Announcements of separate joint ventures between Lifepoint and a regional medical center in Wisconsin and Carondelet and three major health systems in Arizona top the latest round of healthcare business news.
LifePoint Health has entered the Wisconsin hospital market after finalizing a joint venture that gives the Brentwood, TN-based for-profit company a majority stake in Watertown Regional Medical Center, the hospitals announced jointly on Tuesday.
Jeff Seraphine
The deal marks the first conversion of a hospital's tax status from not-for-profit to for-profit in the state of Wisconsin.
Jeff Seraphine, president, Eastern Group at LifePoint Health, says the hospital chain has had Wisconsin on the expansion radar for a long time.
"It's always been an attractive state for us, there just hasn't been a lot of opportunities," Seraphine says. "There haven't been a lot of pieces moving around up there that gave us the opportunity to partner with communities, but when the Watertown opportunity came about, we were right there and excited to be a part of it."
Jeff Baum, chairman of the WRMC board of directors, says it took a little extra effort to convince community leaders and state regulators, that the conversion to for-profit status would benefit all of the stakeholders.
"We had a lot of explaining to do. The staff got it pretty quickly, but it did raise some questions. Let's put it that way," Baum says. "When the community heard we were going to become a for-profit hospital the first thing they said was, 'Oh my God! You're going to have to raise all the prices to pay the shareholders.' But that's not true."
Allan Baumgarten, a Minneapolis-based research consultant who monitors hospital acquisitions across the Midwest, says Wisconsin has been "relatively late to get for-profit hospital companies."
"Michigan didn't have a for-profit hospital presence until about six years ago, but now has Tenet, LifePoint, and Prime and almost got Community Health Systems," Baumgarten says. "I assume that LifePoint is looking for other hospitals to acquire in the state."
"Almost all of the hospitals in the southeast corner of the state (from Madison south and east to the lake and the Illinois border) are already in larger systems," he says. "If LifePoint wants to grow in that region, it may be looking at some of those systems. Or it may be looking in other parts of the state, where there are still a few dozen independent hospitals, many of them small critical access hospitals."
Financial terms of the JV were not immediately disclosed, however it is understood that LifePoint will own 80% of the hospital and WRMC and the community will own 20%. Governance will be shared equally on a board with equal representation from WRMC and LifePoint.
The joint venture will invest $100 million in WRMC and the community over the next 10 years, targeting "significant advancements" in technology, expanding clinical services and population health and wellness initiatives. No layoffs are anticipated and LifePoint has committed to hiring all employees, subject to pre-employment screenings.
Seraphine says LifePoint was comfortable with an 80/20 joint venture model instead of an outright acquisition because WRMC wanted an ownership stake, and that similar governing structures have worked in other LifePoint ventures.
"Our goals and the way we work in either a full acquisition or a partnership model [is] so we work with the community to find out what works for them," Seraphine says. "We feel comfortable with a shared governance model where we can work in a collaborative way with the community, especially in a state like Wisconsin where there hasn't been a long history for an investor-owned company like LifePoint. It's a great way for the community to be at the table from a governance perspective, and it allows people to be more comfortable with a new arrangement."
Baum says the JV ensures that the community will have a say in how healthcare is delivered.
"We still own a part of the hospital and that made it much easier to talk to the man on the street and explain that we still owned part of the hospital," he says. "When LifePoint offered up 50% of the board, that pretty much sewed it up for us."
Proceeds from the transaction will be used to pay off WRMC's existing financial obligations. The remaining assets will be used to create a charitable foundation focused on community health.
Richard Keddington will become WRMC's new CEO on Sept. 14, replacing John Kosanovich, who retires after 20 years as WRMC's CEO. Keddington has served for the past five years as CEO of Select Specialty Hospital, a two-campus, 63-bed hospital in Milwaukee.
The joint venture between Watertown Regional Medical Center and LifePoint was subject to regulatory reviews by the Attorney General of Wisconsin. Baumgarten says the JV with LifePoint could signal an end to WRMC's strategic alliance with University of Wisconsin Health. "The website no longer mentions anything about being a member of the UW Health Partnership."
Financial terms of the deal were not disclosed, and the health systems declined to comment beyond the media release. However, Tenet is the majority partner and will manage the operations of the network's three hospitals, two physician groups, outpatient and ambulatory services, and affiliated businesses in Tucson and Nogales, AZ. Dignity Health and Ascension have minority interests in the partnership, the health systems said in a joint statement.
Tenet and Dignity Health separately own and operate hospitals and clinics in the Phoenix area and together manage Arizona Care Network, an accountable care organization that includes more than 750 facilities across Tenet's and Dignity Health's Phoenix-based healthcare systems, with more than 3,400 providers and more than 200,000 covered lives.
The Tucson-based joint venture will connect Carondelet to ACN, which will is expected to increase access to care for patients, strengthen and grow Carondelet's relationships with physicians, provide development opportunities for current and future employees, and fund strategic growth initiatives across Southern Arizona.
