How Money Fuels Racism In Health Care

Hospitals in low-income communities are often starved for resources. And that makes it harder for people of color in parts of Chicago to get medical care.

Safety Net Hospitals
Paula Friedrich, Katherine Nagasawa / WBEZ
Safety Net Hospitals
Paula Friedrich, Katherine Nagasawa / WBEZ

How Money Fuels Racism In Health Care

Hospitals in low-income communities are often starved for resources. And that makes it harder for people of color in parts of Chicago to get medical care.

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As part of the 2020 Citizens’ Agenda project, WBEZ is reporting on the issues you told us you care about most ahead of November’s elections. Many of you want elected officials to address the racial inequities in health care underscored by the COVID-19 pandemic. This reporting was driven by audience responses to our Citizens’ Agenda Survey.

The COVID-19 pandemic laid bare racial disparities in health care that were generations in the making.

There’s a host of factors fueling inequities, but a key one is a lack of money for hospitals that mainly treat low-income people of color.

WBEZ talked to leaders at these so-called safety net hospitals, to state officials, and to health policy experts and lawmakers to explain how funding contributes to racial disparities – and what they can do to address it.

A critical mission – with big challenges

Safety net hospitals live by this mission: Treat anyone who walks in, regardless of whether they can pay. In Chicago, these medical centers are usually on the South and West Sides, where people often lack good-paying jobs, grocery stores and affordable housing. They also don’t have enough family doctors to keep tabs on diseases like asthma and diabetes, which are far more common in these communities than in wealthier parts of the city.

Safety net hospital patients typically are poor, elderly or people of color. They usually don’t have insurance, or a significant number of them have government-funded insurance. During COVID-19, these hospitals – which don’t have fancy modern buildings or armies of specialists like richer hospitals do – became a lifeline for the most vulnerable patients.

In Chicago, the novel coronavirus has killed Black and Latino residents more than any other racial groups, public health records show.

All of this means safety net hospitals are constantly starving for resources. And they’ll be even worse off if the U.S. Supreme Court repeals the Affordable Care Act, which generated a desperately needed infusion of money for them.

That also threatens the patients they treat, who are sicker and die earlier than in more affluent and whiter parts of Chicago. The pandemic only underscored those long-standing problems.

“We’re at the point where it’s like, don’t talk to me about it, show me,” said Rev. Julian DeShazier, who leads a community advisory council to University of Chicago Medicine in Hyde Park. “You could have a banner covering the entire building and if the people going inside of there are still dying 30 years earlier than folks who live downtown, then that’s not doing anything.”

St. Bernard Hospital in Englewood illustrates safety net hospitals’ financial predicament. About 80% of its patients are on Medicaid. But the hospital’s reimbursement from the government for providing care to Medicaid patients only covers about half of what it costs to treat them, CEO Charles Holland said. Over the last six years, St. Bernard has piled up about $35 million in operating losses.

“Reimbursement through Medicaid doesn’t keep up with the cost of care, and the cost of the escalating requirements in health care,” Holland said.

He added to that list the cost of staff, hiring doctors and keeping on top of quality control measures.

“We’re operating out of 50, 60, 70-year-old buildings that … continually need to be maintained,” Holland said.

He emphasized that money is only a part of what fuels racial disparities in health care. Public health officials have documented how everything from the lack of a stable home, food availability – and even Divvy bikes – contributes to a person’s health.

Diabetes by Census tract map 2016
A 2016 map shows stark differences in the percentage of Chicago adults who have diabetes based on Census tract. (Courtesy of Chicago Department of Public Health)

The struggles of getting paid enough

Many safety nets get a significant amount of their revenue from the Illinois Department of Healthcare and Family Services and private insurers that contract with the state. HFS runs the Medicaid program. Hospitals are paid out of various buckets, and safety nets get a financial boost because they treat low-income patients.

Despite safety nets’ complaints about inadequate funding, HFS representatives painted a different picture for WBEZ. The department provided a document that shows the state is paying most safety net hospitals in Illinois more than what they spend to treat Medicaid patients.

