Report: Rhode Island hospitals are bleeding cash, but we already knew that.

It’s all relative.

And when it comes to acute care, Rhode Island’s hospitals and health care providers fare worse financially than their direct neighbors in Massachusetts and Connecticut, according to a new study commissioned by the Rhode Island Foundation.

The study published Monday based on public data on health care spending across the three southern New England states confirms what industry experts, hospital executives and lawmakers have been saying for years about the worsening financial position of Rhode Island’s hospitals. Indeed, Rhode Island’s acute care hospitals received lower reimbursements from Medicaid and private, employer-sponsored health plans for inpatient and outpatient services in fiscal year 2022, compared with Massachusetts and Connecticut. 

When hospitals make bad neighbors

And while crippling workforce shortages are straining health care systems across the region, Rhode Island has the lowest supply of licensed practical nurses, personal care and service workers and physician assistants per 100,000 residents.

Still, it’s not all bad news. Rhode Island outshines its neighboring states when it comes to the cost and coverage provided by private health insurers, with lower average premiums despite higher “actuarial values” with more generous benefits, the study found.

The 139-page report by Manatt Health stops short of prescribing solutions. Instead, the study aims to offer a foundational stepping down for lawmakers, insurers, hospital executives and state regulators as they consider ways to care for Rhode Island’s ailing health care landscape, according to the Rhode Island Foundation.

“This overall effort reinforces the need for policy discussion to be based on a solid foundation of data that key stakeholders can agree on, even if they may then disagree on diagnosing what solutions might be needed or not needed,” Zach Nieder, senior strategic initiative officer for the Foundation’s Healthy Lives strategic initiative, said in an emailed statement.

The study also offers a rare opportunity to look at the relationship between insurance companies that reimburse health care providers, including hospitals, for services, and the hospital operators themselves. The study was funded by Blue Cross Blue Shield of Rhode Island, Lifespan Corp., Care New England Health System and South County Health.

The Rhode Island Foundation declined to share the total cost of the study or how much each partner contributed. 

Nieder also stressed the objectivity of the study despite the fact that its funding comes from insurers and hospital operators.

“From the beginning, the funders understood that Manatt would have editorial independence and would have the final say about what data would be included in the study,” Nieder said.

Net patient revenue lags Conn. and Mass.

The report’s findings are hardly a surprise, at least when it comes to the dire financial positions of Rhode Island’s acute care hospitals.

From 2018 to 2022, average operating costs in Rhode Island increased by 17%, while the average net revenue from patient discharges grew 9%, the study found. Acute care hospitals in Massachusetts and Connecticut saw even higher expenses, up 36% and 43%, respectively, in the same time frame. However, the two neighboring states are also making more money from their services, with average net patient revenue growth up 19% in Massachusetts and 32% in Connecticut over the same period of time.

Hospitals across all three states saw operating margins descend further into the red, with Massachusetts and Connecticut reporting steeper declines from 2018 to 2022 than Rhode Island. Rhode Island’s hospitals began fiscal year 2022 with a -3.4% operating margin, compared with negative margins of 3.8% and 4.5% in Connecticut and Massachusetts, respectively. 

How to strengthen primary care in Rhode Island? Start with this action plan

Teresa Paiva Weed, executive director for the Hospital Association of Rhode Island, pointed to creative ways that Rhode Island hospital operators have tried to reign in spending as a reason for their slightly less alarming financial losses compared to Massachusetts and Connecticut.

One example: Care New England, one of two major hospital operators in Rhode Island, launched an acute care hospital at-home program for Medicare patients in 2021 as a way to cut costs and improve services for vulnerable patients, especially older adults. 

Workarounds may also explain, at least in part, why Rhode Island hospitals reported fewer inpatient hospitalizations than Massachusetts and Connecticut through 2021, and lower emergency room visits compared to Massachusetts (through on-par with Connecticut).

This came as a surprise to Nieder given the “conventional wisdom” that Rhode Island’s shortage of primary care providers was forcing patients to turn to emergency rooms and hospitals.

Not that Rhode Island’s hospitals are standing on firm footing. 

“We are doing better, but we still feel the strain,” Lisa Tomasso, senior vice president for the Hospital Association of Rhode Island, said in an interview on Tuesday.

Especially because the study concentrated mostly on reimbursement rates and premiums for private health insurers. In Rhode Island, nearly three quarters of acute inpatient hospitalizations are for patients covered under Medicaid and Medicare, or those who pay out of pocket. The heavier proportion of public health insurance patients in Rhode Island, compared to Massachusetts and Connecticut, is a major reason why Rhode Island hospitals are struggling, especially because Rhode Island’s Medicare reimbursement rates have not kept pace with neighboring states.

