The Deepest Cut

The Deepest Cut

Providers say a proposed reduction in the Health Department’s indigent care program will hurt their efforts to serve the poorest residents of Knox County.

by jesse fox mayshark • may 13, 2019

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Cherokee health systems' headquarters on western avenue.

Healthcare providers that serve some of the poorest residents of Knox County under the county Health Department’s indigent care program say that a proposed 30 percent cut in the program will sting.

The county budget is up $34.1 million, but a longstanding healthcare program is targeted for a 30 percent cut.

“We will do our best to squeeze the dollars we’re given,” said Dennis Freeman, CEO of Cherokee Health Systems, which is reimbursed for primary care to uninsured low-income adults through the program. “But there’s no way that it won’t hurt services to the poorest among us.”

Knox County Mayor Glenn Jacobs’ proposed budget for 2019-20 maintains or increases current funding levels for most county programs. The budget as a whole is up $34.1 million, about 4.1 percent, from this year.

But there are a few notable cuts. Innovation Valley, the regional economic development partnership overseen by the Knoxville Chamber, had its allocation cut in half, from $400,000 to $200,000. (Part of that was offset by a new $50,000 proposed grant to the Farragut West Knox Chamber, which is not part of Innovation Valley.)

The largest cut, in total dollars, is to the Health Department’s indigent care program. The program serves a maximum of 1,100 patients with very low incomes -- less than $500 a month for a single person -- and reimburses Cherokee Health and area hospitals for a portion of the care they provide to that population.

In the current year’s budget, the program is funded at $4,316,500. The Health Department requested a $200,000 increase for next year, but instead Jacobs is proposing a 30 percent cut. His budget includes $2,995,000 for the program, a reduction of $1.32 million.

In an emailed statement, Jacobs said he didn’t think it was fair to provide healthcare funding for a small number of people when many working families don’t have access to healthcare either. “We have so many who have a hard time providing themselves and their families with healthcare and because they pay their taxes, they are carrying the burden,” he said.

Jacobs added, “As I’ve said all along, I don’t believe this is government’s responsibility to manage programs like this. It’s not a government issue, it’s a community issue. I think this needs to be addressed by the community as a whole and not just Knox County government.”

Besides Cherokee Health, all area hospitals participate in the indigent care program and receive partial quarterly reimbursements for the care they provide to those with no means of payment.


"As I’ve said all along, I don’t believe this is government’s responsibility to manage programs like this. It’s not a government issue, it’s a community issue." – Knox County Mayor Glenn Jacobs

Tennova Healthcare, which operates hospitals in Powell and West Knox County, cautioned against the cuts. In a statement, the company said, “Reimbursement through the Indigent Care program does not fully cover our cost to provide care, and further cuts to the program could impede our ability to serve our patients. We urge careful consideration of the Indigent Care program to ensure all members of our community have access to the healthcare services they need.”

A spokesperson for Covenant Health, which operates Fort Sanders and Parkwest hospitals, echoed those concerns in a statement: “We understand and are sensitive to the budget challenges Knox County faces, but we are concerned about the proposed 30 percent budget cut for indigent medical care. As the Knoxville area’s largest health system and employer, Covenant Health also faces financial and operational challenges related to growing levels of unreimbursed care. For example, in 2018 alone Covenant Health provided more than $66 million in charity care.

“We are always concerned when there is a proposal to decrease crucial public funds that help cover the cost of medical services for our neighbors in need. If the county’s proposed budget cut for indigent medical care is approved, as a not-for-profit health system Covenant Health would have to carefully consider the cost of additional charity care in light of our responsibility to use our financial resources wisely in delivering care to all the communities we serve.”

Complex History

According to Health Department Director Martha Buchanan, the county’s indigent care program dates back more than two decades. Originally, the University of Tennessee Medical Center provided primary care and pharmacy services to very low-income patients, with the county providing reimbursement.