The facilities in the new partnership include:
St. Joseph's Hospital (486 beds) in Tucson
St. Mary's Hospital (400 beds) in Tucson
Holy Cross Hospital (25 beds) in Nogales
Carondelet Heart & Vascular Institute at St. Mary's Hospital
Carondelet Neurological Institute at St. Joseph's Hospital
Carondelet Medical Group
Carondelet Specialist Group
Carondelet's services also include imaging centers and other ambulatory services and ancillary businesses. The joint venture will maintain Carondelet's Roman Catholic identity through an agreement with the Diocese of Tucson. Carondelet's existing charity care policies will remain in place.
SSM Health Commits $500M to Build New St. Louis Hospital
One day after transferring ownership from Tenet Healthcare Corp., Catholic, not-for-profit SSM Health announced on Tuesday that it has committed $500 million to build a new replacement hospital and outpatient care center within the next five years. The new hospital will be built near the existing 365-bed academic medical center now known as SSM Health St. Louis University Hospital, the health system said in a media release.
SSM Health and Saint Louis University this week mark the start of their expanded partnership, which includes Saint Louis University Hospital joining SSM Health St. Louis. In June, SLU announced it would reacquire the hospital from Tenet and would give the hospital to SSM Health in exchange for a minority financial interest and governance rights in SSM Health St. Louis. The deal became official on Tuesday.
"While the current hospital has served the community well, we have the opportunity to construct state-of-the-art academic facilities that incorporate the best practices in patient-centered design," said SSM Health President/CEO William P. Thompson said in prepared remarks. "This significant investment will enable us to deliver an improved patient experience and even better care for our community."
For-profit Tenet has operated SSM Health St. Louis University Hospital for the past 17 years. The sale was completed on Monday. The relationship between SSM Heath and the university extends back to 1903.
Not-for-profit hospitals have emerged from the recession as leaner and better-managed organizations poised to take advantage of an improving economy, says a Moody's Investors Service analyst.
The financial outlook for not-for-profit hospitals has been revised from "negative" to "stable" by Moody's Investors Service, the bond rating agency's first upgrade for the sector since 2008.
"The outlook revision represents significant gains in the number of people with insurance, growing patient volumes and sizeable reductions in bad debt that are contributing to very strong growth in operating cash flow," Moody's said in its analysis.
"The stable outlook expresses our view that fundamental business, financial, and economic conditions for the not-for-profit and public healthcare sector will neither erode significantly nor improve materially over the next 12 to 18 months."
After two years of flat cash growth, Moody's survey of about 200 not-for-profit hospitals saw operating cash flow growth spike to 12.3% in 2014, up from 0.3% in 2013. Through March of this year, cash flow growth stands at 11.5%. However, that growth is expected to taper off through 2016.
In addition, bad debt was down about 15% in Medicaid expansion states, and down about 4% in non-expansion states.
Daniel Steingart, an analyst and senior vice president at Moody's, says not-for-profit hospitals have emerged from the recession as leaner and better-managed organizations that are poised to take advantage of an improving economy.
"Just as there had been perfect storms over the past several years that had conspired to keep cash flow growth down and to keep overall performance lower than it had been and declining over previous years, you are seeing a bounce back," Steingart says.
"It's a strong performance that we are in the midst of. Some is the generally improving conditions and some of it is the reversion to the mean after some very poor years."
"You have volume growth picking up because of deferred care, and gains in insurance coverage—a portion of which is the economy, a portion of which is Obamacare—and then you also had at the latter end of last year continuing into 2015 some real pick up in overall volumes, not just this pent up demand."
While the Patient Protection and Affordable Care Act was a factor in the not-for-profit hospital sector upgrade, Steinhart says he "would not pin it all on Obamacare."
"If it were simply that, you would see a much bigger difference between the Medicaid expansions and non-expansion states. The reality is everyone has improved," he says. "Yes, there were health insurance exchanges in Texas and Florida and more people gained coverage in those states, but the biggest gains were in Medicaid populations and that didn't happen in those states. I'm not saying Obamacare had no impact. It clearly did. Bad debt coming down has had a positive impact. But it is not the entire story."
Steingart says that the outlook could upgrade to "positive" if the operating environment improves and allows for stronger cash flow. If cash flow is below medical inflation, however, the outlook could be downgraded to "negative."
Either way, Steingart says hospitals should not expect that the level of volume growth they are now seeing will continue.
"It is not a return to the go-go years of the early 2000s," he says.
He says hospitals will also have to contend with rising labor costs.
"A lot of hospitals have been keeping the belt very tight," he says. "Even though there have been a lot of job gains in the sector, a lot of hospitals are telling us they are holding tight on salary and benefits. Wage pressure is going to be an issue over the next six months or so."
Beyond the 18-month forecasting window, Steingart says not-for-profit hospitals face potential bottom-line challenges in the movement toward population health and value-based care that are expected to reduce in-patient days. In addition, information technology upgrades, strategic investments in physician practices, and the growing shift of coverage toward Medicare as the population ages, also will squeeze bottom lines.
Data collected from the nation's 1,300 federally qualified community health centers shows a significant rise in the number of health center patients who are covered by health insurance.
