Author: Janel Davis

photos by janel davis

Rev. James White slowly stands to have his say amid the rising chorus of louder voices. “I’m a firm believer in nonviolence,” he says. “We must do things decent and in order. We must organize and be united, then we’ll get results.”

The 50 or so day-care providers in the room nod in agreement. White is no stranger to civil disobedience; he marched with Dr. Martin Luther King and has long been involved in civil rights activities in the city. But the methods for provoking change have evolved on this night. Nerves are frayed. There are no plans for violence, but the time for quiet protest has passed. This is war for the day-care providers here. Unfortunately, the children and families they serve could end up being the POWs.

On this Monday in late September, the group is meeting to find a way to respond to transportation-subsidy changes enacted by the Tennessee Department of Human Services that begin October 1st. They’ve been meeting for weeks, discussing the proposed funding cuts and weighing the possible consequences. Most of the providers have faced similar situations before. Each time, they’ve juggled their budgets to continue service to their clients, most of whom receive some type of government assistance.

This time, the providers decide to protest the cuts with a transportation stoppage.

Beginning October 1st, many Memphis area day-care providers say they will halt bus service, then regroup after three days to measure the effects. Parents plan to concurrently protest at DHS offices in downtown Memphis. Lines have been drawn. There’s no turning back.

“I’ve been in this business more than 30 years and this is not my first fight, but it is one of the most important,” says protest leader and center operator Diane Manning. “I’m going to retire soon, but I’ve got one more fight left in me before then and I’ll go to hell and back for these children and parents before I let [DHS] take it all away. If [providers] are not together with one voice now, the state is going to pick us off one by one in the future.”

Cause …

The wheels of conflict were set in motion almost two months ago, when DHS officials announced that budget shortfalls would end three assistance programs designed to help families with child-care costs: Day-care providers were informed that the state would no longer provide $2-a-day per child transportation subsidies, a $50 annual registration fee, or a $50 application fee.

DHS statistics show that the number of families participating in Tennessee’s welfare-to-work program has risen 24 percent in three years, leading to a $46 million budget deficit and a $26 million Families First benefit gap. Part of the problem is a 34 percent increase in child-care subsidy expenses. Of the department’s $244 million child-care budget for this fiscal year, $228 million will be spent on subsidies to day-care providers for Families First clients and those transitioning off the program. Of that amount, $19 million in subsidies are set aside for 6,500 children of low-income or working-poor families. An additional 22,000 children remain on a waiting list for these services.

With state poverty levels increasing, co-pay amounts for low-income and transitional families have also increased. “We’ve got families at our centers now who can’t make co-payments, so how does DHS think these people can afford to pay their transportation costs too? It just doesn’t make sense,” Manning says. But DHS officials contend that the co-pay amounts have not been changed since the early 1990s and the increase is nominal.

Of the $6.4 million in transportation subsidies paid out since their inception in 1999, 85 percent have gone to Shelby County, which also leads the state in Families First cases and child-care subsidies.

“Shelby County is a tough area. There are more poor people here than anywhere else in the state, and these people need help,” says state Representative Kathryn Bowers. She is one of a few state legislators attempting to resolve provider and parent issues with DHS. When the cuts were first announced, Bowers held a meeting in Memphis with DHS representatives to educate providers about the changes. Representative Henri Brooks, who also serves as chair of the Families First Advisory Committee, has initiated a plan to stem the inconveniences after the October cutoff date. Among local politicians, only county commissioner and city mayoral candidate John Willingham has attended any provider/parent meetings.

“The decision to cut transportation subsidies was specifically a budget-cutting action,” says DHS deputy commissioner Ed Lake. “We were able to build the Families First program up from the mandated services by using savings when caseloads dropped, performance bonuses, and other one-time funding. But you can’t operate a program with short-term funding, so you have to look at the ever-growing number of [services] and work your way back down to the higher-priority mandated services to get back within projected costs.”

… and Effects

At one time, child-care wasn’t affordable for Teresa Franklin. “At first I didn’t understand really what all this was about,” she says during a parent/provider meeting. “But I feel that the whole thing is unfair. [DHS] doesn’t care what happens to our children. I know where a lot of the parents are coming from, because I’ve been there,” she says, scanning the audience of angry parents. The 31-year-old mother of seven has four children in the Love and Happiness day-care center or using their transportation and after-school services. With the October 1st subsidy cut-off, Franklin will have to pay $8 a day in transportation fees for her children. “If the parents decide to march,” she says, “I’ll be right there marching.”

