The state suffers from a lack of primary care doctors. Reimbursement rates for Medicaid and Medicare are lower than in neighboring states, putting Rhode Island at a competitive disadvantage. And the Hospital Association of Rhode Island advocacy group warns that Governor Dan McKee’s recent budget proposal would hurt hospitals and the patients who rely on them. As president/CEO of Brown University Health, John Fernandez is on the frontline of facing these issues. So can Rhode Island improve healthcare while reducing costs? What is the answer for the state’s medical reimbursement problem? And how is the financial outlook for the state’s top two hospital groups?
This week on Political Roundtable, I’m going in-depth with president/CEO of Brown University Health John Fernandez.
TRANSCRIPT
This transcript has been edited for clarity.
Donnis: Welcome to the Public’s Radio.
Fernandez: Thanks for having me.
Donnis: Brown University Health is made up of five hospitals in Rhode Island, two in Massachusetts and other medical practices. How is your organization being affected by the Trump administration’s plan to hold up billions of dollars for local hospitals?
Fernandez: Right now, on the federal matters, we’re just sort of waiting to see. We’re staying very organized on this. We actually put a small group together to meet once a week of senior members to handle any of the stuff that comes up. So far it has had limited impact, but we’re very concerned about the long term and are watching it closely.
Donnis: John Fernandez, you’re among the local hospital officials warning that Rhode Island’s health care system will face a growing crisis without more state investment. But with the state’s budget outlook worsening, Governor McKee is proposing a smaller than expected rate hike for reimbursing treatment through Medicaid. If the governor’s proposal is adopted by the General Assembly, what would that mean for Brown University Health?
Fernandez: Let me start on the positive. First, we do have a crisis in health care. I could rattle them off the bankruptcies, Fatima, Roger Williams, various physician groups. It seems like each few weeks, there’s something new. That’s not good. So we ought to recognize first we have a crisis. The good news though, is we have proposed, myself and other hospital and physician leaders, have proposed a solution. First step in the solution to increase Medicaid funding by maximizing our federal match. And what we’re proposing is to take 90 million of state funds. We put that into the Medicaid program and ask the federal government to provide the matching funds, which will be another 180. That would bring $270 million into the state to support healthcare, which would go a long way to helping stem the crisis we have here in Rhode Island.
Donnis: As you say, the federal match is very appealing. It’s two federal dollars for every one state dollar invested, but I’m sure you’re aware that Rhode Island is facing a worsening fiscal climate. The surpluses of the COVID years are over and the state faces perpetual budget deficits every year for the next couple of years. Given that, is it realistic to think that the state can really put more money into this?
Fernandez: We think it’s realistic and we’re working with the state, both the speaker, the Senate and also the governor’s office to help find that money. We think having thriving health care is gonna make a big difference of bringing jobs to this community and more tax revenues and long term success for the state. So we think it’s a great investment and we’re going to push hard to prioritize health care.
Donnis: The bottom line for your organization, Brown University Health, returned to the black in fiscal 2023 after some big operating losses for the two years preceding that. In September, your organization announced it was cutting 20 percent of its executive team in a cost cutting move. And my understanding is that a hiring freeze remains in place for parts of Brown University Health. Looking ahead, how do you see the fiscal outlook?
Fernandez: We’re very bullish on the future, assuming we can fix this health care crisis, number one. Number two is, just want to be clear, we do not have a hiring freeze. We’re looking for any nurses, doctors, and other staff to join us. So I’m out recruiting. So thank you for having me on the show to do that. But we’ve had basically 10 years where we have not made even close to the operating margins that we need to sustain a thriving health care organization. The goal is about 3 percent, but over the last decade we only made about $70 million in 10 years. So that’s 7 million a year. That’s not going to get it done. We plan to make a 3 percent margin. We missed it this year. We had a much better year this year at 45 million, but that’s, we missed our target by about 50%, which was a 90 million goal. We hope to make that next year so that we can fix our facilities, recruit our staff and pay people well and continue to thrive as an organization. So we’re bullish on the future, but we gotta make some changes in this state and with our program.
Donnis: Back in 2022, Rhode Island Attorney General Peter Neronha blocked a proposed merger between what was then known as Lifespan and the state’s other big hospital group, Care New England. More recently, your organization became Brown University Health through an affiliation agreement with Brown University. To what extent does that affiliation agreement get at the goals that were targeted or desired through the previous envisioned merger with care. New England?
Fernandez: I don’t think it has anything to do with the prior mergers, it’s behind us. We’re just not even working on a merger like that anymore. So what we did is we said, how can we work better with Brown University? We got with the leadership there and came up with the affiliate expanded affiliation agreement, which will help our organization both with the branding, and they’re handling some of our investments as well as the financial support they’re giving us for the next seven years and that we support the medical school. So I think we figured out a really nice place where we can do better for our patients and better for our research and grow together.
