BusinessTN

Scott Gammons never expected the medical device company he manages in Loudon, Tenn., to become a poster child for the positive and negative effects of health reform on the state's health care industry.

Gammons hopes federal health care reform efforts will create new markets for Adroit Medical Systems Inc., whose 75 employees make devices that regulate patients' temperatures during surgery, as well as other products at a factory outside Knoxville. At the same time, Gammons fears being hit with new taxes intended to help pay for the cost of reform.

"We dread health care reform. Is it going to burden us further?" Gammons asks. "At the same time, we welcome it if it gives us a fair shot at new markets."

Gammons isn't the only one who sees mixed results from the Obama Administration's efforts to make health care more available and more affordable for millions of Americans. Reform and the politics surrounding it are creating potential winners and losers in Tennessee's health care industry.

Washington politics has left Ron Marston's door, but no one is answering. HCCA is offering itself as a small part of the solution to the nation's looming nursing crisis, which will be exacerbated by reform.

When up to 47 million newly insured Americans start appearing at doctor's offices and hospitals, there won't be nearly enough nurses to care for them, Marston says. In fact, Peter Buerhaus, a researcher and faculty member at the Vanderbilt School of Nursing, predicts a shortfall of 260,000 nurses in just a few years.

HCCA's solution to this potential shortfall is to recruit nurses overseas -- chiefly from the Philippines, India, the UK and Canada -- but the company has been caught up in the politically charged debate over immigration. In addition, conservatives and liberals alike in Congress don't want to be seen encouraging foreign competition for health care workers during the recession. As a result, HCCA's business is on hold.

"We're in a fantastic spot," Marston says. "We have 1,000 nurses in the pipeline, 600 ready to come to the U.S. today, and they can't get here because they can't get visas."

He expects the situation to continue until at least the middle of next year.

"This has hurt us badly," Marston admits. "We’ve had layoffs, which hurts the state of Tennessee."

Tom Stephenson, meanwhile, couldn't be happier. His company, Nashville-based Healthcare Management Systems Inc., is busy selling its newly developed electronic medical records (EMR) system to hospitals that hope to qualify for reimbursement under the American Recovery and Reinvestment Act. The act sets aside billions of dollars for hospitals and physicians' practices that invest in paperless patient records. Electronic medical records are an essential part of the administration’s goals of making the health care system more efficient and safer for patients.

"There's a lot of activity. Everybody's looking into it," Stephenson says. "It's going to have a two- or three-year impact on our business."

EMRs save money and improve safety, but a major segment of the health care industry is being largely excluded from ARRA funding. Community-based behavioral health organizations like Nashville-based Centerstone rely on highly trained clinicians to provide mental health services, but only physicians qualify for ARRA payments that add up to as much as $44,000 per doctor.
Centerstone, the nation's largest nonprofit provider of community-based behavioral health services, can't get the payment for the nearly 1,300 clinicians who work directly with patients at facilities throughout Tennessee and Indiana. Its 50 psychiatrists, who are physicians, do qualify.

Centerstone already has its own EMR in place, but being left out of ARRA funding will make it harder for smaller, less sophisticated mental health providers and their patients to benefit from the technology, says Dennis Morrison, CEO of Centerstone's Research Institute.

"Health reform is really insurance reform—who pays for what," Morrison says. "I'm very discouraged, but at the end of the day, it's all about cost."

Decisions in Washington are reshaping the health care system in other fundamental ways, including the relationship between doctors and hospitals, say Fletcher Lance and Mark Cianciolo, with the consulting firm North Highland.

"There's a gold rush on right now for hospitals to buy physicians' practices or to align with them," Lance says.

Many doctors don't have the cash or the expertise to invest in the expensive electronic medical records they'll need in the future to fully participate in Medicare, the federal insurance program for Americans 65 and older. It's easier to affiliate with a hospital, Cianciolo says.

For the hospitals, it's a matter of protecting market share. Millions of people with new insurance cards will want to see a physician, but it takes years to train a new doctor. Cianciolo does not think supply will meet demand, and buying practices helps hospitals be certain they will have medical staff on hand.

Vanderbilt's Buerhaus, who recently published a study in the Journal of the American Medical Association that concludes the physician workforce will shrink over the next decade, says reform will add to the pressure on the health care system.

"Demand will grow, and we'll be looking at shortfalls developing. If that happens at the same time the nursing shortage develops, this isn't going to be pretty," he says.

For hospitals, however, reform holds the promise of a brighter future financially. Nonprofit and for-profit hospitals alike have struggled for years with bad debt from uninsured patients who could not pay their bills. If those patients have insurance, their bills will be paid, Lance says.

For Medicare Advantage providers like Brentwood-based Windsor Health Group Inc., the future of that program is less certain. Advantage providers receive extra payments in return for providing enrollees with services that are not provided by basic Medicare, such as dental and vision plans. Health reform would cut about $170 billion from the Advantage budget over 10 years and use it to fill the Medicare prescription drug "donut hole" and to provide other services.

Windsor, which has 61,000 Medicare Advantage enrollees in Tennessee and four other states, is busy considering new products that it might offer, says John Sowell, Windsor's vice president.
Like Tennessee's other health care providers, Windsor executives are looking for the upside to health care reform.

"Everybody’s examining ways to be profitable," Sowell says.