While the $2-per-day per-child allocation may not seem like a large amount, to many parents even this small sum is a burden.

At 5 a.m., six buses leave from the central garage of Our Future Learning Center in North Memphis to pick up children throughout the city attending the center’s three locations.

Driver Marvin Hathaway has been driving day-care buses for almost a year. Most of his young riders live more than five miles from the center, some even farther away. “I have the longest route and usually do two or three drop-offs each morning, not including the children we drop off at school,” he says. He makes three trips each morning, totaling 90 to 100 miles. His first stop takes him across town to Orange Mound. Next, it’s on to Millbranch Road, to a hotel where a family with four little girls is temporarily housed while damage to their home from the summer wind storm is being repaired.

Since DHS guidelines don’t allow children to remain on buses for one-way trips longer than 45 minutes, Hathaway and van monitor Jerri Matthews keep an eye on the clock. As the children board the van, Matthews records the time and constantly updates Hathaway. “In the mornings our routes are usually pretty quiet. It’s so early and the children are usually still pretty sleepy,” she says. Matthews has worked in the child-care industry for 28 years.

Many of the children are accompanied to the bus by parents, and many are young mothers living in some of the roughest Memphis neighborhoods. “The center is real good about working with the parents on payments and things like that,” says Hathaway. “There’s a lot of kids needing day-care out here, and even with help it’s still hard.”

Our Future Learning Center owner James Yancey is well known in the day-care industry for his outspoken disapproval of many DHS-imposed regulations. “We stand to lose $94,000 this year in transportation [subsidies],” he says. “I would have preferred for them to just shut us down than to nickel-and-dime us this way, because eventually we’ll have to close anyway. It just costs too much to run these buses without some help from the state.” Yancey, who has been in business since 1986, estimates his transportation costs, including payroll, fuel, and maintenance exceed $250,000 a year. More than 70 percent of the children attending his centers require transportation. “I’ve been in this business a long time and I’m just tired of this,” he says. “When I started out, it was a good business to be in, but now it’s too much, it’s just too much.”

Yancey is one of the supporters of the transportation stoppage. He admits the loss of revenue will hurt him, but he says it’s a small price to pay in the long run. “I’m willing to do whatever it takes to get this stopped and get someone to listen. I’ll protest, picket, whatever, even go to jail if I have to.”

In July 2000, DHS strengthened its requirements for day-care providers: Criminal background checks are now required for all employees; vehicles must have liability and accident insurance; the report card and Star Quality rating system were established; the adult-to-child ratio was increased; and DHS’ complaint hotline number is required on the sides of all day-care vehicles.

Many of the rules were implemented after a series of transportation incidents in Shelby County, including fatal accidents, children dying aftere being left on vans during summer months, and several seat-belt and overcrowding violations.

“It’s easy to see why many providers, especially those in Shelby County, would think that [the timing of the cuts] was done on purpose, but it was not,” says Lake. “We had begun this discussion and had some concerns about how to meet our budget going back to last year.”

But Bowers and providers see the latest round of cuts as a bigger issue. They believe the department is looking to not only halt transportation by individual centers but even force some of them to close. “It’s a conspiracy, that’s what I think,” says Bowers. “[DHS] is trying to put more and more on these providers to close them down and privatize the industry. They tried to do this before and [the legislature] stopped it, and they’re trying it again.” Bowers describes an alleged attempt years ago by DHS to begin using a large broker, Day Care of America, to oversee child-care in Tennessee. “I’m mad and I say, ‘No,'” Bowers says. “As a matter of fact, I say, ‘Hell no!'” Some providers claim a Memphis-area company has been mentioned for the job this time. Lake denies DHS wants to privatize the industry.

Bowers and her constituents were instrumental in thwarting another proposed October subsidy cut. Plans were in place to disallow transportation subsidies and other Families First services for mothers with babies 16 weeks or younger who “volunteered” to return to work although exempt from work requirements under the Families First plan. Although the cut would only have affected 1,559 cases statewide and 754 in Shelby County, Bowers and Lake agreed the cut was actually a detriment to many mothers wanting to get off welfare. “We might have saved some money, but it doesn’t make sense in some situations not to allow the person to access those services. They’re being penalized for what we want folks to do anyway, whether it’s finishing high school or going to work,” says Lake.

