Minnesota health systems doing better financially, but bracing for Medicaid cliff

Negotiations continue after nurses in the Twin Cities and Duluth walked off the job last week for a three-day strike. As of Thursday, the Minnesota Nurses Association and hospital management remained far apart, with nurses asking for a nearly 30 raise raise over the course of their next contract and hospitals standing firm and just over 10 percent.

With such a large gap, the All Things Considered team wanted to take a step back and get a handle on how health systems in the state are doing financially at this phase of the pandemic.

Sayeh Nikpay, a health economist and associate professor at the University of Minnesota School of Public Health's Division of Health Policy and Management, joined the show Tuesday.

To hear the conversation, click play on the audio player above or read a transcript of it below. It has been edited for length.

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At the height of the pandemic, we heard a lot about how health systems were struggling financially because they had to cancel a lot of procedures. What is your sense of how they're doing now?

Yes, at the beginning of the pandemic, things were actually quite alarming because utilization dropped off. And in our fee-for-service health system, if you do less that means that less revenue is coming in.

So policymakers stepped in and, over the course of the first year, provided and unprecedented amount of subsidies to hospitals. In the first months of the pandemic, we saw over $100 billion go out hospitals. And if you total up how much actually went out the door to hospitals over the last few years, that gets close to around $200 billion.

What we can see from research is that those subsidies really sustained hospitals through the pandemic.

So if they're doing better, why do you think they’re being so cautious with salaries?

Well, some of those subsidies have have gone away or they were one-time subsidies. And there are other types of subsidies that maybe weren't in the form of payments directly to those hospitals; they were in the form of things like Medicaid expansion.

So we have Medicaid in the state of Minnesota and across the United States, and it is a workhorse when it comes to covering the uninsured. And we know that uninsured patients tend to stress the bottom line for hospitals.

When the pandemic started, we expected to see massive numbers of uninsured patients. Instead, what we saw is that policymakers’ actions to expand the Medicaid program in key ways resulted in folks who lost that employer-sponsored coverage from losing their jobs, they picked up Medicaid.

The levers that policymakers pulled to make Medicaid more available, those levers continue to be pulled until the public health emergency is over. Now, last I checked, the public health emergency was expected to be over sometime in October.

When it is officially over, then those levers get un-pulled and about 16 million people nationally are expected to lose coverage. And that could be bad for hospitals.

What are 16 million people going to do when they're suddenly uninsured?

That's a great question. So people rely on charity hospitals, they rely on federally qualified health centers. So some people will continue to receive care from the providers they already receive care from. It's just that that care will no longer be compensated.

But what we know from economics 101 — or health economics 101 at least — is that when people lose that coverage card, they’re much less likely to see providers and they tend to use less care.

So we hear a lot of criticism about executive pay. How does that stack up from Minnesota health systems?

So what we know from data on nonprofit hospitals is that when you compare the payments, on average, that a CEO gets to the wages that a non-college-educated hospital worker would get, on average across the nation, it's about eight times [higher]. Whether that's too much, too little, it really depends on on circumstances.

But what I would say is that if you are a nurse and you are coming out of this period of intense stress and potentially dangerous work conditions, you would look at the performance of hospitals after the pandemic and think it seems reasonable that they should share in some of those gains.

Because one thing that the research is telling us is that lots of hospitals ended up kind of where they were before the pandemic started. But there are some hospitals — including in the local Twin Cities market, the Minnesota market — that are actually doing better than they were before the pandemic started because of those unprecedented subsidies.

So there's was a lot of talk about travel nurses being hired for the strike and for the pandemic. That’s a big expense, so I imagine some people might think well, why not just pay staff nurses more?

So travel nurses fill very specific niche and they tend to be temporary, right? I think that likely organization, hospitals, think differently about how they budget for travel nurses versus how they budget for the nurses that are part of the organization and will remain — hopefully — part of the organization for many years.

Lots of hospitals are interested in improving and maintaining nurses in their in their staff. So it's hard to say whether, you know, hospitals, think about those those two types of nurses the same way. But I can absolutely see why nurses would think, maybe there's more slack in the budget than hospitals are saying.

What else do we need to be thinking about around these negotiations?

So one thing that I always have to remind myself when I'm thinking about strikes in health care is, you know, I better be careful so I don't end up in the hospital during a strike. What we know from research is that during strikes, patient care tends to suffer a little bit. We'll have to see what happened after this limited three-day strike. It sounds like patients didn’t suffer a huge reduction in the quality of care.

But what the research also tells us about unions, and health care unions in particular, is that they tend to improve quality. So even if you might disagree with the position that the nurses have about a 30 percent raise, having a union benefits us all by improving quality of care in patient settings.