Data compiled from the first year of the Patient Protection and Affordable Care Act is starting to trickle out and it's burnishing the legacy of federally qualified community health centers as a focal point for access to healthcare in poor and underserved areas.
According to the 2014 Uniform Data System, which collects patient and healthcare information from the nation's 1,300 FQHCs, the number of health center patients with health insurance rose by more than 2.3 million, a 17% increase, while the number of uninsured patients declined by 1.2 million, a 16% decrease.
Peter Shin
The total number of patients served rose by more than 1.1 million, a 5% increase. Since 1996, the total number of patients served at federally funded health centers has nearly tripled, from slightly more than 8 million to almost 22.9 million patients served by 2014.
The findings were compiled in a report from the Geiger Gibson/RCHN Community Health Foundation Research Collaborative. The director of the collaborative and a coauthor of the report, Peter Shin, says the data provides a "first glimpse" of how health centers are impacting access in the first full year of federal health reform in 2013.
"If anything, it continues to show that these are very strong programs that are very effective in reaching out to low income populations," he says. "They are in these federally designated underserved communities, reaching the population that they are mandated to reach."
Shin says the data reflects both Medicaid expansion states and the 20 states that have declined to expand Medicaid. He says the collaborative will work in the coming weeks to flesh out the differences.
'A No-Brainer'
"We are just getting into the data now to look at some of the comparative numbers between the two groups," he says. "I don't have anything to show you, but we are expecting that the numbers will be considerably higher among the insured population for the expansion states versus the non-expansion states. That is a no-brainer."
Obviously, the major growth in insurance coverage can be credited to the PPACA's Medicaid expansion. Because patients at health centers tend to be poor, Medicaid accounted for 79% (1.8 million people) of the 2.3 million increase in insured patients served by health centers. The number of privately insured health center patients also rose from 3.1 million to 3.6 million, an increase of 16% and by far the greatest increase in private insurance coverage over the 1996 to 2014 time period, according to the UDS data.
"I don't want to gloss over the fact that there were also significant efforts from health centers doing outreach and enrollment for the patient populations," Shin says. "Health centers helped 10 million people get coverage in one way or another, whether it was through the health centers or through another provider. Regardless, health centers did a tremendous job. [They] are going to try to make sure patients are connected as much as possible and find a medical home as much as possible. That is one piece of the story that has helped, particularly for getting patients more educated and aware of the coverage options they may have."
Shin says it's too early to determine if the PPACA and near-universal coverage has changed the patient mix at FQHCs on a national level.
"For that we'd have to look at the Massachusetts experience," Shin says. "They only have about a 3% uninsured rate and we are finding that their health centers are still not only a provider of choice for the insured population, but they are still key safety net providers for the uninsured and now serve about one-in-two uninsured in Massachusetts, which is about double what it was before health reform up there."
Shin says he expects those story lines to vary among Medicaid expansion states as the PPACA rollout continues to change the coverage landscape.
'A Significant Economic Boost'
"Obviously it will be more or less the status quo for non-expansion states," he says. "In expansion states we are going to find a tremendous boost in access, which will impact disparities in heath and which will impact local economies as well. We are going to see a lot of this play out over the long run as a real major advantage coupling not only Medicaid expansion but these investments in health centers. That is going to be tremendous boost for the local economies."
While the collaborative report does not address the economic impact of the Medicaid expansion, Shin says the community benefit is apparent.
"It is an $18 billion program, and we are just talking about expenditures," he says. "That is going back to the communities and reflects some of the new jobs, because obviously they have hired new people. We are talking about a significant economic boost or a lot of these economically disenfranchised communities."
"People forget there were also significant investments in health centers under the ARRA (American Recovery and Reinvestment Act), where they were trying to create more jobs in health centers and did just that," Shin says. "They were reaching out to the people who normally would not be afforded that opportunity. Health centers are trying to affect not only the daily lives of the population but also providing some opportunities. A lot of the hires are from the communities. A lot of doctors who have been trained in underserved communities come back."
Shin says the UDS data prompts follow up questions, and the collaborative will spend the next few months looking for answers.
"We will look at access issues to see if health centers might have the appropriate staffing levels given that they have significant recruiting and retention challenges in these isolated communities," he says.
"We are going to look at impact on quality, the changes that are affected by having patients who are now newly converted to being insured; to what extent they are seeing sicker patients or might be able to move the dial on making the general patient population a lot healthier. We have quite a few things to look at in terms of operations, performance, quality of care, financial and economic impact. We will look at all of these sectors. We will be able to tell a lot from this data."
Based on annual median wages reported by the Bureau of Labor Statistics, surgeons earn the highest annual median wage, followed by psychiatrists and primary care physicians.
Despite reports of job dissatisfaction, surgeons, psychiatrists and physicians are the three highest-paid professions in the United States, according to the CareerCast's 2015 list of Top 10 best paying jobs.
Using annual median wages reported by the Bureau of Labor Statistics, CareerCast found that surgeons topped the list with an "annual median wage" of $352,220, followed by psychiatrists at $181,000, and primary care physicians at $180,180. All three of the medical disciplines were expected to see a wage "growth outlook" of 18% through 2022, according to CareerCast, a niche job search portal based in Carlsbad, CA.
