Sendero Turnaround Plan In Limbo

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Sendero Health Plans has an attractive turnaround strategy but it’s not clear Central Health will commit

Part 10 in a Series

Corrected Thursday September 13 10:39am to change Managed Access Program to Medical Access Program

Sendero Health Plans is a nonprofit that provides low-cost health insurance for low-income residents of eight Central Texas counties. This despite the fact that only Travis County property owners are taxed by Central Health, the agency that oversees Sendero and approves its budget.

Sendero was created in 2011 by Central Health, aka the Travis County Healthcare District, which so far has invested $88 million in Sendero. In 2017 Sendero provided healthcare coverage for more than 53,000 individuals every month.

At that time the agency was covering patients not only under the Affordable Care Act but also the Children’s Health Insurance Plan (CHIP) and State of Texas Access Reform (STAR) programs. Sendero withdrew from the latter two programs in March 2018 because premium payments were insufficient and Sendero was projecting losses of $800,000 a month.

Now Sendero’s financial health and long-term viability have been called into question, in large part because it is subject to state and federal regulations and every year has had to pay mega-millions of dollars to a federal agency for what’s known as “risk adjustment.”

For the 2016 Benefit Year the risk adjustment cost Sendero $30.5 million, according to the Centers for Medicare and Medicaid Services Summary Report of June 30, 2017. For the 2017 Benefit Year it will cost $47.5 million according to that agency’s report of July 9, 2018. The latter payment was initially delayed because of federal court litigation but will soon come due because the legal hurdles were cleared and the risk adjustment schedule has been reinstated.

The latter report states that 654 health insurers participated in the risk adjustment program for the 2017 Benefit Year. Of those, 628 received funds and 27 had to pay in. In other words, Sendero is among the 4.1 percent of all insurers that were required to pay for risk adjustment.

Essentially the risk adjustment costs Sendero because, in comparison to other healthcare insurers in the risk pool, its patients are healthier than average. If the people insured by Sendero were sicker, on average, its payments into the risk pool would be significantly smaller. Instead of being charged, it could even wind up being paid to take care of the sickest patients.

Better healthcare, better financial outcomes

Lynne Hudson
Lynne Hudson

Sendero board member Lynne Hudson wrote an article published June 26, 2018, in the Austin American-Statesman: “Maximize funding and care for Austin’s underprivileged.”

“One way to keep and secure more funds for care and enhance Central Health’s budget is by moving more of the community members who currently receive care through Central Health’s Managed  Medical Access Program (MAP) onto Sendero’s health plan,” she wrote.

“Sendero’s plan covers and provides for the same care as the MAP: prescriptions; primary, specialty and hospital care for low-income individuals; and behavioral health services. This approach would function similarly to the current successful program which provides Sendero coverage for Travis County musicians through the SIMS Foundation and the Health Alliance for Austin Musicians.” Central Health budgets $1.5 million a year to pay insurance premiums for these musicians.

Hudson has been a registered nurse since 1966 and served in the Army Nurse Corps in Vietnam. She’s been a women’s healthcare nurse practitioner for decades.

Hudson served on Central Health’s Board of Managers until the end of 2017, in all a total of nearly seven years, and said she advocated even then to move patients from MAP to Sendero.

“I never stopped talking about healthcare would be better if patients were moved in Sendero,” Hudson told The Austin Bulldog. “I have to say it fell on pretty deaf ears.”

She said the move would make financial sense and would also make budgeting for indigent healthcare easier because healthcare provided to MAP patients is paid through fees for service, which cannot be predicted and depend on how much care is provided. Insurance premiums paid to cover healthcare through Sendero, on the other hand, are predictable.

It should be noted that patients would only be moved from MAP to Sendero voluntarily. If they’re happy with their current level of services they could opt to stay with MAP.

Sendero’s boss pushing for change too

Wesley Durkalski, Sendero’s president and CEO, laid it out in his short presentation to Central Health’s Board of Managers, starting at 9:15pm Wednesday September 5.

“Sendero’s mission is that we are dedicated to improving the health of the community by providing affordable, quality healthcare coverage, especially for those who need it most. We are benefitting Central Health and the local community in three key ways: Saving our members and the community money, leveraging funding for healthcare, and most importantly, improving community health.”

He said, “In 2018, Sendero’s  27,000 members—about half the number insured before Sendero withdrew from CHIP and STAR—would have had to pay $105 per month more in premiums for the only competitor with a comparably broad network” of healthcare service providers.

“Central Health’s investment over the past seven years of $88 million has enabled Sendero to deliver over $470 million in services, with the vast majority of those services going to households below 200 percent of the federal poverty level, and at the same time offering significant value and savings to the whole community,” Durkalski said.

He noted that about a thousand local low-income musicians are covered annually with the help of partners SIMS and HAAM. Hundreds of MAP members also are covered through Sendero, costing about $1 million but drawing an additional $5 million for care. “This matching of six-to-one is not available through any other source or program.”

Expansion of the program to cover some of Central Health’s sickest members would give them access to comprehensive benefits through the Affordable Care Acct, a certified health plan with a broad network, and significantly greater subsidies.

