Why Hospitals Are Getting Into the Housing Business

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Yves here. Malcolm Gladwell is very much a mixed bag, but an important 2006 New Yorker article of his, Million Dollar Murray, bears on the issues discussed in the post below. Key section:

[Reno police officers] O’Bryan and Johns called someone they knew at an ambulance service and then contacted the local hospitals. “We came up with three names that were some of our chronic inebriates in the downtown area, that got arrested the most often,” O’Bryan said. “We tracked those three individuals through just one of our two hospitals. One of the guys had been in jail previously, so he’d only been on the streets for six months. In those six months, he had accumulated a bill of a hundred thousand dollars—and that’s at the smaller of the two hospitals near downtown Reno. It’s pretty reasonable to assume that the other hospital had an even larger bill. Another individual came from Portland and had been in Reno for three months. In those three months, he had accumulated a bill for sixty-five thousand dollars. The third individual actually had some periods of being sober, and had accumulated a bill of fifty thousand.” The first of those people was Murray Barr, and Johns and O’Bryan realized that if you totted up all his hospital bills for the ten years that he had been on the streets—as well as substance-abuse-treatment costs, doctors’ fees, and other expenses—Murray Barr probably ran up a medical bill as large as anyone in the state of Nevada.

“It cost us one million dollars not to do something about Murray,” O’Bryan said.

By Markian Hawryluk, the senior Colorado correspondent for KHN, based in Denver, who previously reported for the Houston Chronicle, American Medical News and, most recently, The (Bend, Ore.) Bulletin. Originally published at Kaiser Health News

One patient at Denver Health, the city’s largest safety net hospital, occupied a bed for more than four years — a hospital record of 1,558 days.

Another admitted for a hard-to-treat bacterial infection needed eight weeks of at-home IV antibiotics, but had no home.

A third, with dementia, came to the hospital after being released from the Denver County Jail. His family refused to take him back.

In the first half of this year alone, the hospital treated more than 100 long-term patients. All had a medical issue that led to their initial hospitalization. But none of the patients had a medical reason for remaining in the hospital for most of their stay.

Legally and morally, hospitals cannot discharge patients if they have no safe place to go. So patients who are homeless, frail or live alone, or have unstable housing, can occupy hospital beds for weeks or months — long after their acute medical problem is resolved. For hospitals, it means losing money because a patient lingering in a bed without medical problems doesn’t generate much, if any, income. Meanwhile, acutely ill patients may wait days in the ER to be moved to a floor because a hospital’s beds are full.

“Those people are, for lack of a better term, stranded in our hospital,” said Dr. Sarah Stella, a Denver Health physician.

To address the problem, hospitals from Baltimore to St. Louis to Sacramento, Calif., are exploring ways to help patients find a home. With recent federal policy changes that encourage hospitals to allocate charity dollars for housing, many hospitals realize it’s cheaper to provide a month of housing than to keep patients for a single night.

An architectural rendering of Denver Housing Authority’s renovation of the 10-story building once used as office space on Denver Health’s campus.(COURTESY OF THE DENVER HOUSING AUTHORITY)

Hospital executives find the calculus works even if they have to build affordable housing units themselves. It’s why Denver Health is partnering with the Denver Housing Authority to repurpose a mothballed building on the hospital campus into affordable senior housing, including about 15 apartments designated to help homeless patients transition out of the hospital.

“This is an experiment of sorts,” said Peg Burnette, the hospital’s chief financial officer. “We might be able to help better their lives, as well as help the financials of the hospital and help free up capacity for the patients that need to come to see us for acute care.”

Spending To Save Money

Denver Health once used the shuttered 10-story building for office space but opted to sell it to the housing authority and grant a 99-year lease on the land for a minimal fee.

“It really lowers the construction costs for us,” said Ismael Guerrero, Denver Housing Authority’s executive director. “It was a great opportunity to build additional housing in a location that’s obviously close to the hospital, close to public transit, near the city center.”

Once the renovation is complete in late 2021, the housing group will hire a coordinator to assist tenants with housing-related issues, including helping those in the transitional units find permanent housing. The hospital will provide a case manager to help with their physical and behavioral health needs, preparing them for life on their own. Denver Health expects most patients will be able to move on from the transitional units within 90 days.

The hospital will pay for the housing portion itself. That will still be far cheaper than what the hospital currently spends.

It costs Denver Health $2,700 a night to keep someone in the hospital. Patients who are prime candidates for the transitional units stay on average 73 days, for a total cost to the hospital of nearly $200,000. The hospital estimates it would cost a fraction of that, about $10,000, to house a patient for a year instead.