Healthcare professions presented six of the 10 highest paying jobs on the list. Dentists came in at No. 5, with a median annual wage of $146,340 and a growth outlook of 16%; orthodontists were No. 7 with an annual wage of $129,110 and a growth outlook of 16%; and pharmacists were No. 10, with an annual wage of $121,000 and a growth outlook of 14%, according to CareerCast.
Physicians defend their high compensation by noting that they spend up to 10 years in training and that they accrue huge student loan debts that can take decades to pay off. The Association of American Medical Colleges reports that the median debt was $180,000 for medical students graduating in 2014.
While the specific value of compensation paid to various professions can vary from survey to survey, the findings by CareerCast are consistent with lists compiled by other sources. For example, Forbes magazine listed "physician" in general as the "highest paying in-demand job" in 2015, with an "average base salary" of $212,000. Pharmacy manager was No. 2 on the Forbes list with an average base salary of $131,000.
Healthcare professions represent seven of the top ten "100 Best Jobs"as rated by U.S. News & World Report, and Money magazine. Their ranking take in other factors such as quality of life, challenging but not overly stressful, career advancement, and hiring demand.
Although limited to healthcare professions, one of the more detailed assessments of physician compensation comes from the annual physician recruiting search results published by Merritt Hawkins, the Irving, TX-based physician recruiters. Invasive cardiologists topped the Merritt Hawkins list of Top 10 in most demand specialties with an annual income of $525,000.
The problem with precision medicine is "the paradox of prevention… some very significant achievements at the individual level can be achieved without having much of an impact at a population level," says a public health researcher.
So far, precision medicine has been long on potential but short on delivery and some health policy experts question whether this focus on this novel and cutting edge medical discipline may distract from proven but more mundane population health strategies.
In a recent essay in the New England Journal of Medicine, Ronald Bayer, and Sandro Galea, MD, write that the movement toward precision medicine comes even as consensus solidifies around the idea that health differences between and within groups have more to do with social factors than with clinical care.
Ronald Bayer
Bayer shared his concerns about the potential drawbacks of precision medicine in an interview with HealthLeaders Media. The following is an edited transcript.
HLM: What do you mean by "precision medicine?"
Bayer: "There is a view that the goal of public policy and science should be to make diagnoses and focus treatments that are specific to the individual, so that rather than thinking about how we should treat large numbers of people, we should be concerned with which people will be most likely to respond to a given intervention or therapy because of their biological or genetic background.
We believe that precision or personalized medicine takes our focus off the question of 'what do we do to improve the health of vast numbers of people living globally' and asks a different question, which is 'how can we target medicine most effectively to treat those who are sick?' We think this is a huge mistake.
HLM: Why?
Bayer: It is focusing on the wrong problem because we have just begun to provide decent and adequate healthcare for all of our citizens under the Accountable Care Act and we have a long way to go to just provide decent medical care to people.
The issue goes even beyond that. Americans don't know it, but they are at the bottom of the heap when we talk about life expectancy and every other stage of the life cycle when compared with other people in other countries similarly situated. The question is why and the answer can't be that they know better what the genome of their citizens is, or that they know better how to target medical care.
The reason clearly is that the US has become over the last 40 years increasingly and strikingly vastly socially unequal. Everything we know about who gets sick, how they fare when they get sick, who dies, when they die, at a population level, is that social inequality is bad for health.
HLM: How is a focus on precision medicine detrimental to population health?
Bayer: For example, the question we want to ask about tobacco is 'why do some people smoke for a lifetime and never get cancer or emphysema?' My question is why 'do so many people who smoke get sick?' The answer from a public health point of view is to severely regulate tobacco consumption, not to figure out the genomic bases for figuring out lung cancer or heart disease.
In public health it is call the 'paradox of prevention.' Very small reductions in risk at the individual level can produce huge consequences at a population level. The problem with precision medicine is that some very significant achievements at the individual level can be achieved without having much of an impact at a population level. That is what we have to be concerned about."
HLM: Do you see any value in precision medicine?
Bayer: Yes. I believe we should push the frontiers of science and there is much we may learn in the future. My sense as I read the literature is that there is a lot of hype involved. While a lot of serious scientists may understand the limits of what they are doing, the way it is presented to the public is that this is going to transform our world not in the next century but within our experience. I just think that is baloney.
Advancing the frontiers of science is a great idea. It's a question of priorities and a question of the public discourse about health. Every time I read a statement that advances the agenda of personalized medicine, it has the aura of religious fervor and that is misleading. And from the point of view of public health, we know that there are these vast disparities within our own nation.
Americans like to boast that we have the most technologically sophisticated healthcare system in the world and they go from that to say which of course means we must be the healthiest people.
There is no connection between the two, and at some level the question is, 'what is the metric you use to define the best healthcare system in the world?' Is it the one that can take care of a rare disease most exquisitely or is it the one that has an impact on life expectancy?
HLM: Why do you think precision medicine is getting so much attention?