Rare public discussion of Sendero

Although Sendero Health Plans is a nonprofit, it competes in the Affordable Care Act marketplace against for-profit health insurers including Blue Cross Blue Shield. As a result, the Board of Managers usually goes into closed-door executive sessions to discuss anything about the insurer. Even allowing Durkalski to provide a public briefing was unusual.

Even more unusual was that after hearing what he had to say, some board members spoke about their reactions, in essence foreshadowing how they might vote on moving MAP patients to Sendero.

Cynthia Valadez
Cynthia Valadez

“Sendero needs to continue to be supported by the board as an additional tool for comprehensive care served to consumers in our community,” said Cynthia Valadez Sr.

“Sendero’s commitment to quality services at the best price…speaks volumes to their commitment and alignment to our mission. I think we do need to support them.”

Guadalupe Zamora
Guadalupe Zamora

Board chair Guadalupe Zamora, MD, said he also supported Sendero.

“You provide fantastic services,” he told Durkalski, “doing everything we’re empowered to do by voters.”

Board member Maram Museitif spoke more cautiously.

“I feel we need to look at it as holistic and what’s more impactful and good for our business model, and help in reaching out to our communities and health delivery, so, I just wanted to reserve that.”

None of the other four Central Health board members spoke publicly in response to Durkalski’s presentation.

Obstacles to implementing this strategy

While the benefits of moving patients from MAP to Sendero seem manifestly obvious, skeptics see some formidable barriers.

First, Central Health would have to come up with money to pay the premiums to insure these patients through Sendero. While there’s an acknowledged upfront cost attached—the amount of which depends on how many patients are moved—there would be a huge return on the investment because of the far greater amount of federal funds that would be drawn down in risk adjustment.

That big carrot, however, would be lost if the agency can’t come up with the cash to pay those premiums. Estimates for the premiums run as high as $7 million. That’s about 3.2 percent of the FY19 proposed budget. Plus, whatever the number turns out to be, it would be a recurring annual expense that would need to be met.

Second, the ability to draw down federal funds from the risk adjustment depends on continuation of the Affordable Care Act. Republican lawmakers have tried for many years to kill the ACA, the president is doing his best to undermine it, and litigation has whittled away key provisions, such as requiring everyone to buy insurance or pay a penalty.

The Texas Tribune reported “Texas leads 20-state lawsuit against Obamacare.” The state argues that the federal tax changes enacted by Republicans last year repealed the mandate for everyone to have health insurance and therefore the law is no longer constitutional. The Wall Street Journal reported that the U.S. Justice Department will not defend the Affordable Care Act in that lawsuit.

Third, there is a sentiment among some members of Central Health’s Board of Managers that the agency should stop giving money to Sendero, although at the moment there’s $20 million included in the FY19 budget. The reluctance stems at least in part due to Central Health’s dwindling reserves and cash flow that’s hemorrhaging because it not only gives $35 million a year to the University of Texas Dell Medical School but also lost $30 million a year in revenue when Seton moved out of the Brackenridge Campus and into its own new hospital across 15th Street.

Fourth, there may be a perceived political risk. What if the MAP patients are moved and it doesn’t work out as expected? What if the November election results in political shifts and the method of drawing down federal funds changes? Advocates of moving the sickest patients to Sendero say the fallback position would be to move those patients back to MAP. But in the meantime they would be getting access to more and better healthcare through insurance.

Fifth, as Hudson pointed out, inertia exists because of the entrenched methods of administering MAP, procedures established when Central Health was created in 2004. There are employees whose job it is to pay the bills, for example.

“You would have to strip that down and reintroduce the MAP patient population to what’s in their best interest,” she said. “None of this is impossible but it takes work and commitment.”

“It’s difficult to dismantle a healthcare delivery system that pays for their staffing and their budget since the creation of Central Health. To change anything is difficult—and this represents a major change,” Hudson said.

Central Health president speaks

Mike Geeslin
Mike Geeslin

In an exclusive interview August 29, Central Health’s president and CEO, Mike Geeslin, said that part of the budget process, “We’re currently working on a plan that would allow what Lynne Hudson articulated. At this point, the costs haven’t been finalized yet.”

A complicating factor, Geeslin said, is what happens if changes are made to the Affordable Care Act, something that’s always in play with the Republican control of the Congress and White House.

Charles Bell, MD, a Central Health board member, also sat in for the interview.

As it stands now, “If it’s above a certain index, then that allows a payment to the insurance company from the risk pool as opposed to a net payment into the risk pool,” Geeslin added. “If you had patients with the right index score or higher, then it would result in a net payment to Sendero, as opposed to the current situation where they’re paying out.”

Geeslin confirmed that patients would only be moved to Sendero under this scenario if they volunteered. “Ultimately, patients need to decide what’s best for them,” he said.

Asked what’s holding up implementing this idea, Geeslin said, “Nothing’s preventing it from being done. Right now, this is part of the budget process, as you pointed out, and in addition to Sendero, the board has a number of other decisions that it’s making around a number of different funding issues, and really, it’s just a matter of working through the budget process, and ultimately, the board will take a vote.”