“The hospital really is like the most expensive form of housing,” Stella said.

After its targeted late 2021 completion, the building will be used for affordable senior housing, including about 15 apartments designated to help homeless patients transition out of the hospital. (COURTESY OF THE DENVER HOUSING AUTHORITY)

Growing Interest

A recent report from the Urban Institute found that while most hospital officials are well aware of how poor housing affects a patient’s recovery, they were stymied about how to address the issue.

“It’s on the radar of almost all hospitals,” said Kathryn Reynolds, who co-authored the report. “But it seemed like actually making investments in housing, providing some type of financing or an investment in land or something that has a good amount of value seems to be less widespread.”

The report found housing investment has been more likely among hospitals with their own health plans or other types of arrangements in which they were receiving a fixed amount of money to care for a group of patients. Getting patients into housing could lower their costs and increase their operating margins. Others, particularly religiously affiliated and children’s hospitals, sought housing solutions as part of their charitable mission.

Reynolds said the trend is due in part to the Affordable Care Act, which requires hospitals to perform a community needs assessment to help guide their charitable efforts. That prompted more hospitals to consider the social needs of their patients and pushed housing concerns up the list. Additionally, the Internal Revenue Service clarified in 2015 that hospitals could claim housing investments as charitable spending required under their tax-free status. And provisions included in the 2017 tax cut bill provided significant tax savings for investors in newly designated opportunity zones, increasing their interest in affordable housing projects.

Some hospitals, she said, may use their cash reserves to invest in housing projects that generate a lower return than other investment options because it furthers their mission, not just their profits.

In other cases, hospital systems play a facilitator role — using their access to cheap credit or serving as an anchor tenant in a larger development — to help get a project off the ground.

“Housing is not their business,” Guerrero said. “It’s not an easy space to get into if you don’t have the experience, if you don’t have a real estate development team in-house to understand how to put these deals together.”

Cutting Costs

In the southwestern corner of Colorado, Centura Health’s Mercy Regional Medical Center has partnered with Housing Solutions for the Southwest to prioritize housing vouchers for frequent users of the emergency room.

Under a program funded by the Catholic Health Initiatives, Mercy hired a social worker and a case manager to review records of frequent emergency room patients. They quickly realized how big an issue housing was for those patients. Many had diabetes and depended on insulin — which needs refrigeration. Kidney failure was one of the most costly diagnoses for the hospital.

Once patients received housing vouchers and found stable housing, though, costs began to drop.

“We now knew where they were. We knew that they had a safe place to live,” said Elsa Inman, program coordinator at Mercy Regional. “We knew they would be more effective in managing their chronic conditions.”

The patients with stable housing were more likely to make it to their primary care and specialist appointments, more likely to stay on top of medications and keep their chronic conditions in check.

The combination of intensive case management and patient engagement helped to halve ER visits for the first 146 patients in the program, saving nearly $495,000 in Medicaid spending in less than three years.

“Hospitals are businesses and nonprofits are businesses,” said Brigid Korce, program development director for Housing Solutions. “They are bottom-line, dollars-and-cents people.”

Inman acknowledged that the hospital might have missed out on some revenue by reducing ER use by these patients. Hospitals are still largely paid by the number of patients they treat and the number of services they provide.

But most of those patients were covered by Medicaid, so reimbursements were low anyway. And the move freed up more ER beds for patients with more critical needs.

“We want to be prepared for life-threatening conditions,” Inman said. “If you’ve got most of your beds taken up by someone who can be receiving patient care outside in the community, then that’s the right thing to do.”

That was less of an issue for the inpatients at Denver Health. Because hospitals are generally paid a fixed amount for a given diagnosis, the longer a patient stays in the hospital, the more money the hospital loses.

“They’ve basically exhausted their benefit under any plan because they don’t meet medical necessity anymore,” Burnette said. “If they had a home, they would go home. But they don’t, so they stay in the hospital.”

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  1. Carla

    Yves, thank you for the introduction to this post. This:

    “It cost us one million dollars not to do something about Murray,” O’Bryan said.

    … made me think, yeah, and it’s costing us billions, month in and month out, year in and year out, not to have Medicare for All. Plus untold human suffering.

    But, the medical-industrial complex is doing just fine, thank you very much. $200,000 a month for one patient to stay in a hospital? It’s obscene. I’m crying crocodile tears for them.

    1. Greg Gerner

      Thanks, Carla. Great comment. Not losing the multi-multi-billion dollar forest for the million dollar Murrays . . .