Bayer: Being at the leading edge of science and exploring new frontiers accounts for it. My concern is that what we've written might be seen as 'anti science.' People at the center of precision medicine have said we are cranking out the same old story, but I think there is a need for a serious conversation, where people take a step back, take a deep breath, stop hyper-ventilating and ask 'what are our needs?' How do we prioritize our resources and our attention. It is pretty clear that the precision medicine crowd is diverting our attention from where it needs to be.
HLM: Do you get a sense that precision medicine is somehow designed with more affluent patients in mind?
Bayer: More money is spent on the treatment for male pattern baldness globally than on research on tuberculosis. There are hardly any new drugs in the pipeline for TB, which kills about 2 million people a year. The drug companies aren't interested because it doesn't look like these drugs will have huge profit margins. The use of the words 'personalized' and 'precision' is strategically very interesting.
Of course we want clinical intervention to be as precisely targeted to the problem as possible and certainly we want our doctors to treat us as people and not statistics. But it sometimes seems to be something darker that is involved, and that is, a kind of mismatch between what public and population health tells us we need to be doing and this huge intellectual and resource investment in the world that is not going to make an impact on those issues.
HLM: You cite $215 million that NIH has earmarked for precision medicine research. That's not a lot of money when you consider that the U.S. spends close to $3 trillion on healthcare.
Bayer: The goal and mission of the NIH is to advance the frontiers of medicine and science. The absolute spending at this point may look small, but when NIH says the 21st century is the century of biology, I'm concerned about the sharpness of the challenge.
It's time for those who've been proclaiming the vast implications for wellbeing from precision medicine to give an explanation for why a focus on precision medicine is not a diversion from meeting the health needs of Americans at a global level, the vast numbers of people who suffer and die too early from preventable diseases.
HLM: How can we strike a balance?
Bayer: There is much we might learn delving deeper into the biological and genetic foundations of disease. At the same time we must recognize that major achievements in our lifetime will not come from those investments, but will come from changing the conditions under which people live and the conditions under which they receive care.
There we will see returns on investment within our lifetime. The investments we are making in precision medicine and genomics are for the future.
Financially struggling Cochise Regional Hospital, a 25-bed CAH in a town of 17,000, closed last month after the Centers for Medicare & Medicaid Services ended its provider agreement and shut off funding.
Douglas, AZ, a town of 17,000 souls nudged against the Mexican border, has become the latest small town in the United States to lose its hospital.
Financially struggling Cochise Regional Hospital, a 25-bed critical access hospital, was forced to shutter late last month after the Centers for Medicare & Medicaid Services ended its provider agreement and shut off funding.
CMS inspectors visited the hospital in March to address complaints about patient care. CMS provided a brief statement explaining the closure: "The most significant issue was the facility's failure to monitor an inpatient placed in a waiting room for 1.5 hours prior to transfer to another facility where the patient became unresponsive, had to have a breathing tube inserted, and ultimately died after being transferred to another hospital."
Harley Goldstein, is a Chicago-based attorney representing parent company People's Choice Hospital LLC, which bought the twice-bankrupt CRH in January, 2014. He says People's Choice was trying to correct the problems identified by state and federal inspectors when CMS withdrew the provider agreement. Read CMS's complaint, filed in US District Court for the District of Arizona.
"Cochise Regional Hospital aggressively sought not only to rectify the underlying issues, but also pursued a number of parallel tacks to avoid closing the hospital," Goldstein wrote in an email to response to my questions, "including filing of motion for a temporary restraining order in federal court to prevent Medicare and Medicaid from failing to provide coverage, contacting state and federal representatives, seeking remedies with the appropriate administrative agency, and negotiating extensively with the United States Attorney on behalf of the federal agencies to try to reinstate Medicare funding for going-forward patient care."
Despite those efforts, Goldstein says the hospital was denied a timely administrative appeal hearing and the U.S. Attorney's office refused to intervene.
"Accordingly, although the hospital kept its Emergency Department and related services open as long as was economically feasible without continued Medicare coverage in order to serve the local community while the hospital sought to resolve the Medicare coverage matter through negotiations (and in hopes that the U.S. Attorney or the politicians would intervene and convince the appropriate regulatory folks to change their minds so the community was not left deprived of critical-access medical services), such efforts were in vain," Goldstein says. "Without the reinstatement of Medicare coverage to Cochise Regional Hospital, the hospital lacked the funds to continue to operate, and closed its doors permanently."
The closure means that Douglas residents and emergency services will have to travel to Bisbee, AZ, 27 miles due west to access the nearest hospital. It also means the loss of 70 healthcare jobs and makes difficult the city's efforts to recruit new providers and businesses.
By some counts, Cochise Regional Hospital is the 56th rural hospital to close in the past five years, and unfortunately it may not be the last. Rural hospitals already operating on hair-thin margins took a severe hit during the Great Recession. These hospitals generally care for a patient mix that is older, sicker and less-affluent than in urban areas. In addition, inpatient services are declining, as are Medicare reimbursements. It's even worse for rural hospitals in states that have refused to expand their Medicaid programs under the Affordable Care Act, which Arizona reluctantly agreed to do in 2014.