For example, St. Bernard is getting reimbursed $1.18 for every dollar it spends on Medicaid services, the state said. In other words, these hospitals – at least on paper – look to be profiting off of Medicaid.

“If the state Medicaid program was paying this much money, then we wouldn’t be facing financial hardships,” St. Bernard Chief Financial Officer Robert Springer said.

The state has reimbursed Mercy Hospital in Bronzeville on the Near South Side 114% of its Medicaid costs in 2020. Yet that hospital says years of losing money and patients are the primary factors behind its plan to close next year.

Even if a hospital was receiving more money from the state to cover how much it spends on Medicaid services, there are other factors that hurt these medical centers financially.

Paying specialists is expensive. Hospitals have to eat the cost of treating patients who can’t afford their care and don’t pay their bills. And like many hospitals nationwide before the pandemic, hospitals were getting emptier as they lost patients to cheaper urgent care centers and pharmacy clinics.

Mercy Hospital
After years of losing money and patients, Mercy Hospital on Chicago’s Near South Side plans to close next year. Inadequate funding for so-called ‘safety net’ hospitals — which serve mostly low-income populations and people of color — contributes to racial disparities in health care. Mark Susina / Flickr

When COVID-19 started raging here in March, hospitals stopped elective surgeries – a main way they make money – to make room for patients sick with the coronavirus and to prevent it from spreading.

Patients, and the money they bring in, are slowly making their way back. But the crisis hobbled hospitals that were already ill-equipped to handle more fiscal problems.

The struggles of getting paid at all

It’s one thing for hospitals not to get reimbursed enough for treating patients. Many safety nets also struggle to get paid at all.

A lot of the current problems in Illinois started after former Republican Gov. Bruce Rauner largely outsourced the Medicaid program in hopes of saving money while helping enrollees get healthier. The majority of Illinois Medicaid’s roughly 3.1 million enrollees are overseen by private insurance companies with state contracts.

For years, hospitals and doctors have complained that insurers take months to reimburse them – and sometimes don’t pay them back at all. In some cases, community physicians have closed their practices, partly blaming insurers for their demise.

Saint Anthony Hospital, a safety net near the Little Village neighborhood on Chicago’s Southwest Side, is an example of how far this financial headache can push a medical center.

Saint Anthony took the unusual step earlier this year of suing Theresa Eagleson, who runs Illinois HFS, in federal court over the late payment problem. Saint Anthony alleged that as of February, the state partly through private insurers it contracts with owed the hospital at least $22 million, and that HFS has failed to make sure insurers pay providers on time.

“That is a great deal of money for any hospital, but a dire problem for a 150-bed charitable hospital serving a mostly poor, Medicaid-dependent population,” Saint Anthony wrote in its lawsuit.

In interviews with WBEZ, Saint Anthony leaders have said there is little transparency in how insurers decide how much they do reimburse the hospital, making it hard to know whether they’re owed even more money.

In court, the state argues it can’t be forced to pay Saint Anthony for past-due bills.

This type of battle isn’t new. HFS keeps a log of complaints from health care providers. From late February to mid-July, about two-thirds of the 455 complaints filed were about payment issues related to the private insurers, according to records HFS provided to WBEZ under a public records request.

What can lawmakers do?

There are many levers Illinois lawmakers could pull, but they often involve money. And with COVID-19 blowing a projected $6.5 billion hole in the state budget, money is hard to come by.

The federal government and Illinois share the cost of the Medicaid program, with the feds typically picking up around 51% of the cost of services and Illinois paying the rest. But Congress has the power to change that and pay a larger share. Illinois has among the worst matching rates in the U.S., according to the Kaiser Family Foundation, a nonprofit that tracks health care policy.

During the pandemic, the federal government is temporarily covering a higher share of Medicaid costs. If that became permanent, Illinois Medicaid could save money and invest it elsewhere, said Jennifer Tolbert, an associate director at Kaiser.

At the state level, Illinois lawmakers could increase the state’s Medicaid reimbursement rates for procedures and other medical care. But last spring, they just did that for the first time in years, hiking rates by $150 million a year for community physicians.

