Virginia’s Hospitals’ Financial Strength Improves

A new study by the Thomas Jefferson Institute for Public Policy shows that the overall finances of Virginia hospitals have substantially improved between the numbers published in 2016 (for FY 2015) and those in December 2017 (for FY 2016). The study may be found by clicking here.

Using numbers posted on the Virginia Heath Information website (www.vhi.org ), the Institute compared the figures with those posted in previous years. Those numbers demonstrated that hospital profits increased by 13.86% between FY 2015 and 2016 (the most recent numbers available) and the net worth of Virginia’s hospitals increased 8.1%.

More important is the bigger picture: Since 2012, hospital profits have risen from $1.58 billion to $2.15 billion, hospital net worth has risen from $14.75 billion to $19.3 billion, and the number of hospitals operating at a deficit has fallen from 42 to 28.

These are numbers for an industry in a strong financial position. Yet, the Virginia Hospital and Healthcare Association (VHHA) continues to vigorously argue that hospitals need monopoly-type protections provided by Certificate of Public Need (COPN) laws that limit competition which would lower healthcare costs. And this huge corporate lobbying arm supports Medicaid expansion, again tying that expansion to the financial needs of the hospitals.

We don’t question that some hospitals are struggling and our report clearly shows that. But the industry as a whole is doing quite well. In all regions of the state, the hospital industry remains profitable, and all regions had increases in their net worth as well. Even the hospitals in Southwest Virginia are doing much better with profits up an incredible 36%.

As our elected officials debate opening more competition into the healthcare system through reforming the outdated COPN laws and the expansion of Medicaid beyond its original intent, we hope that this report will help bring important facts to the table.

The graphs below show the financial progress of Virginia hospitals over the past five years, during a time of a devastatingly sluggish economy in the Commonwealth. Our hospitals have made substantial financial progress as these numbers show.

The study may be found on the Thomas Jefferson Institute website by clicking here.

As their own numbers show, our hospital industry as a whole continues to improve year over year as it has since we started looking at these numbers, starting with those in 2012. With hospitals doing so well overall, and healthcare costs continuing to rise, it seems that bringing more competition into the healthcare system makes a lot of sense for our citizens.

And as the debate over expanding Medicaid to more than 400,000 people heats up, these numbers show that the hospitals don’t need an expansion for financial reasons.

Thompson
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The Case for Performance-Based Funding in Higher Ed

The following position paper was published by Partners for College Affordability and Public Trust, a sponsor of the Bacon’s Rebellion blog.

ISSUE: Performance-based (also known as outcomes-based) Funding for Virginia’s Public Colleges and Universities.

PROBLEM:  Until a little over a decade ago, nearly all state funding for higher education was based on enrollment. Regardless of any outcome other than access, colleges and universities were funded simply on the number of students who attended courses, often measured mid-course, creating no institutional incentives or accountability for course completion or any other indicators of student success. 

OPPORTUNITY: Performance-based funding, also referred to as outcomes-based funding, is the growing concept that state funding for higher education should be connected to student success, rather than just course enrollment.  While the definition of performance-based funding can vary, there are currently at least 26 states implementing performance-based funding. There are also at least eight more states currently in transition to performance-based funding and several others in formal discussion around the concept. By connecting state funds to outcomes, institutions are not only financially incentivized to increase student success, but are also held publicly accountable to their peer institutions on common metrics.

SOLUTION: Performance-based funding formulas vary from state to state.  Typically states create separate formulas for community colleges and universities. Some formulas simply focus on shifting from only measuring seat-time enrollment to the number of students who complete a course with a passing grade, while others focus on more complicated and granular metrics of student success. To ensure incentives do not flow only to highly selective institutions, states weight metrics for at risk students (e.g., low-income and adult students). Additionally, several have or allow different metrics based on institutional missions. States also tend to create policies that limit risk and volatility for institutions, including having a guaranteed operational subsidy, only using new funds for performance-based funding, and/ or measuring outcomes on three- year averages.

Examples of leading states allocating nearly all their higher education funds on the basis of performance include:

Ohio: They have shifted to nearly 100% performance-based funding, with many of the metrics weighted based on at-risk students as well as specific program costs.

  • Universities: 50% of funding is based on number of degrees awarded, 30% is based on course completions, and 20% for doctoral and research set asides.
  • Community colleges; 50% of funding is based on course completions, 25% based on success points (includes achieving certain credit milestones and completing developmental courses and enrolling in college-level courses), and 25% based on completion (including associate degrees, transfer, and certificates).