Douglas Mayor Danny Ortega, Jr. calls CRH's closing a "tragedy" but not a surprise. CRH's financial and clinical problems were widely known and some sort of shake up was expected. Even before the closure, he says, many Douglas resident chose to get their care elsewhere.
Danny Ortega, Jr.
In the short term, the town is making due with a quick care center for non-emergency care, and transporting acute cases to Copper Queen Community Hospital in Bisbee. Ortega says the town will likely have to spend more for EMT overtime, and contract ambulance services with private companies.
"Long term, we had a meeting with the healthcare providers last week and there is some interest in building an emergency room here in Douglas by Copper Queen and there are a couple of organizations that are interested in bringing a hospital into town, Ortega says. "It is sad that we lost a hospital, but it is encouraging that there is interest in our community by these providers."
Ortega says city officials are still trying to gauge the economic fallout.
"We lost 70 jobs from that hospital, and we are trying to develop a new port of entry and the associated infrastructure and jobs," he says. "It is very difficult to recruit not only citizens to your community, but new industry when there is not a hospital in your town."
The $4 million stand-alone emergency department proposed for the town by Copper Queen would not be a 24-hour facility, and Ortega says his constituents believe that Douglas needs a new hospital.
"There are enough government jobs and people with insurance in town to support a hospital," he says. "Bisbee is a town of 5,300 and they have a 15-bed hospital. We are triple that population and we have nothing at this time."
So far, Ortega says, local providers have rallied to the cause. "They're not talking about leaving," he says. "Quite the opposite; they're asking what do we need to do to get a hospital here. Many of our physicians live in town and they know we need a hospital."
"I am hoping that in the end we will have something better than what we had," the mayor says. "The hospital was 75- 80-years old. It was antiquated. Some of the facilities were grandfathered in. The people of Douglas deserve a more modern facility."
Asked if he had any advice for other small town leaders who may confront a hospital closure, Ortega says: "Just keep fighting. Hopefully you'll get what you need."
As many as 20% of hospitals will seek mergers over the next five years, and none of the 306 hospital referral regions in the United States is considered "highly competitive," researchers say.
Hospital mergers that create monopolies in their service areas can drive up costs and reduce quality while presenting a risk for a government bailout if they become "too big to fail," two health policy experts from Johns Hopkins University say.
In a commentary in the Aug. 13 issue of JAMA, the two researchers call on the Federal Trade Commission to be more aggressive in its review of hospital mergers, particularly when the mergers could create a single dominant hospital system in one geographic area.
"What we are saying is that the basic principles of economics hold true for medical pricing in the same way they do for any other industry," says "viewpoint" lead author Marty Makary, MD, MPH, professor of surgery at the Johns Hopkins University School of Medicine and associate professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.
Makary and his co-author, Tim Xu, a student at the Johns Hopkins University School of Medicine, note that hospital consolidation has accelerated at an "alarming" rate over the past five years, with 95 hospital mergers of some sort occurring in 2014, the most since 2000.
Marty Makary, MD
The two researchers cite studies showing that as many as 20% of hospitals will seek mergers in the next five years, and that none of the 306 hospital referral regions in the United States is considered "highly competitive" and that nearly half are "highly concentrated."
Makary draws parallels between hospital consolidation and the consolidation of the banking industry, which required a taxpayer bailout when it collapsed during the Great Recession. He says such a scenario could occur when some geographic regions are controlled by one health system.
"If a bank goes out of business because of bad decisions and the consequences affect everyday businesses and consumers—and that is what happened—as a society, we decided that because of that it is justifiable to use taxpayer dollars to bail out the bank. That is why we created the concept of 'too big to fail' as being something that there is a low appetite for in the United States. We have created healthcare systems that are so large that they dominate an entire state and maybe too big to fail."
Makery rejects the assertion that hospitals are consolidating to protect themselves from consolidation in the health insurance sector.
"There is a huge difference," he says. "While we still have a small group of geographically large insurers, the competition at the local level is still fierce. That competition keeps the market healthy and keeps pricing reasonable for the consumer."
"But when you get sick," he says, "if there is only one hospital system in a giant geographical region the patient is far less likely to choose care far outside that region than they are to choose a different health insurer when they are shopping."
"I believe insurance pricing remains very competitive. The pricing is transparent and the dollar amount spent on benefits is public information and unrestricted," Makary says. "Price increases are lower at the hospital level when there is negotiating leverage by the insurers. When there is less leverage by insurers the prices are higher and those are passed on directly to consumers in the form of high deductibles and copays."
Clinical Integration vs. Consolidation
Makary also challenges the idea that hospitals need to consolidate to prepare for integrated care and population health. That claim, he says, relies upon "metrics that are far too immature to be meaningful for value-based goals. The enthusiasm for ACOs has outpaced the maturity of the metrics for patient outcomes."
He says there is much evidence to suggest that benchmarking hospital quality scores at the state and regional level has had a tremendous effect on improving quality, and that does not require consolidation.