Standing for Something

Rev. James White listens to speakers during a recent meeting of parents and day-care providers.

Pastor Lenon Coleman of SSB Learning Academy stands quietly in the back of the meeting room, taking it all in. “I can’t say I can afford to park my buses [in protest],” he says, “but I’ve got to make a sacrifice.”

Some of the parents here are also concerned about the effects of the transportation stoppage. “I have three children who attend day-care,” says Erica Gonzalez, 25. “I’m in college at LeMoyne-Owen and about to graduate. What am I supposed to do, take my children to school with me? I think this protest is hurting some of the same people it’s designed to help.”

Gonzalez’s sentiments are echoed by van driver Lavell Osby. Her employer, Kids School, instructed its drivers not to report to work after October 1st. “We’ve got three drivers and three monitors on our buses, and now all of us are out of jobs,” she says. “What are we going to do?”

Keep the faith, says Manning. While the short-term outlook for some is grim, she is sure the long-term effects will be worth the inconvenience. Manning has had to terminate 17 of her employees since last year. “Before DHS started giving out these subsidies, [providers] just operated neighborhood centers or didn’t provide transportation at all. But transportation costs money and we needed it, so everyone started competing for those dollars. Now we’re stuck with providers crisscrossing the city to pick up kids.”

But DHS is standing firm. “We understand transportation costs a considerable amount,” says Lake. “But we don’t require transportation. Prior to 1999 we weren’t paying for this and yet somehow the system worked in providing child-care for these families then.”

The parents and providers at this meeting say they won’t allow DHS to railroad through its subsidy cuts. “No Justice, No Peace” has become their rallying cry.

Trudy jokes with a friend about another unproductive morning spent waiting for work at the LSI day-labor employment agency. The University of Memphis education major is undeterred. She doesn’t have to be here — the day assignments are just something to do until the fall semester begins in a few weeks.

“See, they can laugh about not having a job because they have homes and families and food on the table to go home to,” says Sarah (not her real name). “Everybody is not that lucky. People like me don’t have anywhere to go.”

Sarah sits in the drab women’s waiting area at LSI with seven other women listening for the attendant’s intercom announcement of a work ticket with available positions. Dressed in jeans and a multicolored blouse, Sarah is actually one of the lucky ones. She’s clean, is staying in temporary housing, and still has hope. “My daughter is in the military,” she explains to the room. “Her and her husband are moving here next month, and she said I can move in with them. She’s going to take care of me and help me get myself together. I just have to hold out one more month.” The other women in the room nod knowingly. In the world of day labor, one month can seem like a year.

While the conversation in the room is usually light — comments are made about the wardrobes of passersby, advice is given on where to find the best mustard greens, pictures of family members are passed around — the dire situations of most of the women are never far from the surface. A businesswoman’s pantsuit leads one woman in the room to comment on an old outfit of her own. A delivery truck parked on the street reminds the women that it delivered to the same location yesterday and reminds them that they too were here yesterday, in this same waiting room, listening for the call and watching life pass them by.

“The [day-labor] companies take advantage of us because they see we have nothing and need to work,” says a small Asian woman, 43, with a thick accent. “This kind of place is not fair, they don’t treat us right, and something should be done about it.” It’s 8 a.m. Her day started four hours earlier with the hour walk downtown to the labor-company office. Layoffs at a Mississippi clothing store forced her to Memphis six months ago, where she and her husband have been looking for permanent employment ever since.

“This is a nightmare,” she says. “I came yesterday and the [attendant] promised me work today. I walk here in the dark to be on time and still no work. This is a very tough place.” But complaining doesn’t pay the bills or buy food, so the determined worker heads out. There’s talk of work at a warehouse across town.

“Do you know how to get there?” asks Sarah.

“No,” replies the woman. “But it’s work and I’ll find it.”

Hard Times

While finding work may be difficult, finding day-laborers is not. In most major cities, local companies like LSI Temporary Services can be found in the phonebook — alongside national day-labor companies such as Manpower and Labor Ready — under “Employment Contractors and Employment Services.” The companies specialize in providing temporary employees, usually for unskilled positions lasting from one day to a few weeks. Jobs range from basic construction and cleanup to warehouse assembly lines and unloading freight.