Tennessee: Nearly all funds are awarded based on outcomes. Community colleges and universities have different success outcomes measured on a three-year average with weights added for adults and/or low-income students. Community college metrics include students accumulating 12, 24, and 36 credit hours, dual enrollments, job placements, degrees and certificates. University outcome metrics include students accumulating 30, 60, and 90 credit hours, degrees, research, and graduation rates, and are further weighted to align with institutional missions.

(This article first ran in Bacons Rebellion on January 19, 2018.)

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RAND’s Sensible Guidelines for Infrastructure Policy

A recent article on the forthcoming White House infrastructure plan quoted an Administration spokeswoman as saying it would address “rebuilding our nation’s crumbling infrastructure.” That frequent characterization is misleading, as pointed out in an excellent new report from the RAND Corporation, “Not Everything Is Broken: The Future of U.S. Transportation and Water Infrastructure Funding and Finance.” (https://www.rand.org/pubs/research_reports/RR1739.html)

To begin with, the report reminds us that the large majority of transportation and water infrastructure is owned and largely funded by state and local governments, not the feds. It also includes graphs showing that total infrastructure spending as a fraction of GDP since around 1980 has been largely flat. And it notes that “needs assessments”—such as those produced by the American Society of Civil Engineers—”offer an unreliable guide for policy and priority setting.” This is in part because some proposed infrastructure projects would cost far more than their benefits, which would make our economy poorer.

After setting the stage, the report goes on to offer guidelines for sound investment in transportation and water infrastructure. Since much of what is wrong with our infrastructure is the result of bad policy, rather than lack of money, “an across-the-board ramp-up of federal spending is unlikely to solve the infrastructure problems that need fixing.” In addition, focusing on “shovel-ready” projects is ill-advised; instead, Congress should focus on longer-term projects likely to produce significant national benefits. And where federal funding is involved, it should be made conditional on “regional sponsors securing matching funds from any combination of public and private sources, including user fees and [user] taxes when appropriate.” Congress should insist on life-cycle cost analysis, and require that state and local governments provide for ongoing operating and maintenance of the new or rebuilt infrastructure.

Hence, public-private partnerships (P3s) are seen as important, and the RAND report recommends that Congress provide assistance to state and local governments to develop common standards for structuring P3s, to make it easier for infrastructure investors. And while the report stresses the importance of retaining tax-exemption for traditional municipal bonds, it neglects to mention the need to expand current federal tax exemption for Private Activity Bonds (PABs), which have been critically important in financing P3 transportation projects. It mentions pension fund investments in infrastructure, but only taxable Build America Bonds in this connection. Missed entirely is the recent U.S. trend of pension funds investing equity in P3 infrastructure projects.

The report also stresses that the federal government needs to do a much better job of investing in infrastructure that it actually owns, such as large dams, inland waterways, and the air traffic control system. It proposes merging the Army Corps of Engineers (waterways) and the Bureau of Reclamation (dams) into a single federal water resources agency. But it is silent on recent efforts to convert the ATC system into a self-funded nonprofit corporation, like those that exist in 60-odd other countries.

Whatever the White House proposes will be modified by Congress. The RAND report offers important guidelines for that endeavor.

(This article first ran in the January 2018 issue of Surface Transportation Innovations.)

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Invisible Frog Threatens Private Property

Editor’s note: The U.S. Supreme Court on Monday announced it will accept the Louisiana ESA frog case for briefing, argument and decision.

“The essentially boundless authority granted the federal government by the Fifth Circuit [U.S. Court of Appeals] to control local land and water use under the guise of species protection conflicts with a plain reading of the Endangered Species Act.”

I spoke last week to the Illinois Association of Drainage Ditches and noted the ESA is a basic threat to farmers with drainage ditches on or close to their property in any state particularly in Iowa, Illinois and Indiana because of a case presently pending in the United States Supreme Court. It is a story you will not believe. Maintaining drainage ditches is a huge issue in the above-mentioned states and others. The ESA has basically been applied in the Far West. Now the ESA is likely to be applied when improvement work is contemplated on drainage ditches.

The question posed before the Supreme Court is shocking. Can the Department of Interior’s Fish and Wildlife Service (FWS) designate and take a landowner’s property as critical habitat, when the land is unsuitable as a habitat, has no connection with a protected species, and the species has not been seen on the property? The case of the “invisible frog” has been widely described in the press because it is hard to believe or understand.