    2. hoonose

      First off, the $200K might be the total hospital ‘charges’ for a month of acute care that includes testings, meds and other therapies. That is much higher than what the hospital will typically accept or actually receive as payment. Hospitals might collect 25% or thereabouts of total charges. Second, the number would again be much lower for a patient in a bed basically for custodial care. In fact if the bed is not needed for another patient, the overhead would be quite low.

      Does one cry tears if the hospital actually receives ‘only’ $70K for a month of acute care?

    3. Susan the other`

      It is as though it was originally part of the medical industry’s monopolistic business plan (to impoverish and blackmail people) but it got outa hand and now they have to do something to fix it. Shame that this seems to be considered an effective solution for the social catastrophe we are facing. It’s not exactly the same as killing your own demand (which our brand of neolib capitalism has done every place else) because as luck would have it hospitals are in the business of saving people, come hell or high water. Political legislation could solve all of this social injustice; but the medical lobby is very powerful. It just gets funnier and funnier.

  2. Steve H.

    There was a recent discussion about jails dumping inmates, with a prime problem being responsibilty for medical bills. I’ve assumed the prison-industrial complex would be setting up homeless camps.

    This makes clear, Medicaid could be the leverage for isolating homeless from genpop. Our local youth psychiatric facility is part of a chain known for making use of involuntary holds, at least for those with insurance. We have a standard 72-hour involuntary max, but I was privy to a case recently where they tried to keep a kid for ten days, and when the parents pulled him, called the police and threatened to have CPS take him away. Arkham Asylum stuff, and I know personally one of the docs is effing sandman. As in discharging an entire wing of patients except one, for payback of a Tech giving him admission instructions when he was filling in for a doctor on vacation.

    Point being, there’s enough crazy evil in the profession that we don’t need prison-mil types to monetize the homeless. And the FIRE sector could dump expenses on the public dole. A way forward for Medicare/Medicaid!

    Not that I’m bitter…

    1. Steve H.

      Oh, duh! Involuntary holds need no trial! Gotcher habeus corpus right here! You don’t get Out til your bill is paid! Which is NEVER! You don’t need that extra kidney!

      Am I going overboard here? Hmm…

    2. kiwi

      I don’t understand the hostility to the concept of co-locating services. We are talking about a population that is very difficult to serve. The article mentions that the housing would be temporary in nature until the people find more permanent housing, but I don’t think this is even realistic for those with continuous medical needs.

      I think it is a good idea to co-locate the services and make it easier on everyone providing the services and the client, especially since there will likely be many with ongoing medical issues. It would surely be better than to repeatedly release the clients from hospitals only to have them return in medical crisis.

      In government, we try to provide many services in one location so that the users don’t have to go from office to office to office to get different services.

      “This makes clear, Medicaid could be the leverage for isolating homeless from genpop.”

      I would think co-locating services would be much more efficient for those with continuous medical needs. Also, Medicaid doesn’t provide housing; other funds (from HUD, Social Services, local taxes) are used to provide housing.

      And affordable apartments are spread throughout urban areas. Frequently, apartments will have a number of apartments set aside for low-income clients that are subsidized by government.

      1. Steve H.

        My hostility is entirely to the involuntary nature of the homeless, and the costs of healthcare, and the inequality which drives both.

        I don’t disagree with anything you say. What I don’t get is that it seems you’re saying your area has these covered. Where I live, there is an overflow of homeless * mental illness * drug addiction which is very divisive (and occasionally dangerous), and we are nothing like the encampments of thousands in many larger cities. How do you do it?

        (ps, I just saw your comment below about Denver, and can’t quite get what you’re driving at. Is it that local government and HUD provide adequate funding?)

  3. Richard H Caldwell

    In human affairs, it seems that morrality trumps (ouch!) practicality, rationality, and compassion every time. Sad.

    1. notabanktoadie

      That depends on one’s version of “morality”, doesn’t it?

      E.g. what’s moral about accounting with sham liabilities?

      1. Titus

        As David Hume said to paraphrase “Well, that’s the problem with morality, it defies logic, which is to say he thought it does not lend it self to rational, analysis”. He did offer this: that one should at least be consistent. If one is prolife, that would mean in all things: agasint the death penalty, in favor of healthcare for all, food for all, shelter for all, education for all, etc.,. If not, one can be said to be morally inconsistent, or a liar, or insane, or a bullsh*t artist. I agree with Hume. The conviction of holding any moral belief is that you act on it, why else lay claim it to. Life is short. No time for moral nonsense. By the way it’s not necessary for everyone to be moral, there is the rule of faw, or following the instructions. But, it is nessary that some people are moral and act moral. Just enough but not to much.