Donnis: Speaking of Peter Neronha, the Attorney General has been a mostly lonely voice for a few years in lamenting how, in his view, Rhode Island suffers from the lack of a long term strategy for its health care system. Do you agree with that critique?
Fernandez: I agree that we have a crisis, a problem. I agree we need plans for moving forward. However, I don’t think the solution is in the planning. The solution is in the doing. and I think we have many, many plans and many, many ideas. I think we have to focus on getting stuff done and executing on how we continue to provide great care and fix the finances. I think that’s the big linchpin. As we keep trying to do plans or ideas or this or that, the real fundamental problem is a financing problem, and especially with Medicaid.
Donnis: Given those fiscal constraints, how can the state and institutions such as yours make more progress on issues like a shortage of primary care doctors and specialists?
Fernandez: Again, I would say it’s all about the money. If we don’t fix the underpayment by Medicaid and deal with some of the other financial structural problems, look, we’re getting paid on Medicare, Medicaid and commercial at least 20 to 25 percent less than our neighboring states. And so we can’t compete for talent. Everything else is about the same price as it is in Massachusetts and Connecticut as it is in Rhode Island. If we can fix this underlying financial problem, that will allow us, for example, for Brown Health to do more for our primary care doctors, more for our facilities, more for our nurses. Financial success is what will help fix the primary care problem. So the one off primary care plans are nice and helpful, but I think we’re avoiding the tough problem, which is called the underpayment that we have in healthcare right now.
Donnis: We’re talking here with John Fernandez, President, CEO of Brown University Health. And John, I wonder, do you think there is a mismatch between the number of hospital beds in Rhode Island and what the state can afford to sustain?
Fernandez: You know, I don’t think there’s a mismatch in beds if you look over the long term. I think some of the locations you could argue if you were doing sort of statewide planning, but it’s so political to move things around, but if you think of where the beds are allocated, and second point I make is health care on the provider side of health care is really more and more an outpatient set of services, whether they be clinics, ambulatory surgery, imaging centers, so much that can be done outside of the beds in hospitals. The biggest problem we have with beds is actually not the beds, it’s the staffing of the beds and having the financial resources to recruit the nurses and techs and docs that we need to staff those beds.
Donnis: We’ve heard for many years about how efficiency and digital technology could lower the cost of healthcare. Instead, it seems like the cost keeps going up with the biggest impact for people on the margins. What is holding the U. S. back from making more progress in reducing the cost of health care?
Fernandez: My opinion would be that it’s a very siloed industry and that gets to be expensive. We have a lot of organizations that are, I would call in the middle making money on this. Whether that be pharmacy benefit managers, whether that be some of the insurance expense. I’ve been working hard with Blue Cross and others to how can we reduce denials and pre authorizations by working together. Because there’s a lot of expense that goes to things that don’t help patients and don’t take care of patients. So I hope we can get rid of some of that bureaucracy and that would help. And that’s both on the provider side and the insurance company side.
Donnis: On a related note, people who study the issue have made the point that some other countries, like Costa Rica, which place a greater emphasis on primary care and public health, rather than treating disease, have longer life expectancies. What would it take to shift more in that direction in your view as the head of Brown University Health?
Fernandez: I hate to say this, but I think a political miracle would be required. We have so many issues in healthcare and other important matters in our economy that I just don’t see the political will to make the changes, whether that be in this state or in the United States in particular, I wish I could say differently, but I, I just, I just can’t.
Donnis: And I’ll come back to where we started with a question about President Trump. We see how his administration has taken the U.S. out of the World Health Administration [Organization]. Robert Kennedy, who has some very controversial views about vaccines and healthcare, is on track to be the Health and Human Services Secretary. As someone who works in healthcare, do these kind of things concern you?
Fernandez: They concern me, but I approach it this way is that whoever gets put in office in those leadership positions, we’re gonna have to figure out a way to work with them. Health care is too important to the people that live in our state, live in our country. I’m hopeful that we’ll be able to figure out ways to work with the new administration on how we move forward and actually make progress. I’m sort of a glass half full kind of person. So we’re just gonna have to, we’re gonna have to work with it. Change has happened before. We’re just gonna have to figure it out.
Donnis: All right. Our time is up, so we need to leave it there. Thank you very much for joining me. President, CEO of Brown University Health, John Fernandez.
Fernandez: Thank you, Ian.
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That’s it for our show. Political Roundtable is a production of The Public’s Radio. Our producer is James Baumgartner. Our editor is Alex Nunes. I’m Ian Donnis, and I’ll see you on the radio.