When asked whether funding contributes to racial disparities in health care, Illinois House Majority Leader Greg Harris said it’s a “huge yes.”

“Where we put our resources is going to be very, very important,” the Chicago Democrat said.

And it will also be challenging, considering lawmakers will have to decide how much goes to hospitals, compared to nursing homes or neighborhood clinics that mostly serve low-income and uninsured patients.

The Illinois Legislative Black Caucus has held hearings about racism and disparities illuminated by COVID-19, and those could help guide the General Assembly about where to invest, they say.

During a recent press conference, Black Caucus leader State Sen. Christopher Belt, a Democrat from downstate Centreville, shared his personal story to shine a light on racial health disparities. He has kidney disease and had a transplant in 2010.

“When I was on dialysis, I look across the room and my brother’s on dialysis. We dialyzed together,” Belt said. “If I look behind me, I seen other people from my neighborhood, a little section of Centreville. It’s called Golden Gardens. It was six of us in there when I was there.”

Black Americans have kidney failure more than three times more than white Americans, and they make up over one-third of all people in the U.S. on dialysis for kidney failure, yet they are just 13% of the overall population, according to the National Kidney Foundation.

One resource for all hospitals in Illinois is a $150 million fund they can apply for to help change how they do business. Harris said lawmakers plan to potentially tweak who is eligible to participate, what the goals would be and how they would be measured.

And then there’s making sure private insurers pay safety nets and other hospitals on time. State Rep. Lamont Robinson Jr., a Chicago Democrat who represents parts of the South Side, is pushing a proposed law that would create a state-run center to streamline the billing process between hospitals and insurers.

Illinois lawmakers over the years have passed other laws to hold the state and private insurers more accountable. For example, HFS was supposed to set up a claims clearinghouse that would help the department collect and analyze data. A HFS spokesman said the clearinghouse is so far analyzing the claims of two insurers, with plans to add more in the coming months.

Providers collaborating on their own

After four South Side hospitals, including Mercy and St. Bernard, ended their effort this spring to merge and Mercy later announced plans to close, providers in this area of Chicago got together to hatch a plan.

It involves community physicians and organizations, the heavyweight University of Chicago Medical Center, and three smaller providers: St. Bernard, Advocate Trinity Hospital and South Shore Hospital.

It’s still early in the process, but so far the plan is to create a model that makes it easier for hospitals to partner without merging. Give patients more access to care and actually improve their health. Make sure the most vulnerable people don’t continue to fall through the cracks. Close the life expectancy gap between Black and white Chicagoans, which at its widest point is 17 years between Edison Park on the North Side compared to Fuller Park on the South Side, according to Chicago public health officials.

Some ideas on the table: making sure a patient at a safety net like St. Bernard can quickly get to a specialist at the U of C, or hiring community health workers who can meet with patients after they visit the emergency department. The workers could help patients quickly set follow-up appointments with a local doctor, instead of that taking a month or longer like it can now.

Organizers also want to figure out a way to woo more doctors to the South Side.

Dr. Tony Hampton, a family physician at Advocate Trinity who is involved in the discussions, acknowledged the collaboration won’t be easy. After all, hospitals are businesses that compete. Referring patients to other hospitals means sending money out the door.

Still, he said this is necessary.

“We’re trying to figure out, how do we work together as a team and not overly focus on the economics to the point where it becomes a barrier,” Hampton said. “If we don’t do this, we may have hospitals close.”

DeShazier, who helped broker meetings that led U of C to re-open its adult trauma center, said competing health systems working in silos aren’t helping rid the South Side of its long-standing racial disparities.

The plan is for the collaboration to apply for some money from the state’s $150 million fund.

Hospitals, DeShazier said, can work and thrive together.

“It takes probably the humility of a financial statement,” he said. “But also it takes the reality of COVID-19 ravaging without apology throughout an entire community, and recognizing that none of us have all the resources.”

Kristen Schorsch covers public health on WBEZ’s government and politics desk. Follow her @kschorsch.