According to the National Campaign for Jobs and Income Support (NCJIS), in 2000, Manpower surpassed General Motors as the largest employer in the country. Welfare reform, the worsening economy, and an increase in the immigrant population have all been blamed for the increase in the day-labor population. The employees that these jobs attract make it impossible to provide an accurate number of laborers, but NCJIS says the industry has grown 30 percent in the past 10 years.

For workers, the appeal lies in the daily payment system. Workers at the agency make at least the minimum hourly wage of $5.15 and usually work an eight-hour shift. Pay can be higher depending on the type of work and skill level required. Checks are distributed at the end of each work shift. But the money doesn’t go far. In addition to taxes, other company-imposed costs eat away at the net pay. For example, LSI charges a $1.25 transportation fee to and from job sites. Labor Ready doesn’t provide transportation, but it requires employees who give rides to other workers to collect a $2 fee each way. LSI workers say the company also charges an equipment fee. Labor Ready makes a $15 drug test the responsibility of the employee. With check-cashing fees added, day-laborers can lose more than $8 each day from their checks.

To company clients, the appeal lies in the hands-off approach they can take with day-labor employees. For a contracted price, labor companies are responsible for check preparation, deducting all employee taxes, insurance, and even child-support payments. “We provide a service,” says Labor Ready customer service representative James Pegues. He operates the company’s Jackson Avenue location in North Memphis, one of four Labor Ready offices in the city. “We give companies able-bodied workers, and we give people who want to work jobs.”

But many workers say the employment agencies take advantage of them. NCJIS statistics list Labor Ready workers as having a one-in-four chance of workplace injury. One out of every two workers is homeless.

“I worked for LSI several times from 1986 to 2000, and they ain’t right,” says Darrell. Although the 38-year-old former Navy man is currently unemployed, he refuses to return to day-labor work. “[The company] wouldn’t give me my separation papers to get my unemployment. And all the jobs are going to the Mexicans. They don’t even have to sign in in the mornings. They go through a side door, and then you see them loading buses to go to work.”

Raymond, 58, takes a break from sitting in the men’s waiting room to stretch his legs outside. A welder by trade, he has been coming to LSI for 90 days and has only gotten one assignment. A little over six feet tall, he looks distinguished and is proud of his craft. “I was a welder for 31 years and got laid off. The one time I got sent out here I unloaded a truck for $6 an hour,” he says. “I haven’t seen them use the [sign-in] list yet. It’s not fair, but I’m four months behind on my rent so I have to keep trying.”

The owner of the LSI downtown location at Second and Monroe refused to release any information about his company or even his last name. His first name is Bill. “I had a bad experience with television and newspaper, and I’m not doing it again. I don’t have anything to say. I’m not interested,” he says, before slamming shut the receptionist’s window.

“[The company] ain’t gonna say anything about the problems. They don’t care and really don’t have to,” says Darrell as he rides away on his bicycle.

Working for Change

Complaints of racial and gender discrimination, low wages, inadequate hours, and dangerous working conditions are not new to the day-labor business, but in an industry known for catering to drug-dependent or homeless people, these concerns have seldom garnered enough attention to bring about change. In recent years, however, Atlanta, Chicago, and Philadelphia have enacted laws that regulate the practices of day-labor companies.

Human rights activist Dexter Cox has heard these workers’ complaints and many more like them. The situations are not limited to LSI or Labor Ready but exist throughout the industry. He and other laborers relate stories of men working eight to nine hours repairing roofs for minimum wage, working alongside permanent employees making twice their salary. They also tell of clients requesting women-only, men-only, and even Hispanic-only employees to fulfill assignments.

“It’s easy to overlook these people because they are poor and don’t make a lot of noise,” says Cox. “But everyone deserves to be treated fairly. That’s what we’re trying to do.” Cox is no stranger to activism. He helped get fair-practice day-labor laws passed in Atlanta in 1992 and has worked for fair-housing rights in Philadelphia. He and four other activists are working to get a city ordinance passed in Memphis to regulate the day-labor industry. Cox, members of Tennessee Industrial Renewal Network (TIRN), and Well Operator (another labor activist organization) have held meetings with day-laborers in recent months to review problems and possible solutions.

Organizers hand out bright-yellow fliers to day-laborers advising them to “Organize!” for better rights, health, safety, and wages. “It’s a good thing that he’s doing,” says Sarah. “But it will never happen because [workers] don’t want to help each other and do anything.” There is even some disagreement as to tactics among the organizers. Marian Butcher of TIRN thinks organizers’ efforts should not be limited to work-related items but should include health and housing issues that also affect day-workers.