Deciding whether to move patients from MAP to Sendero, and if so how many, and the logistics for it will be decided in the budget process, Geeslin said, and the final answer will be clear once the Board of Managers votes on the budget September 12.

Asked if there were other factors restraining this initiative, such as players in the healthcare system that would be hurt if patients were moved to Sendero, Geeslin said, “No, that is not factored in at all.”

“There’s a lot that’s changing throughout this county, and you have to make these holistic decisions—not just about Sendero, but about everything that you’re doing,” Geeslin said, including major plans to expand services throughout the eastern part of the county. “This is a multi-factor decision.”

When the question is turned around, it becomes whether Sendero is doomed if it has to continue paying millions and millions in risk adjustments every year? Then Central Health might decide it can’t keep making up the deficits.

Geeslin responded by saying Central Health and Sendero’s board will have to continue evaluating performance. They “would need to step back and answer that very question,” he said, adding that it’s premature to validate that premise now.

Commissioners Court will have final say

On August 29 and September 5, 2018, Central Health’s Board of Managers held public hearings on Central Health’s FY 19 budget. On September 12 they will vote to adopt the budget and tax rate.

On the table is a proposed FY 19 tax rate of 10.5221 cents per $100 property valuation. That would result in a tax bill of $344 for the owner of an average taxable homestead valued at $326,895. The agency intends to grant a homestead tax exemption of $85,500.

That tax rate would produce property tax revenue of $196.9 million. Lease revenue would add $18 million, and other revenue totals $2.4 million, bringing total projected FY 19 revenue of $217.3 million.

The five elected officials who sit on the Travis County Commissioners Court are scheduled to vote September 18 on Central Health’s FY 19 budget and tax rate. The Commissioners Court may decide to weigh in on whether Hudson’s proposal to transfer MAP patients to Sendero is approved.

Brigid Shea
Brigid Shea

Travis County Commissioner Brigid Shea in a telephone interview with The Austin Bulldog, noted that Sendero would be able to collect three to seven times as much federal matching funds what Central Health gets for MAP patients. And Sendero would no longer have to pay millions of dollars for the risk adjustment.

MAP patients already moved to Sendero gave its health insurance plans a high satisfaction rating, according to a survey, Shea said.

“The combination of all these factors makes me think it’s incredibly stupid to charge Travis County taxpayers for indigent healthcare when we could get a higher federal match,” she said.

Which raises a key question in her mind: “Why have we not had an aggressive campaign to transfer MAP patients over?

“We should promote the heck out of Sendero. We need to make an aggressive and sustained push to transfer MAP patients to Sendero.”

Shea added that she doesn’t understand why some people are talking about shutting down Sendero.

“It doesn’t make any sense to me. We put hundreds of millions of dollars into the Sendero insurance program and then handicap and hogtie it and say you’ll walk away from that investment?”

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2017 Central Heath Demographic Report, February 5, 2018 (56 pages)

Central Health Strategy Proposed FY 2019 and FY 2020 Strategies, based on Performance Review Recommendations adopted by Board of Managers July 25, 2018 (1 page)

Community Conversation: The 2019 Budget, July 31, 2018 (31 pages) with answers to the 11 polling questions annotated by The Austin Bulldog to show the audience’s feedback.

Related Bulldog coverage:

Central Health Hears Budget Feedback: Live audience interacts with slide show, answers questions via electronic polling, Part 9 in a Series, August 3, 2018

No-Bid Brackenridge Lease Approved: Two blocks of the 14.3-acre campus tract leased to limited partnership that won’t profit, Part 8 in a Series, July 17, 2018

Central Health Sponsorships Top $200,000: New spending adds $88,000 to the total having no connection to indigent healthcare, Part 7 in a Series, May 2, 2018

Dining and Shining on Taxpayer Dollars: Central Health spent more than $111,000 for sponsorships that have nothing to do with providing indigent healthcare, Part 6 in a Series, March 30, 2018

Central Health’s Checkup Delivered: Consultants delivered performance review completed eight months after contract let, Part 5 in a Series, February 14, 2018

Lawsuit Challenges Central Health Spending: Plaintiffs argue it is not legal to give $35 million a year to the UT Austin Dell Medical Center, Part 4 in a Series, October 18, 2017

Critic: Proposed Financial Policies “’Pointless’: Commissioners Court will vote tomorrow on Central Health financial policies for FY 18, Part 3 in a Series, October 9, 2017

Central Health Financial Policies Hotly Debated: $185 million given to Dell Medical School and Seton, with little to show for indigent healthcare, and $55 million more is on the way for FY 2018, Part 2 in a Series, September 29, 2017

Central Health Feedback Meetings Ill-Attended: Two public forums to gather opinions about the agency drew just nine speakers, Part 1 in a Series, August 27, 2017

Trust indicators:

Ken Martin has been covering local government and politics in the Austin area since 1981. See more on Ken on the About page. Email [email protected]. This is his 10th article about Central Health and indigent healthcare arising out of his ongoing investigation that begin in early 2017.

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