"The method is there and the alignment of incentives are there for hospitals to perform well and to collaborate around quality," he says. "Clinical integration is a great way in which patient information can be shared across institutions, where affiliations can allow expertise, consultations, and referrals to connect the most appropriate doctors and facilities with the patients who need that specialized care. But all these benefits can occur within the context of hospitals competing or not being wholly owned by one central corporation."
Makary says he is not rigidly opposed to consolidations, as long as it doesn't muzzle completion. He notes that his employer, Johns Hopkins Hospital and Health System, has consolidated "in a highly competitive geographic region that remains highly competitive with several large health systems."
"The prerequisite is that there remains completion," he says. "There are no pricing concerns when you have mass consolidation of a system competing with another system. The concern is in a geographic region where patients don't have feasible options to get care elsewhere."
Mega-mergers that create monopolies put hospitals on one of two roads, Makary says.
"One road is where they apply best practices and improve quality across the board and create a tide that raises all boats in their system, which is good," he says.
"On the flip side, other systems have had their central management detached from the frontline providers in their system and the disconnect has caused problems. If you talk to doctors and nurses in these large systems they will tell you they know how to improve quality of care in their system but that the system is too large for them to have input and their wisdom is not being solicited."
Let's not forget the economic benefits that Medicaid provides for rural America. The money paid to providers, however insufficient, is better than swallowing the cost whole with no reimbursement.
Much has been written of late to note the 50th anniversary of Medicare and Medicaid, and with good reason. Despite their many problems and budgetary pressures, these two programs are among the most successful pieces of legislation in the history of the United States. It would be fair to say that Medicare and Medicaid have improved, enriched and lengthened the lives of tens of millions of Americans.
For my purposes, I'll concentrate today on Medicaid, which critics hate, not because it doesn't work, but because it does. Yes, the reimbursements are too low. Yes, mandates such as the Two-Midnight Rule have no basis in reality. Yes, recovery audit contractors are like pit bulls that must be leashed and held financially accountable for over-zealous auditing. Yes, Medicaid strains state budgets. There is no shortage of complaints.
Nonetheless, the program and its many experiments and pilot projects in various states demonstrate that government can innovate and provide access to healthcare for the poor and the sick, a demographic that commercial health insurance companies (and some providers) generally avoid because they're— so far— not profitable when you take on the risk.
What would we be like without Medicaid? Unfortunately, to some extent that's not just a rhetorical question. The 21 states that have declined to expand their Medicaid populations under the Patient Protection and Affordable Care Act provide a sad comparison to those states that have expanded their rolls. For example, a study this spring by the Kaiser Family Foundation found that if the 21 states that had not expanded Medicaid were to do so, then:
The number of nonelderly people enrolled in Medicaid would increase by nearly 7 million, or 40%.
4.3 million fewer people would be uninsured.
There would be $472 billion more federal Medicaid spending from 2015 to 2024.
States would spend $38 billion more on Medicaid from 2015 to 2024.
Savings on reduced uncompensated care would offset between 13% - 25% of that additional state spending.
States would be able to realize other types of budgetary savings if they expanded Medicaid that are not included in this report.
The alleged reason why elected leaders in these states say won't expand their Medicaid populations is because they're afraid of an expensive entitlement program that they won't be able to afford. Yes, it is expensive, but doing nothing costs more both in terms of dollars and lives.
The Cost of Uncompensated Care
"Many of the states that have decided against Medicaid expansion are those who would gain the most," the KFF report noted. "This applies when examining the impact of expansion on the uninsured, increases in federal Medicaid funding, or reductions in uncompensated care."
"Reduced costs for uncompensated care are one of several sources of savings that would help to mitigate that increase in state costs," the study found. "Assuming that states only realize 25% to 50% of the reduction in their share of uncompensated care, those savings would offset 13%— 25% of the total increase in state Medicaid spending due to expansion. In addition, states could realize other types of budgetary savings and increases in revenue if they expanded Medicaid that are not included in this report."
Jodi Schmidt, a career rural hospital and Federally Qualified Health Center administrator from Kansas, and president of the National Rural Health Association, told Congress last week that Medicaid is particularly vital for rural America. Unfortunately, the majority of rural residents in this country live in states that are not expanding Medicaid. In fact, poor and rural states are least likely to expand Medicaid, even though their residents rely upon it the most.
Rural hospitals in these states continue to serve the uninsured, but reductions in disproportionate share payments and other Medicare and Medicaid reimbursement reductions have forced 55 rural hospitals to close since 2010, and 283 others are close to closing.
NRHA estimates that if those hospitals close, 700,000 rural patients will lose access to their local hospital; 50,000 jobs in rural America will be lost; and $10.6 billion in economic harm.
"After nearly 3 decades as a rural hospital, clinic and FQHC administrator, I have never been more concerned about the future. The rural safety net is unraveling," Schmidt told Congress. "I believe we must explore Medicaid Expansion through partnerships with organizations other than the state, working together to address the gap between traditional Medicaid and eligibility for the exchange," Schmidt says.
"Provider-based demonstration programs have proven successful, as the precursors to the Critical Access Hospital program, among others. If allowed the opportunity to create innovative new approaches to expanding Medicaid, I feel confident you will find willing providers."