The average fee-for-service payment per inpatient discharge to Rhode Island hospitals was $14,324 in 2021, compared with $16,381 in Massachusetts, and $16,951 in Connecticut.

And the per-patient cost for those in government insurance is more than twice that of the cost for those on private insurance; as of 2019, Rhode Island providers spent on average $11,420 for each Medicare enrollee, $9,230 per Medicaid enrollee, and $4,501 per patient in private insurance.

Is R.I. losing health care workers to neighboring states?

Lower Medicaid reimbursement rates are also blamed as one reason why the state has been unable to attract and retain workers in key primary and acute care positions. The report did not confirm or deny claims that health care workers have traded in their jobs in Rhode Island for better pay in Massachusetts or Connecticut. However, it noted several examples of fields in which Rhode Island workers are paid less on average than their peers in neighboring states, including registered nurses, nurse practitioners, and physicians assistants. 

Not by coincidence, Rhode Island also has fewer physician assistants, personal care and service assistants per 100,000 people than Massachusetts and Connecticut. Rhode Island has a lower supply of registered nurses and primary care physicians than Massachusetts.

One specialty where Rhode Island outshines its peers is emergency physicians, with 19 per 100,000 people, versus 15 and 18 in Connecticut, and Massachusetts, respectively.

Paiva Weed hoped the confirmations about worker shortages would help jumpstart efforts to train the next generation of health care workers. A 25-bill package unveiled by the Rhode Island Senate last month includes many measures aimed at addressing workforce shortages, including a scholarship program offering up to $70,000 a year for students in medical school or studying to be nurse practitioners or physician assistants. 

Dr. Michael Fine, a former state health director who now serves as board chair and president for a national advocacy group called Primary Care for All Americans, backs the scholarship bill as a key way to fill critical health care worker shortages. However, Fine is skeptical of the study more broadly.

“Who cares really how we compare to Connecticut and Massachusetts?” Fine said in an interview on Tuesday. “Comparing us to other places that aren’t succeeding and spending a lot of money isn’t helping us with anything. It’s like comparing deck chairs on the Titanic.”

Fine questioned the influence of the state’s major hospital systems on the findings of a study they paid for.

“It’s not meaningful unless you’re a hospital executive trying to talk Medicaid into giving you more money,” he said.

None of the hospital systems that paid for the study answered questions about bias in results.

Dr. Michael Wagner, president and CEO of Care New England, offered an emailed response on Tuesday.

“Over the years, Care New England has expressed concerns that lower reimbursement rates have hampered our ability to innovate and remain competitive,” Wagner said. “The study raises additional questions, and we anticipate that more analysis will be required to develop an approach that sustains and supports our goal of creating better health for those who make Rhode Island their home. We look forward to working with our elected officials and stakeholders to develop solid policy decisions as we engage in the next phase of this important work.”

Aaron Robinson, president and CEO of South County Health, specifically named companion bills sponsored by Sen. Susan Sosnowski and Rep. Teresa Tanzi, both South Kingstown Democrats,  as critical to addressing the funding imbalance laid bare in the study. The legislation aims to ensure regional parity in insurance reimbursement rates to providers in Rhode Island by setting minimums based on average rates Connecticut and Massachusetts, with oversight and review by the Office of the Health Insurance Commissioner.

“These bills will serve as a critical step forward in stabilizing RI healthcare and addressing the broader healthcare needs of our community and state,” Robinson said in an emailed statement.

John Fernandez, CEO and president of Lifespan, pointed to the study’s findings regarding Rhode Island’s lack of primary care physicians relative to Massachusetts as particularly important.

“Better rates are needed to attract and retain the providers who care for people when they need it most,” Fernandez said in an emailed statement Tuesday night.  “A thriving healthcare sector creates jobs, discoveries and innovation and most importantly takes care of people. This healthcare financial structure review is important to making sure that RI is invested now to have a thriving system in the future.”

Blue Cross, which also paid for the study, referred questions about the study’s objectivity back to the Rhode Island Foundation.

Speaking to the report more broadly, Blue Cross spokesperson Rich Salit pointed to the need for additional research on physician services and prescription costs.

“This will help us understand where our healthcare dollars are being spent and develop policies that achieve our shared goals of ensuring that healthcare, especially primary care, remains accessible and affordable and that we continue to improve quality and health equity,” Salit said in an email.

Senate President Dominick Ruggerio, who has championed the need for more competitive reimbursement rates and other health care-related legislation, had not read the report as of Tuesday.

“Our policy team will be diligently reviewing it in the coming days, and we hope that it can further inform the Senate as we move our Rhode Island HEALTH Initiatives forward,” Ruggerio, a North Providence Democrat, said in an emailed statement.

Updated to include comments from South County Health and Lifespan, and to correct the response from Blue Cross Blue Shield of Rhode Island.