It needs $300 million immediately for sorely needed renovations, and must deal with $63 million in accumulated debt to its biggest creditors, Emory University Medical School and Morehouse School of Medicine. New oversight was the predicate for a hoped-for financial bailout from business, philanthropies and financial institutions.

Other Atlanta hospitals are undoubtedly concerned that Grady will fail, and will probably do everything possible to support a bailout. The last thing they want is for Grady's patients to come to their facilities. Now would be a good time to rally business leaders and legislators, who nearly always go to fancier hospitals, which of course has been a big part of the problem.

Grady’s turmoil should be recognized as the first small shock of much larger seismic event, long in the making, a concrete sign of America's relentlessly intensifying health care crisis. The wrath falls on our most vulnerable - those with health problems or with few financial resources - as well as on the institutions and professionals that care for them.

Nearly every large and mid-sized city has a Grady that struggles with similar issues. In addition to being the health care resource to the poor, they are often academic centers - clinicians-in-training need SOMEBODY to learn on. They can be home to a region's highest expertise, particularly related to crisis care. Many house their community’s neonatal intensive care unit and burn unit, as well as the level 1 trauma center, which brings with it disaster preparedness responsibilities. These are precious services that we somehow EXPECT will be there when we need them. So if a safety net hospital closes, the loss to the community and the replacement resources required are immense.

Grady, like other safety nets around the country, isn't failing due to mismanagement, although some of that almost certainly plays a role. Instead, it is the slowly-boiled frog, its financial base eroded over decades as it increasingly became the hospital of the inner city, the center for care for Atlanta's low-income and uninsured residents. As governmental support steadily dwindled, demand for its services rose. Fully 75 percent of Grady's patients are on Medicaid, which pays less than the cost of care. Only 7 percent have commercial insurance.

Strained to the breaking point like other safety nets, Grady provides far greater levels of uncompensated and ambulatory care while generating far lower margins than non-safety net acute care hospitals. A study released earlier this year by the National Association of Public Hospital and Health Systems found that, between 1998-2004 and compared to non-safety net acute care hospitals, the average safety net provided three times the level of uncompensated care as a percentage of total expenses (20% vs. 5%), more than three times the volume of ambulatory care services (meaning emergency and outpatient visits), and saw their margins plummet so low (in 2004, 0.5 percent vs. 5.2 percent for non-safety nets) that investments to maintain infrastructure become difficult to impossible.

Safety net hospitals are famous for struggling through, but presumably there's a calculus here. As small businesses are increasingly priced out of the coverage market, and as state government, facing budget crisis, cut back on publicly funded coverage, the burden on the safety nets will continue to rise and the resources will continue to decline. At some point the demand-resource mismatch will give way, and some will topple. Their patients will seek care at other hospitals, which will simply transfer the burden elsewhere.

We can keep the safety nets afloat. The most logical solution would establish universal coverage for "basic" care services - we have to define what "basic" means - which would associate dollars with each presenting patient. We could also update the EMTALA laws that govern how emergency patients are seen, so those seeking minor care can be managed in less expensive settings.

But these answers don't seem likely at the moment. Despite current rhetoric, universal coverage legislation is doubtful unless we can find ways to significantly drive down cost. Legislation that drives out unnecessary health care spending would reduce health industry revenues, though, an unlikely prospect so long as lobbyists drive Congressional policy.

Still, we should think deeply about what Grady's troubles really mean, and consider this case not in isolation, but as possibly representative of systemic forces. Without significant system change, we could see more safety nets falter in the next few years. Each community where a failure occurs will gradually appreciate the importance of its loss. As the poor turn to the remaining hospitals for care, the cascading impacts on the larger system could severely test America's commitment to care that is independent of an ability to pay.

And that would challenge our core values as a nation.