  4. lyman alpha blob

    It’s a start I suppose, but expecting for-profit institutions to provide affordable housing is not a long term solution to this problem.

    Living wages, medicare for all (or better yet real nationalized healthcare) and the government taking at least some responsibility for affordable housing would go a lot further in solving the problem. But that would break a lot of rice bowls…

  5. kiwi

    I work in the homeless business. And it is as much a business as any else, non-profit or otherwise. The form of the business doesn’t really have much to do with anything.

    No one “provides” affordable housing (for the people who can’t afford housing through typical means) except for the government, one way or another.

    Look up Denver Housing Authority’s financials and see how much of its funding is from the taxpayers. See how much is devoted to housing. Then you can look at government counties’ and cities’ financials and see how much money they spend on housing. Then take a look at HUD’s budget while you are at it, and you can see how the “government takes at least some responsibility for affordable housing…”

    HUD – US Department of Housing and Urban Development

    1. Steve H.

      Okay, I did this. About a third of the housing budget comes from Section 8, and there’s about 12k units of public housing maintained by the housing authority. The ratings and occupancy rates are very high.

      At the same time, there’s 5k homeless in Denver, and “Denver voters rejected Initiative 300, dubbed by supporters the “Right to Survive.”” The anti-camping ordinance keeps them out of sight. The DHA budget increased by about a third in the last ten years, while units increased by about a fifth. While businesses are putting in significant resources to keep them off the streets, the voters are becoming more unfriendly, and therefore resources are entirely inadequate to address the problem.

      1. kiwi

        I’m certainly not saying that the need is met anywhere.

        I was just noting that posters seem rather hostile to the notion of co-locating services.

      2. kiwi

        Well, my comment below was supposed to be in response to your comment up-thread. Sorry.

        So, I’m glad you took the time to look at the financials.

        I wouldn’t describe the population in Denver as becoming “more unfriendly;” the City has increased funding.

        Essentially, you are making a political argument for more funding for the homeless. Fine. Elect politicians that support more funding.

        The funding issue has nothing to do with your notion that medicare (or anyone) is trying to herd the homeless somewhere.

        The services have to be provided somewhere, and in Denver (and larger metro area), they are. There are numerous entities that provide rental assistance and hotel vouchers (for those in immediate need) across the metro area. There are also shelters. There are apartments that have units set aside specifically for low-income people who struggle to pay rent, and the government subsidizes those units, frequently with the client paying a portion of the rent. These apartment complexes are spread across the metro area.

        But again, I wasn’t talking about funding levels, I was talking about the herding notion.

      3. Dick

        Didn’t Salt Lake City decide to provide housing for all their homeless? The city simply found it cheaper than continuing the same old same old.

    2. lyman alpha blob

      I should have been more precise – I’d like to see the government take more direct responsibility and not just provide funding that can be grifted away before getting to the intended recipients.

      My spouse is a local politician dealing with an affordable housing shortage and I keep suggesting that if the government really wants to do something about this issue, and it should, then the government needs to build and administer the housing. It’s not rocket science – governments own and manage all kinds of property. Not everything has to be contracted out.

  6. Wyoming

    I have mentioned before that I work for my local police department as a volunteer officer.

    A couple of months ago while on patrol I observed a man collapsed on the sidewalk (sort of sitting there in the sun with his head on his chest – Aug in AZ this is not a good idea in general – so I stop and go over to see what the situation is. He is barely conscious and I get his attention and ask him if he needs help. Of course I can see he does, but I am asking more to see what his response is going to be and what his mental state is. He tells me he is dizzy and cannot stand up or walk any more. I ask him when he last had any water to drink. Sometime the day before!! Ahh Heat stroke and dehydration most likely I think.

    So I get on the radio and ask for medical and another officer (3 show up as we are only 4 blocks from the station). So the big scrum – fire engine, ambulance, 4 officers. As soon as the first additional officers show up it is “Oh hi Dave what’s the problem today? Have you been drinking again?” So. Bottom line is that all of the other officers who showed up know this person by first and last name. The firemen know him too. He is a frequent flyer and they haul him to the ER weekly. Homeless, bad alcoholic, drug user, malnourished (his legs are the diameter of my biceps), sores on his skin. Best part of the story for Dave (sort of) is that this time he has a local misdemeanor warrant out for not appearing in court and they can arrest him (he has multiple others in other jurisdictions as well, but they are not extraditable so no one cares about them). Being arrested is good for him because after the ER gets him stable the officers can take him to the jail. There he gets fed, shower, a bed, out of the summer heat and sun, no alcohol or drugs (mostly). Until he gets put back on the street in a few days.

