On Thursday, October 31, 2019, the St Croix Chamber of Commerce Executive Committee met with Governor Albert Bryan and his team to discuss moving the Juan F. Luis Hospital to a public/private partnership and restructuring to a Hospital-Owned Physician Practice Mode. This recommendation stems from the Juan F. Luis Hospital’s (JFL) decades-long financial struggles further complicated by extensive damage by Hurricane Maria.
The problem of failing hospitals due to economics is not unique to the US Virgin Islands. Since January 2005, 160 rural hospitals, mainly in the central to southern states have closed. [Sheps Center, “113 Rural Hospital Closures: January 2010 – Present”] “Since 2000, hospitals of all types have provided more than $620 billion in uncompensated care to their patients.” [American Hospital Association, “Uncompensated Hospital Care Cost Fact Sheet – January 2019”]
What is Uncompensated Care?
Uncompensated care is an overall measure of hospital care provided for which no payment was received from the patient or insurer. It is the sum of a hospital’s bad debt and the financial assistance it provides. Financial assistance includes care for which hospitals never expect to be reimbursed and care provided at a reduced cost for those in need. A hospital incurs bad debt when it cannot obtain reimbursement for care provided; this happens when patients are unable to pay their bills, but do not apply for financial assistance, or are unwilling to pay their bills. Uncompensated care excludes other unfunded costs of care, such as underpayment from Medicaid and Medicare.
In the case of the United States Virgin Islands, in consideration of our geography, closure for St Croix or St Thomas is simply not an option.
Stateside, hospitals must compete for patient care from physicians as they have multiple choices within a reasonable distance. Within urban areas, they are often in proximity, increasing competition. However, on an island like St Croix, there is little to no direct competition for the average citizen. And virtually none for cases that present to the emergency room.
The Medical Staff Model
In 1982, when the VI Government obtained funding to build Juan F Luis Hospital (JFL) on St Croix, competition to attract doctors to the Territory to staff the Hospital was challenging. At that time, they adopted the “The Medical Staff Model”. This model allowed physicians to maintain their own private practices and, at the same time, work within the hospital. With the Medical Staff Model, physicians bill their patients directly via their private practice. A noted benefit of this model is that physicians can directly track their patients through inpatient and outpatient care. However, the downsides are that doctors work fairly autonomously with no incentives to benefit the hospital and the hospital only generates revenue from the usage fees (rent) for the physician to use the facilities. In other words, physicians are paid a below-market salary by the hospital but are able to supplement that salary by billing directly for their services. In short, the hospital receives no financial benefit from the physician’s services and the physician has no incentive to increase hospital revenue.
As a result, the salary structure at JFL is not competitive to recruit off-island physicians and specialists to JFL because they lack an established local patient base necessary to offset the minimal salary offered. Additionally, the hospital loses out on a substantial revenue stream that could be generated if physicians were employed by the hospital and incentivized to create modern hospital revenue sources. “For example, employed physicians should be more likely than independent medical staff members to cooperate with a hospital to improve the quality and/or to manage the costs of care for patients covered by capitated contracts.” [Casalino, Lawrence and James C Robinson, “Alternative Models of Hospital-Physician Affiliation as the United States Moves Away from Tight Managed Care”, 2003] Better hospital resources and services means access to better care for Crucians and Virgin Islanders.
The Hospital-Owned Physician Practice Model
The St Croix Chamber of Commerce encouraged the Governor and his team to investigate “The Hospital-Owned Physician Practice Model” where physicians are fully employed by the hospital and billing for physician services is generated by the hospital. Given the unique situation of our geographic constraints, the JFL Hospital does not have to contend with competing hospitals in regard to emergency or acute care. However, for those patients with chronic or long-term care issues, many seek alternative care in the contiguous 50 states creating a wide net of competitive hospital care.
Ultimately, the current model results in JFL handling a higher percentage of emergent cases, many of which fall under uncompensated care due to the high level of low income and uninsured residents in the Territory.
St Croix Chamber of Commerce Position on JFL
The St Croix Chamber of Commerce recommended to the Governor and his team to further investigate and consider the more modern “Hospital-Owned Physician Practice Model“. In this case, physicians are directly employed by the hospital at a competitive market rate salary. This would put JFL in a better position to recruit Board Certified hospital and emergency room doctors to the Territory.
In addition to and complementing the more modern Hospital-Owned Physician Practice Model, the Chamber also strongly recommended the Governor work towards a public-private partnership for JFL.
Public-private partnerships are not a new concept and have been introduced in many rural communities throughout the United States. Benefits include securing immediate funding to improve in-house facilities while leveraging private-sector expertise and best practices. Currently, JFL is in an excellent position to negotiate this scenario as FEMA is set to fund the construction of the new hospital structure that would be owned by the Government of the Virgin Islands. The current timeline is for the Juan F Luis Hospital staff to be operating out of the modular hospital in May 2020. At that time, the construction of the new hospital should break ground. A public-private partnership at this time would allow for an experienced entity to establish best practices in medicine at the newly built facility.
This scenario would mean potential benefits to the VI Government to include savings of direct appropriations to both hospitals (JFL and Schneider Regional on St Thomas) of approximately $50 million, in addition to appropriations for WAPA and IRB withholdings.
Currently, over $200 million in healthcare revenue leaves the Territory for stateside hospitals that are primarily paid by CIGNA Government Health Insurance for VI Government employees. A significant portion of these dollars can be circulated in the local economy under a public-private partnership where the delivery of hospital care would be improved.
The percentage of low-income residents, in this case, is a benefit to the Territory. Medicare & Medicaid reimbursement rates of the Virgin Islands are among the highest in the United States. As a result, our hospital system should act as a positive revenue and jobs generator, as opposed to negative costs to the VI Government.
“We were encouraged with the open dialogue and are confident the Governor and his staff are committed to solving this problem for the people of the Virgin Islands. The Chamber will continue to advocate for its members and healthcare is at the top of our priorities,” stated Chamber Chair, Ryan Nelthropp, following the meeting.
It is the St Croix Chamber of Commerce’s position that this is the optimal time for Governor Bryan to work towards restructuring Juan F. Luis Hospital from top to bottom to benefit the residents of and visitors to St Croix.