In the 1990s, UTMC withdrew from that arrangement and the county Health Department took over the program itself, serving indigent patients at an in-house clinic and pharmacy. That continued until 2007, when the county outsourced the primary care and pharmacy portions of the program to Cherokee Health, which had just opened its new building on Western Avenue and was already providing psychiatric care to the same population.

Since 2007, the county has capped participation in the program at 1,100 patients per year. County funding started at $5.25 million a year in 2008, dipped for a few years under former Mayor Tim Burchett to $3.95 million and then climbed back to its current level of about $4.3 million.

Jacobs’ proposed funding would be the lowest the program has ever had. Adjusted for inflation, $2,995,000 next year would be a 53 percent cut from the program’s 2008 funding level under former Mayor Mike Ragsdale.


"Many of these people are really struggling in their day to day lives. They’re generally showing up pretty sick, with challenging health conditions." – Dennis Freeman, CEO of Cherokee Health Systems

Freeman at Cherokee Health emphasized that there has been no drop in demand for healthcare services. He said many of the uninsured people Cherokee sees would benefit if Tennessee expanded its Medicaid program under the Affordable Care Act, but it remains one of 14 states that have not done so.

He said Cherokee’s portion of the current indigent care program amounts to about $1.2 million a year -- about 2 percent of its total budget. He said if the county cuts that amount, the health system will strive not to turn anyone away, but will need to find other ways to pay for the services.

“We always try to cobble together the resources we have, federal, state and local,” Freeman said. “We’ll do our best.”

The Formula

Buchanan said the indigent care program primarily serves adults, because most children in Tennessee qualify for TennCare, the state’s Medicaid program. Those covered by the program are certified as eligible by the Health Department, based on their income and lack of insurance.

Patients are charged a $5 co-pay for primary care visits, although that can be waived if they can’t afford it.

The county’s funding is split into defined streams:

  • About 29 percent goes to Cherokee Health as reimbursement for primary care and pharmacy services.
  • 33 percent is paid directly to other physicians who provide services to patients in the program.
  • 28 percent is divided among area hospitals, which track the number of hospital days charged to patients in the program.
  • And the remaining 10 percent provides reimbursement for medical supplies such as colostomy bags, chemotherapy and orthopedic equipment.

One part of the hospital funding in particular seems to have caught Jacobs’ attention. If any hospital’s indigent care services in a given quarter amount to less than 5 percent of all hospital services under the program, but the hospital maintains an open emergency room, it is still eligible for 5 percent of that quarter’s hospital payment.

As Jacobs characterized this in his statement, “There are healthcare providers that are on retainer through this program that aren’t seeing any patients. It’s unfair for taxpayers to be paying a for-profit entity for services that aren’t being rendered.”

Buchanan said she was unsure of the origin of that clause in the contract, though its intent seems to be to encourage hospitals to maintain emergency room services. The largest beneficiary has been East Tennessee Children’s Hospital, because so few children are enrolled in the indigent care program. (Of the hospital operators in Knox County, only Tennova is a for-profit company. Covenant, UT Medical Center and Children’s Hospital are nonprofit.)

But Buchanan said that provision will be removed from an amended version of the indigent care program contract that will be brought to County Commission for approval in the near future, which will ensure that all hospital funding goes to pay for services.

Buchanan said if County Commission approves Jacobs’ cut in the program, the Health Department will monitor the program and measure its effect on patient services.

“If people are not getting the care they need because of these changes, then we need to look again,” she said.

Commission Chair Hugh Nystrom said that makes sense. “I’m hoping we can take a good hard look at the data that’s collected, and give us a chance to reassess next year,” he said.

Freeman cautioned against underestimating the needs of the indigent care population. Although Cherokee’s services under the program are described as “primary care,” he said that doesn’t mean people are coming in for check-ups or preventative care.

“Many of these people are really struggling in their day to day lives,” Freeman said. “They’re generally showing up pretty sick, with challenging health conditions.”

“I wish that Commission had a higher priority of taking care of poor folks, that’s the bottom line,” he said.