    And so it goes. I can’t imagine what this has been costing. Maybe the articles ideas about housing could be useful. But I wonder what happens when you get a mass of folks with these kinds of problems housed in a close proximity.

    1. Erika

      But I wonder what happens when you get a mass of folks with these kinds of problems housed in a close proximity.

      Not much good: https://www.latimes.com/california/story/2019-08-15/the-street-within-part-three-homeless-people-find-apartment-life-difficult

      Some adjust to indoor life okay. Some feel lonely or guilty and so ask all their friends to come live with them, which is against the rules and a bad idea all around. Others are so mired in anti-social, destructive behavior, they put out cigarettes on the walls and defecate in common areas.

      These hospitals might get a rude awakening if they house a sufficient number of Million Dollar Murrays. One in a housing complex might be manageable without the facility having highly trained security and medical staff on call, but a housing complex full of them could be a problem.

  7. Bill Wald

    This has been happening for at least 35 years. In Seattle, police officers took obviously sick people to Harborview Hospital because their no other place to take them.

    In the OLD old days, we could arrest street people for “drunk in public” and the Doc at the jail would take a look at them. No telling how many lives we saved by putting people in jail. They would get 30 or more in jail and get dried out. That is now an unconstitutional practice . . . and a day in jail only cost the taxpayers 35 bucks, a good deal for the taxpayers.

  8. Anon

    Let’s be clear. Just because hospitals are classified as “non-profit” does not mean they aren’t focused on the bottom line. They are; that’s why getting uninsured folks out of the hospital and into other accommodations is smart business. The number of uninsured surely isn’t going away (unless a single-payer, nation healthcare system is implemented). Hospital administrators (highly paid) do not want that. So co-housing becomes a feasible option/investment (improves the bottom line).

    As an aside: simply providing a national dental care system would reduce medical costs and create a healthier population. People with dental issues (gum disease, molar infections, etc.) succumb to heart attacks earlier because of the constant effort of the body to fight this inflammation. Dentists are less costly that Cardiologists.

    The strongest argument for a national healthcare system is the it will help create a more productive nation AND reduce medical costs. Preventive action at its best.

    1. Appleseed

      Anon is on to something, According to a Ball State University study, Indiana nonprofit hospital systems made nearly $1.5 billion in profit in 2017. Indiana has a monopoly problem in healthcare.
      “We conclude that evidence strongly suggests healthcare markets in Indiana experience significant monopoly power, which has increased prices, allowed not-for-profit providers to accrue stunningly large profits, increased the burden on Hoosier families, and likely reduced healthcare outcomes across the state.”

    2. inode_buddha

      One of the largest non-profits in my area is a very well-known cancer center/research hospital. There is a Maserati in the area with a custom license plate that reads “ONCOLOGY”.

  9. JBird4049

    Sometimes homelessness is the reason for and not caused by mental illness as it *extremely* stressful physically and emotionally. If you were fine before, a year of it will find those breaking points.

      1. Janie

        And many similar quotes. I often wonder how it is that so many of our Christian elected officials have reached middle age and beyond without ever hearing these precepts, or so it appears.

        1. JBird4049

          Oh, they hear them, but they don’t want to listen as it is ever so much easier to follow the modern con known as the prosperity gospel instead of Jesus’ actual teachings especially about wealth.

          Giving up your wealth and serving the needy is obviously communism which is evil so Jesus could never have said that. /s

    1. smoker

      Thank you, though I would go far further than that in pushing back on that favored mythology.

      If it were actually the case that the vast predominance of homeless were homeless because they’re mentally ill (a vast category of human behaviors considered not normal), then wouldn’t we be seeing significant encampments of homeless billionaires and politicians who are severely mentally ill with: psychopathy; sociopathy; megalomania; narcissism; etcetera?

      It probably only takes a day or two – versus the year you mentioned – sleeping on cement to become mentally overwrought, who in the world wouldn’t be?

  10. Luke

    “Legally and morally, hospitals cannot discharge patients if they have no safe place to go. So patients who are homeless, frail or live alone, or have unstable housing, can occupy hospital beds for weeks or months — long after their acute medical problem is resolved. For hospitals, it means losing money because a patient lingering in a bed without medical problems doesn’t generate much, if any, income. Meanwhile, acutely ill patients may wait days in the ER to be moved to a floor because a hospital’s beds are full.”

    So, why not move the indigent type who no longer needs a hospital bed to a chair in the ER waiting room, and move the genuinely acutely medically needy person to the hospital bed the recovered-enough indigent type no longer needs? Bet the latter would “self-release” out of the hospital in no time flat, and the laws governing hospitals would still have been followed.

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