Cox points to the day-labor laws passed in Atlanta and in Chicago (in 2002) and urges quick reform. Bernard Hansen identifies with Cox’s urgency. The former Chicago alderman was instrumental in getting his city’s day-labor reform passed last year. The municipal code amendment regulates industry standards on issues such as equipment rental fees, transportation fees, record keeping, and work tickets.

“We have migrant workers from other countries and states that come here and can’t get permanent jobs. But they can get jobs that other people just don’t want to do on a temporary basis,” says Hansen. “We figured the only way you’re really going to help people is to see where the [day-labor] industry itself is and analyze the industry.”

Complaints by laborers in Chicago included irregular and illegal transportation of workers by companies to and from job sites; management mixing up, losing, or adjusting sign-in lists; and jobs being granted inequitably.

Hansen says day-labor employment companies in Chicago were receptive to some of the proposed changes but objected to other parts of the law because of what they perceived as increased costs. A six-month follow-up after the law was passed revealed a 4 to 5 percent increase in costs but also an 11 percent increase in productivity.

“If you have legislators who go in with the idea of coming up with a solution to the problem, it can work,” he says. “And you have to show them how [the new laws] benefit everyone. It’s a matter of managing a situation for the overall benefit of the entire process.”

A Snail’s Pace

Nationally, the movement for better day-labor conditions took a step forward last month when Labor Ready signed a voluntary agreement with the U.S. Department of Labor’s Wage and Hour Division to enforce the U.S. Fair Labor Standards Act.

Locally, a meeting between Cox and the employment agencies is loosely scheduled for sometime in the next few weeks. In the meantime, he has taken the city ordinance proposal to city councilwoman Barbara Swearengen-Holt. “I have not yet done any work to get the ordinance before the council,” says Holt. “I told Mr. Cox that usually when it comes to private industry, we usually have no jurisdiction. But I will get with the city’s legal office and see what we can do.”

Holt is wary about acting hastily because Cox is the only person to bring day-labor grievances to her attention. She says there have been few complaints filed against the companies with the Better Business Bureau. The BBB shows no membership records for LSI, Anytime Labor, or Labor Express. Manpower and Labor Ready are both registered with the BBB. Jim Fleming is listed as Labor Ready’s general manager, but other basic information requested by the bureau has not been received, making it impossible for them to issue a customer experience report.

“I feel that in any industry employers should be fair with their employees,” says Holt. “But you have to remember that everyone is operating as a free agent in this. The [laborers] are not being made to work at these places.”

Councilwoman Holt is not alone in this assessment. Some of the workers are satisfied with the day-labor companies. Corey moved to Memphis six months ago from New York. He has worked through Labor Ready for two months. “I’m in school at Concord Career Institute training to be a patient care assistant,” he says. “I’ve been working here to earn money in the meantime, and [the company] has been very helpful. They help you find jobs and other things that you need. Most of the places like this in New York wouldn’t help you like they do here.”

A tour of the North Memphis Labor Ready office reveals a different atmosphere than the one at LSI. By 11 a.m., the waiting room is nearly empty. More than 35 workers have been sent out. Only two remain, waiting for work. The room is much cleaner, staff members are easily accessible, and there are no loiterers around the building’s entrance. “I think things are better here because this is a corporate-run operation,” says Pegues. “You’re always going to have employees who complain about low wages and things, but you have to realize that this is a business. Labor Ready provides a service, but it is also trying to make a profit. I always tell people that if they are not happy with the situation here, they need to get themselves together and get a better, permanent job somewhere else. We’re not a charity organization.”

As for racial-discrimination complaints, Pegues says Labor Ready does not accept requests from clients for women, men, or any race-only work tickets. The company will send out a Hispanic crew if the client requests “bilingual” workers, which seems like an obvious loophole.

Pegues says his company has seen an increase in applications since 9/11 and the attending economic downturn. “Most of the people that we get in here get stuck here,” says Ron, an LSI employee. “A lot of them get off the Greyhound after getting this far and running out of money. We do the best we can for them, but we can’t guarantee that everyone will go out to work every day they’re here.”