The story begins in 2001 when FWS listed the Mississippi gopher frog as an endangered species. In 2010, the FWS issued a rule designating approximately 2,000 acres in Mississippi as habitat for the frog. In 2011, FWS expanded the radius for the protection of the frog by designating more than 1,500 acres of privately owned land in St. Tammany Parish, LA, because it was alleged the frog might have been at the sight in 1965.

The owners claim their land does not now nor never will in the future contain elements for the frog to live on their property. The owners had leased the land for timber operations and planned on developing home sites and businesses on the property.

In 2012, FWS renamed the gopher frog as the “dusky gopher frog.” FWS claims the landowners’ site “…could provide a refuge for the frog should the other sites suffer catastrophic events.”

Under the ESA, an economic analysis must be undertaken. On all the sites in Mississippi, the economic impact on the majority of sites was $102,000. The designation on the timber site in Louisiana was approximately $34 million over 20 years.

The case pending in the Supreme Court is Markle Interests, LLC v. The United States Fish and Wildlife Service.

That $34 million over 20 years is a pretty big economic impact, considering that the dusty gopher frog has never been found on the Louisiana property. Even the lower courts said the FWS determination that the 1,500 acres was critical habitat for the frog was “…odd, troubling, harsh, and remarkably intrusive [with] all the hallmarks of governmental insensitivity to private property.”

One judge dissented vigorously, and was concerned that a designated ESA area that does not have biological or physical characteristics that would support the dusty gopher frog was beyond the pale. The dissenting judge claimed, “Land that is not essential for conservation does not meet the statutory criteria for critical habitat.”

The majority opinion is dangerous for all landowners because it allows FWS and the Department of Interior “…to impose restrictions on private land that is not occupied by the species, and is not near areas inhabited by the species and cannot sustain the species without substantial alterations and future annual maintenance, that the government cannot effectuate… [and] the panel decision would unduly subject large areas of the United States to strict federal regulation.”

This case falls far outside the parameters of ESA and common sense. It is also an example of a government agency out of control and protected by a legal interpretation which allows the government’s decision deference when there is ambiguity in the statutory language.

The true tragedy of this case is the Trump administration’s Justice Department apparently is supporting the Department of Interior’s outrageous taking of private property.

(This article first ran in Farm Futures on January 22, 2018.)

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Change can be good—for producers, consumers, and animals

If I’ve learned anything through my life—whether growing up on my family’s fifth generation hog farm, or through my time representing the voters of an diverse rural, suburban and urban congressional district for seven terms in the U.S. House of Representatives—it’s this: what’s good for the goose is good for the gander. The same is true of making animal welfare reforms in the food supply.

I know first-hand how agriculture is under scrutiny from outside forces. And I know how frustrating that can be for all of us involved in production agriculture. I also know that American farmers are some of the most inventive, resourceful, hard-working folks in any sector of the economy. The American farmer straps on his boots and goes to work and when a problem arises, he fixes it. That’s what it means to be a farmer or rancher and good animal husbandry has been at the center of farming practices for generations.

The reality is, it’s not just about our views and values.  We have to pay attention to the values of our customers.  Many consumers these days just aren’t aligned with some of what happens on farms. I know, of course, that there are pros and cons to all types of production systems. But study after study show that consumers today want animals to be able to engage in normal behaviors and not be confined so severely that the animals cannot move.  I am speaking about practices such as cages in the laying hen industry and crates in the pig industry.  No farmer was trying to be hurtful to animals in using these systems, but the reality is, they are extreme practices and they are no longer acceptable to American consumers, including rural people.   An American Farm Bureau-funded study found that 95% of Americans think farm animals should be treated well. Another study, from the food industry consulting firm Technomic, found that consumers today value animal welfare over local, fair trade, organic and other top-of-mind issues.

So it’s no surprise that the biggest names in the food business are requiring animal welfare changes—companies like McDonald’s and Walmart and Kroger; companies like Cracker Barrel and Bob Evans.

Now I know it’s easy to view this shift as a problem. But farmers are great problem solvers, and many view it as an opportunity. This is why major pork firms like Virginia’s Smithfield are getting rid of sow stalls. It’s why egg producers like Rembrandt and Rose Acre are going cage-free. It’s why Perdue is launching aggressive animal welfare programs in conjunction with The Humane Society of the United States.

These moves make good business sense: after all, the least economical product type of product to produce is the kind no one wants to buy. Many of us often argue the need to let market forces prevail.

The American farmer has a rich tradition of adaptation and I have every confidence that more will continue rising to the occasion by progressing on animal welfare measures—rather than trying to slow them down—that’s good not just for the animals, but for consumers and their own bottom lines.

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