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The History of Skiff Part IV

Published: Monday, Nov. 18, 2013 11:09 a.m. CDT

Legislative updates are a regular item on the agenda for the Skiff Medical Center Board of Trustees these days.  The implementation of health-care reform and the innumerable related regulations have enormous impacts on our hospital, making current information on the changes absolutely essential.  I tend to think of our current time as unique in the history of health care, and in many ways it is.  But I recently read a set of board minutes from 1959 in which Mr. Koss, the hospital administrator at the time, was recorded as presenting information to the board on important legislative issues impacting the hospital.  As I read these documents, I chuckled to myself as I was reminded that, while our current situation is certainly challenging, it is not unique.  Skiff has had to adapt to several periods of intense change during its 95-plus-year history and we will adapt again as they did in the 1960s … which is where we left our story last time.

It was 1962 and the federal government had been part and parcel of the health-care funding equation for many years, primarily through the passage of the Hill-Burton Act (Hospital Survey and Construction Act) in 1946.  This act provided money to hospitals for the expansion of existing facilities and the construction of new facilities with the goal being increased access to health-care services across the country.  In addition to providing greater access to health-care facilities, the law also prohibited hospitals accepting those funds from discriminating against patients on the basis of race, color, national origin or creed.  In addition, the law required those facilities to provide a reasonable volume of free care for patients who could not afford their care.  This bill was seen as a compromise to the National Health Insurance legislation supported by President Truman at the time.

By 1959, Skiff Memorial Hospital (as it had now become known), had already received federal Hill-Burton money for one expansion project, so this was no doubt one topic of legislative discussion by the board.  Another topic that was likely on the list was the potential passage of the Forand Bill.  In 1957, Congressman Aime Forand from Rhode Island, with the support of the AFL-CIO, introduced legislation that would create a program of national health insurance for beneficiaries of social security, the income safety net program for seniors that was introduced in 1935.  The American Hospital Association supported the Forand bill because hospitals were increasingly impacted by the growing elderly population who were predominantly low-income and had little access to health insurance.  Interestingly, the bill was opposed by the American Medical Association and a variety of business groups.

A pitched battle around the Forand Bill was waged in congress for several years with a compromise passing in 1961 called the Kerr-Mills Act. It created the forerunner of the Medicaid program but was restricted to covering only the elderly poor and gave states the choice of opting-out, which many did.  President Kennedy’s administration was dissatisfied with this outcome and continued to push for a more comprehensive plan for which they had coined the name “Medicare.”  Kennedy’s untimely death interrupted the process, and it was not until late 1965 that the bill, with support from the Johnson administration, was finally passed, and only after more than 500 amendments had been attached.  The result was the creation of Title 18 (Medicare), and Title 19 (Medicaid).  These two bills would forever change the face of health care in America not only by providing insurance coverage, but by requiring hospitals and doctors accepting payment from these programs to participate in racial desegregation.  The days of segregated clinic waiting rooms and hospitals inpatient wards was coming to an end.

On July 1, 1966, poor and elderly Americans became eligible for comprehensive medical insurance coverage.  Skiff, like most hospitals in America, applied to be an approved provider of services to Medicare beneficiaries.  In those early days, most commercial insurance companies paid hospitals either by reimbursing the hospital for the reasonable costs of care provided or through a negotiated charge (price).  Medicare’s payment process for hospitals followed essentially the same model but required hospitals to submit a report of all their costs at the end of each year.  Medicare then calculated the ratio of costs to charges and in the following year paid the bills submitted by the hospital using this percentage.  Interestingly, Medicare paid physicians the entire amount they charged for their services.

This cost-based payment system was a boon to hospitals as it effectively shielded them from the financial risk associated with their high fixed costs and made success in health care a volume-based proposition.  The system also offered flexibility because hospitals had the option to keep charges (prices) low, while ensuring their costs would still be covered.  Unfortunately, this payment mechanism also fostered large differences in the cost of hospital care around the country as there was little incentive to improve efficiency.  This resulted in some parts of the country (primarily the east and south) experiencing profoundly higher costs than others (primarily in the upper midwest).

With improved access to insurance payments and government funding, hospitals were able to dramatically improve facilities and equipment for their patients.   While many of these investments were in advanced medical technology (pacemakers in 1957, hip replacements in 1962, and Valium in 1963), there were also improvements in other areas.  At Skiff, for example, obstetrics became the first part of the hospital to be air-conditioned in 1957, although fans blowing across blocks of ice continued to be used in other areas!  Televisions were installed in the hospital in 1964 and a nurse/patient intercom was operational in 1965.  For hospital staff, life became easier with the introduction of a spectrophotometer in the lab in 1961, an automated X-ray film processing unit in 1964, and an NCR 395 punch-card data processing machine in the business office in 1967.

The introduction of Medicare not only changed the way hospitals were paid, it also required hospitals to achieve compliance with quality standards.  These standards became known as “Medicare Conditions of Participation” and are still in place today.  In addition to meeting quality standards, hospitals began to think more critically about the health of the community.  One result was the elimination of cigarette vending machines from the Skiff lobby in 1967.  Another result was the growth in options along the continuum of care.  At Skiff, this took the form of the construction of the Hunter Addition in 1964.  Thanks to a generous gift of $400,000 from the estate of Charles Hunter, the expansion project was completed and the hospital had a bed complement of 126, with more than 40 of those being for extended care patients.  At the other end of the spectrum, Skiff had begun to provide for outpatient services in 1958, including X-ray and physical therapy, though outpatient areas remained small due to the inpatient-focus of most health-care services.

An interesting side note from this period in history is in relation to the ambulance service.  It appears that prior to 1962, the ambulance service in Newton was managed by the local funeral directors, with hearses and ambulances being the same vehicles!  This changed in the mid 1960s when the funeral directors approached the city and stated they could no longer afford the program and would be ending their participation.  After much debate, the city of Newton eventually took on responsibility for the ambulance service, and it remains there today. 

In the last few years of the 1960s and the first few years of the 1970s, hospitals were experiencing a period of growth in volume, facilities and funding.  Financial performance was strong as Medicare and Medicaid grew and health insurance benefits were offered to more and more people through their place of work.  However, at the federal level, issues were appearing in the relatively new government health insurance programs.  By 1973, these issues had come to a head and Medicare “tweaked” their program in such a way that an immediate response by Skiff Memorial Hospital would be needed.

To be continued …

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