John and his wife are textbook cases. The couple came from the Gulf Coast on the bus on their way to Kansas City. When money ran out, they were forced to stop in Memphis. He has found occasional work with a private company, but his wife has been waiting unsuccessfully for work from LSI. “We’re just trying to get enough money to get out of here,” John says. “This is not for us.”

“When you look at the situations of some of these people, they need help now,” says Cox. “They can’t afford to wait. [Day-labor laws] are something that has been done before and we can do it here.”

Financial problems for the Regional Medical Center at Memphis — The Med — started last November, according to the hospital’s president and CEO, Dr. Bruce Steinhauer. It was then that the hospital began seeing a dramatic increase in uninsured patients and a decrease in service repayments. In the midst of a sagging economy, enrollees were being dropped from TennCare — Tennessee’s health-care program for the poor, uninsured, and uninsurable — during a reverification process begun in July 2002. By March of this year, 25 percent of the hospital’s rolls consisted of uninsured patients, accounting for 32 percent of its health-care costs.

The situation at the hospital has now become a crisis, causing an outpouring of support from state legislators, hospital administrators, patients, and even taxpayers who recognize the importance of the 174-year-old hospital. With six centers of excellence in specialized care (including the Mid-South’s only trauma unit), a newborn intensive-care unit, and a wound-care unit, The Med’s services are unmatched. In the past few months legislators have lobbied for bills, hospital staff members have cut costs, and requests have been made to government officials, all to ease the hospital’s budget deficit, which has reached more than $15 million. “The problem is clearly changes in the environment in which we are in,” said Steinhauer. “[The amount of uninsured patients] has added up to millions of dollars in debt. We can’t save our way out of this. We need help.”

Helping Others, Hurting Themselves

Financial experts need not worry about persuading Paul and Sarah Lowe about The Med’s importance. Five years ago, their son Stephen was airlifted to the hospital’s Elvis Presley Memorial Trauma Center. On December 19, 1997, while on the way to lunch with a group of friends, another driver ran a stop sign and crashed into Stephen’s truck, pinning his 6’4″ frame between the dashboard and steering wheel. The Bolton High School student was declared brain dead five days later, on Christmas Eve.

While the loss of their son has been hard, the Lowes appreciate the importance of The Med. “We didn’t even know where they had taken [Stephen] when it first happened,” said Sarah Lowe. “Once at The Med, our son received excellent care. Not only did they take care of him, but they also took care of [me and Paul]. That is a great hospital and we just can’t lose it.”

This latest round of financial troubles is nothing new for The Med. In 1994, a financial crisis caused by TennCare’s implementation left the hospital with a $3.8 million deficit, forcing a layoff of employees and a reduction in the number of patient beds. The current situation is much grimmer. The deficit is five times as much as it was in 1994 and the hospital could be out of money in two months. The facility — which needs $750,000 to operate each day and more than $3 million in payroll every two weeks — has just seven days worth of operating expenses on hand.

“This community cannot exist without The Med,” said Methodist Healthcare president Gary Shorb. “If [the legislature’s] got a list of priorities, put The Med’s above ours, because it’s that important that they survive. We could not do what they do with the trauma center, burn center, jail services. There’s no way any [health-care] provider in town can do that.”

Doing those things is partly to blame for the hospital’s current situation. Over the years The Med has garnered the label of Shelby County’s “charity hospital.” It cares for the majority of the county’s indigent patients, regardless of their ability to pay. County taxpayers fund $31 million of the hospital’s $250 million annual budget.

On the state level, the large amount of unreimbursed care equates to millions of dollars of federal funding. The money is shared with six other Tennessee hospitals (including Vanderbilt University Hospital and Erlanger Medical Center), called “safety-net” hospitals, that provide similar indigent care. Local hospital administrators and legislators have requested that Governor Phil Bredesen release half of those funds to The Med. Bredesen has in turn asked hospital administrators to first submit solutions for long-term financial solvency. This year, The Med has received $6 million of a promised $12 million from those funds. It is the only safety-net hospital serving the Mid-South, with the next closest facility, Metropolitan Nashville General Hospital, 206 miles away.

“Shelby County is different from a lot of places because we have a lot of poor people here,” said Steinhauer. “With corporate layoffs and other things, there are a lot of people who just don’t have insurance anymore.”

