How broke is Mercy Health really?

Posted on Aug 29, 2023

A back burner issue has been playing out in Ohio for about a month now. Ohio politicians appear yet to weigh in on it, so we have not (until now) covered it. But in view of a few recent developments, we’re giving it some ink at this time.

The issue is this: Ohio’s mega-hospital system Mercy Health has decided to put all of its Medicaid patients insured by Anthem out of network before the end of its contract with the big insurer. It has done so, it says, because Anthem is behind on claims and is not offering reimbursement rates on employer plans– notably not on the Medicaid plans it has decided to target– to keep pace with inflation.

That sounds slightly weird, if also potentially plausible on its face (inflation is high; hospitals are having to contend with demands for higher pay from staff claiming COVID burnout and their own challenges in meeting the constantly rising cost of living).

But someone who does not see things Mercy’s way recently pointed this out to us: While Mercy has been claiming the system lost $1.2 billion in 2022— suggesting it’s right on the margin of financial catastrophe–one of its affiliates has gone in on a joint venture worth $2.9 billion. That seems like a lot of money for any entity tied in with a hospital system that is supposedly up against the wall, financially, to be throwing around.

So, we reached out to a Mercy Health spokesperson for comment on this. It’s been just about 24 hours and we have not heard back, so we’re running with this item. Yes, we’re not the Cincy Enquirer, so we don’t expect to be treated as a priority. But we still would like our questions answered, because something does not appear to add up here.

To most people, the notion that Mercy might be in trouble financially sounds plausible. After all, didn’t hospitals get royally screwed financially as a result of the pandemic?

Well, actually, no. According to a JAMA Health Forum analysis, “[h]ospital operating margins — the difference between operating revenues and expenses — hit an all-time high during the first two years (2020 and 2021) of the pandemic… The fact that some facilities not only survived but thrived during the first two years of the pandemic might help explain how hospital margins are continuing to improve…”

Sure, that doesn’t necessarily mean Mercy benefited from the trend, or that its margins are looking great now. But the analysis also noted that “[t]eaching hospitals, disproportionate-share hospitals and facilities in urban centers received more COVID funding from the government than other facilities.” At least one of those categories sounds like it covers a lot of Mercy facilities. Also, it appears that hospitals treating a high percentage of Hispanic patients got screwed financially where others did not to nearly the same degree– if they did at all. This is where we have to remind you that Mercy operates in Ohio and Kentucky, not Texas, New Mexico, Arizona or California.

So, is Mercy really in such dire straits that it needs to sever a contract and hammer Ohio’s poorest patients in order to achieve what is reported to be a three-times-the-rate-of-inflation increase in reimbursement rates for plans that don’t even cover the people they’re putting out of network? Mercy hasn’t explained the $2.9 billion joint venture to us, in view of its claims of financial hardship, and that leaves us with a sense that Mercy might just be arguing here that 2 + 2 = 5.

It’s also worth noting that it may prove awfully hard to ascertain the truth behind any of the numbers Mercy is throwing around. The system has a really crappy record when it comes to transparency involving its prices. Mercy also appears to have tried to enlist the Ohio Department of Medicaid to do its dirty work here in pressuring Anthem and ODM promptly told them to pound sand. Remember how Ronald Reagan used to say “trust but verify?” It’s pretty hard to verify what seem like key details with Mercy, though there’s plenty of bad out there that has been independently reported about the system which does not engender much trust. No one thinks very highly of health insurers; we all get that. But something seems fishy here to us, and hopefully Mercy will reply with a comment. If they do, we will update accordingly.

Separately, Ohioans should know that Mercy will put Medicare Advantage patients out of network next; that is set to happen on October 1, though the system has been accused of kicking Medicaid patients out of hospital before the Medicaid deadline and Anthem says they’ve had reports of their members being denied care ahead of Mercy’s “out of network” deadlines.

We’ll see, but in general, the $2.9 billion joint venture strikes us as something specific that needs to be explained.

Separately, while none of this is an issue for Congress to legislate on, we have to ask whether Sen. Sherrod Brown or Sen. J.D. Vance is tuned in on this. Vance’s home turf is ground zero for this, and he has sort of built his political persona around speaking up for white, working class people– you know, people who are probably on Medicaid and might now have very limited if any access to Mercy facilities. If you work for Vance and have thoughts on this, shoot us a line: buckeye dot briefing at gmail dot com.