Center for Studying Health System Change

assachusetts has a long history of promoting broad access to health care through cultivation of a strong, well-supported network of safety net providers. The Boston area has 26 community health centers (CHCs) and two major hospitals that provide a disproportionate share of care to the uninsured and to Medicaid recipients: Boston City Hospital (now a part of Boston Medical Center) and Cambridge Hospital, a public hospital owned by the city of Cambridge.

Safety net providers derive the bulk of their revenues from two public funding sources: the Uncompensated Care Pool and Medicaid. As discussed earlier, the funds in the Uncompensated Care Pool have been seriously depleted in recent months, and emphasis is being placed on expanding the Medicaid program to provide coverage for many of the uninsured.

Although recent state legislative changes provide for increased funding to the Medicaid program to care for an expanded pool of eligibles, safety net providers face competition from managed care plans to capture these revenues. About one in seven Medicaid eligibles in the Boston area is currently enrolled in an HMO. Although current numbers of enrollees in managed care options are small, Medicaid is expected to account for a sizable share of the HMO market by the year 2000. Each of the three large health plans, BCBSM, HPHP and Tufts Associated Health Plan, has a contract to serve the Medicaid population.

The migration of Medicaid recipients from traditional fee-for-service arrangements to managed care options poses significant challenges and opens up new opportunities for CHCs. In response, CHCs collectively and individually have pursued various alternatives for protecting existing and attracting new revenue sources, or, as one respondent explained, hedging their bets. Under the auspices of the Massachusetts League of Community Health Centers, an HMO known as the Neighborhood Health Plan (NHP) was established during the 1980s. Somewhat constrained by its small size (about 40,000 enrollees), lack of capital and dependence on public funding sources (most enrollees are Medicaid), NHP is now trying to develop strategic partnerships with commercial plans. Many individual CHCs are also pursuing contracts with health plans and hospitals to participate in established provider networks that serve commercial and Medicaid insureds.

CHCs face serious competitive challenges as they adapt to the changes in public financing programs and new market dynamics. For a variety of reasons (e.g., provision of social and enabling services, productivity), their costs appear to be higher than those of many other ambulatory care providers. But they also have important strengths, including networks of geographically accessible and culturally sensitive providers with loyal patient bases that many AMCs are eager to tap. CHCs, it was also noted, represent a diverse group. Some will probably be very successful in adapting to change; others may not.

Boston City Hospital and Cambridge Hospital, which rely heavily on public funding sources, are taking steps to ensure their continued financial viability. As discussed earlier, Boston City Hospital recently merged with Boston University Medical Center to form Boston Medical Center, a hospital system with a more diversified revenue base and comprehensive array of services and capabilities.

Both public hospitals have also created managed care for the uninsured programs by enrolling uninsured patients in shadow managed care plans. Under these programs, uninsured individuals are treated as if they were enrolled in a managed care plan (e.g., individuals are assigned a unique individual identifier and a primary care physician and resource use is tracked). These programs are intended to serve several purposes:

• They provide uninsured patients with a medical home and coordinated health care services.

• They build patient loyalty to the hospital system in the event that these individuals are folded into Medicaid under future insurance expansions.

• The shadow plans generate utilization statistics and data on care-seeking patterns for the uninsured population that will be useful to the hospital system in negotiating capitation payments in the event that these individuals are enrolled in Medicaid managed care.