When finances took a downturn, Steinhauer and his hospital staff made some profound discoveries regarding their clients. An assessment of patients revealed more than 60 self-pay patients each day — those who either had been expunged from TennCare or had no other form of insurance — who used more than $4 million in health-care services. With ailments including congestive heart failure, AIDS, tuberculosis, and gun and knife wounds, the patients had come to the right place, but the hospital was left to absorb the costs. “One of the biggest problems with no-pay patients is that the majority of them that are trauma patients cannot go from The Med to home; they need intermediate care. It’s been difficult to find accommodations for them, which leads to the high number of days here,” said Steinhauer. The study found that patients requiring orthopedic services only remained at the hospital an average of one day, while some high-end trauma patients required an average hospital stay of 240 days.

“I don’t think the hospital’s reputation has suffered from our financial problems becoming public,” Steinhauer added. “I think the truth makes you free, and it has resulted in a lot of people being supportive of The Med. Most people realize what the problem is and they’re not blaming it on us. We run a fairly efficient hospital and most people know that.”

The TennCare Debate

At the center of The Med’s financial distress is TennCare. Whether discussing higher numbers of uninsured patients, delayed funding, or increased health-care costs, the state’s insurance program always comes up. It’s an insurance plan for the poor, and The Med, a hospital serving the poor, is directly affected.

As TennCare began its reverification process last year, more than 166,000 people were dropped from its rolls because they no longer qualified for the program or because they failed to respond to the agency. Since then, those dropped have been granted a grace period — until March 31, 2004 — to renew their coverage. Even so, many Tennesseans do not qualify for the program and are left with no coverage.

“It used to be that a patient would come in with an injury or illness that would make them uninsurable and TennCare would get those people on its rolls,” said Steinhauer. “From a hospital’s viewpoint it was a good thing. From TennCare’s it was not. But it was one way in which the state saved hospitals like us. Now that’s very difficult to do.”

While the problems are more evident at hospitals like The Med, TennCare restrictions and low reimbursement rates for services are even affecting private hospitals like Methodist Healthcare. Although Methodist can somewhat subsidize its costs of care for TennCare and uninsured patients with revenues from private insurers, it too has experienced some financial strain. “We’re doing 14,000 TennCare discharges at Tennessee hospitals [each year] and need to get the reimbursement right. We want to continue to serve the population, but we can’t do it and end up where The Med is now,” said Shorb.

While many of The Med’s problems are related to TennCare, program director Manny Martins said the hospital cannot use the program as a lifesaver. “We want to do what we can to help The Med within our budgetary limits, but it’s incumbent on management of The Med to realize that TennCare and essential access payments are not the sustainable answers surrounding safety-net hospitals,” he said. “The fact is that the state has what it has in terms of finances. Part of the problem with TennCare has been the use of money over a period of time that the program really didn’t have.”

“I absolutely think the reciprocal,” said Steinhauer. “TennCare can no longer think of The Med as something to bail it out. It costs us more to provide TennCare services than we are paid by TennCare, so in any sense of the word TennCare is using us to bail them out.”

But TennCare has its own problems to solve before it can pass on savings to The Med. A recent state audit of the year ended June 30, 2002, revealed several long-standing problems that have not been addressed by the program’s administration. “From [TennCare’s] inception it has had two problems,” said Methodist Healthcare’s corporate affairs vice president, Cato Johnson. (Johnson serves on the TennCare Advisory committee created last year by the general assembly.) “The first problem was that it was underfunded, and the second problem is a lack of oversight.”

Martins, who took over the program in July, says TennCare’s problems are a symptom of a larger problem: “a lack of a good strong management infrastructure.” He adds, “That lack presents itself by things not being done accurately and appropriately and things not being followed up on.”

The state attorney general’s office estimates that there are 10 pending lawsuits involving TennCare. Three of the lawsuits have influenced the way the program pays its providers and the coverage it provides. The 1998 John B. v. Menke class-action lawsuit charges the program with denying early screening, diagnosis, and treatment for TennCare children and children in state custody. After agreeing to provide the services, TennCare was found to be still in violation of the agreement in 2001. Program administrators were to work with an appointed special master to develop a plan for compliance. A second case filed in 1998 revised TennCare’s termination process of people on its rolls. Negotiations eventually led to the court requiring TennCare to grant the year-long grace period for enrollee reinstatement.

A third case, filed in 1999 on behalf of Medicaid enrollees, has directly affected prescription and pharmacy costs. The lawsuit originally covered enrollees who were not given the opportunity for appeal if the Medicaid program refused to pay for healthcare services. Appeal rights were expanded by a 2000 consent decree providing enrollees a 14-day supply of a medication during their appeal process. According to Martins, the Grier Consent Decree has had an adverse effect on program costs. “The state is unable to do some things that other states have done in an effective way, like develop preferred drug lists and enhanced rebates to try to streamline the cost of the program,” he said. “We can reduce costs that way without it affecting the quality of care to our clients and our [health-care providers].”

Getting By

Mild scarring is still visible at the end of Dan Harshbarger’s knee. Luckily, the pain is gone, his residual limb has healed, and with the help of a below-the-knee prosthesis, he’s almost as good as new. Harshbarger, a Med patient, was working at Federal Express when a plane got loose from its tether and began rolling up his right leg. He was thrown to the ground with the plane resting on his leg below his knee.

After an initial attempt at wearing a prosthesis failed, Harshbarger was sent to The Med’s Firefighters Regional Burn Center and Dr. Stephen King to undergo new skin-grafting techniques. King has worked with the burn unit since 1991 and took over as its medical director more than a year ago. “We’re a 14-bed unit and the only burn center in 150 miles,” he said. “We recommend what we think is best for the patient, but they always have the final say. You’d be surprised by how many of our patients tell us how their quality of life has improved [after going through procedures here].”

Specialized care has been a part of The Med’s history since its opening. While none of the hospital’s programs has had to be cut yet, administrators are considering options to reduce costs, including layoffs. Shelby County mayor A C Wharton recently called for a collaborative review by the health department and the hospital to prepare a contingency plan in a worst-case scenario — of continually declining revenues and a reduction of services. “We don’t have many nonessential programs. You need the trauma center; you need [obstetrics]; you need the nursery; and you need a prison unit,” said Steinhauer. “I go over those things every day and try to decide what is not needed and can’t come up with a single thing that can be done away with.”

Spurred by Governor Bredesen’s proposed budget, which calls for a 9 percent decrease in spending across the board by state agencies, Med administrators plan to reduce spending by $6 to $8 million. Those cuts will come from reducing overtime pay for hospital staff, possibly decreasing the number of employees, and reducing supply and equipment costs. A concerted bill-collection effort within the past two months has netted the hospital almost $2 million in outstanding bills. To control supply costs, the hospital has entered into a purchasing coalition with Methodist Healthcare to receive discounts on some items.

For The Med’s financial situation to improve, these savings measures must be accompanied by higher revenues. One piece of tort reform legislation, proposed by state Senator John Ford and state Representative Kathryn Bowers, was put off last week after successfully passing through both chambers. The bill would place a limit on the amount of compensation available to victims of medical malpractice, and updates the Governmental Tort Liability Act. It would designate The Med as a “governmental entity,” the same classification as school and utility districts that receive funding from county government. The bill adds hospitals in counties with a population of more than 800,000, whose boards of directors are appointed or elected by the county legislative body, and that use or lease property from the county. Inclusion in the “governmental entity” classification would limit liability claims against The Med to $250,000. Steinhauer estimates that passage of this bill would save The Med $2.5 million each year. The bill was sidelined last week by an amendment to limit the “governmental entity” to a three-year classification. A decision is expected early this week.

Also at issue is the hospital’s service to residents of surrounding counties in Mississippi and Arkansas. As the only trauma, burn, and critical-care unit in a 150-mile radius, The Med sees many out-of-state, indigent patients. The daily self/no-pay patient study included 14 other-state residents of the 60 surveyed — from nine Arkansas and four Mississippi counties. Legislators from both of those states have pledged reimbursement for health-care services, but actual transactions have been slow, with payment amounts well below actual costs.

Although The Med has received short-term reprieves to temporarily stabilize its funding problems, the crisis could arise again in July, the beginning of another fiscal year. Buffeted by TennCare’s instability, questionable reimbursement from neighboring states, and a foundering economy, the hospital is still in trouble. But Steinhauer is somewhat optimistic. “I think things will turn around by early fall,” he said. “If they don’t, we’ll have the cash crisis again. We’re not going to let ourselves get distracted from our main mission, which is to continue to take care of patients. We’ve got a good track record of doing that. We’ve got to be like the Japanese industries after World War II and consistently try to improve our product. The fundamentals have to improve — and that’s what we’re working on.”