Let's not forget the economic benefits that Medicaid provides for rural America. The money paid to providers – however insufficient – is better than swallowing the cost whole with no reimbursement. And the money paid to rural hospitals and other providers helps to pay for the salaries of employees. That money is in turned cycled through the community in the form of goods and services. If those hospitals close, those tiny economic engines seize up.
Of course, refusing to expand Medicaid was never about sound health policy or state budgets. It has always been about partisan politics, with a side dish of rigid ideology that insists that government can do nothing correctly and government doesn't create jobs.
People who actually deliver the care know better. They've seen what Medicaid can do, every day.
The findings in a "secret shopper" survey of about 300 primary care providers across the state before and after the implementation of the Healthy Michigan Plan were counterintuitive.
Access to primary care physicians in Michigan increased after the Medicaid expansion, even with the rapid addition of about 350,000 newly insured adults, a new study shows.
Renuka Tipirneni, MD, the lead author of the study and a clinical lecturer at the University of Michigan Medical School, says the findings in the "secret shopper" survey of about 300 primary care providers across the state before and after the implementation of the Healthy Michigan Plan were counterintuitive.
Renuka Tipirneni, MD
"We had an expectation that practices would get full due to the multiple insurance coverage expansions, both through Medicaid and private insurance on the exchanges under the [Patient Protection and] Affordable Care Act," says Tipirneni, who is also a practicing internist. "We thought we would see decreased availability of appointments and longer wait times. What is interesting is we saw the opposite happen."
In a study published in Health Affairs, U-M researchers in 2014 called primary care physicians posing as relatively healthy patients looking for a routine checkup with a new healthcare provider. For those who said they had Medicaid, 49% of clinics offered an appointment before the expansion and 55% offered an appointment after expansion.
For those who posed as patients with private insurance, 88% of clinics said they could take them before expansion and 86% said they could after expansion, the study said.
Overall, wait times for the first available appointment for all patients stayed the same as before the Medicaid expansion took effect, at about a week.
"There was more flexibility in the capacity of primary care providers to accommodate new patients than we initially anticipated," Tipirneni says "As a practicing primary care physician, I can see there are multiple impacts on my schedule and how easy it is to accommodate new patients and new patient appointments on the schedule. It's not just related to the number of providers. It is also related to the types of providers, whether they are physicians or non-physicians. It is related to how many appointments we can make available both on a daily basis and on a long-term basis."
One Huge Caveat
Before the PPACA, Medicaid reimbursements in Michigan were about 50% of Medicare. During the survey period, Medicaid rates were temporarily raised to 100% of Medicare, specifically to entice primary care physicians to accept Medicaid recipients. That rate has now dropped to about 75% of Medicare.
Tipirneni says it's not clear if new Medicaid patients would have a more difficult time finding a primary care physician now that the rates have decreased to 75% of Medicare.
"That is a good question and one of the reasons why we continue to track these patterns of appointment availability and wait times," she says. "We continue to track this into 2015 to see how these availability of appointments may or may not change once the rates have gone down."
Tipirneni says there were concerns among clinicians and health policy experts in Michigan that the rapid expansion of Medicaid would make it difficult for new enrollees to see a primary care physicians within three months of gaining coverage – a key provision of the Medicaid waiver that created Healthy Michigan Plan.
Tipirneni says the easy access to primary care may reflect increased efficiencies from primary care practices.
"Primary care practices are redesigning how they practice and a lot of that is related to improved efficiency," she says. "A lot of it is to improve patient-centered care. This is not related to coverage expansion but happening at the same time. There is a strong movement for patient-centered care and particularly having patients in medical homes and primary care clinics. There are many incentives that weren't always the ones intended that have made primary care practices potentially more efficient."
There were exceptions. "Clinics that had long wait times for new patient appointments had long waits for everyone," says Tipirneni.
About half the clinics had only one or two primary care providers; 6% had 10 or more providers. Nine percent of the clinics were safety-net clinics, in line with the state's overall distribution of clinics that accept all patients regardless of insurance status. While there was a small drop in the percentage of clinics that were taking new privately insured patients after expansion, this did not result in an overall increase in wait times.
Tipirneni says it's not clear if the results of the Michigan survey would apply in other states.
"There is the old adage that if you have seen one Medicaid program you've seen one Medicaid program," she says. "There are important distinctions and differences between settings and states and different programs and for that reason it is really going to be important to study this across many states."
Treating blood clots as a "never event" under pay-for-performance guidelines doesn't reflect reality, says a researcher who is calling for a re-evaluation of venous thromboembolism outcomes and process measures.
Hospitals are incurring unfair financial penalties when their patients suffer from blood clots, even when clinicians can demonstrate they've taken every best-practice preventive measure to reduce complications, according to a study published the July 29 issue ofJAMA Surgery.
Elliott R. Haut, MD, lead author of the study, says blood clots are treated as a "never event" under pay-for-performance guidelines and that doesn't reflect reality.
"We all agree that we should eliminate preventable harm. The operative words are is it really preventable," says Haut, who is also an associate professor of surgery at the Johns Hopkins University School of Medicine.
"Some things are truly preventable, these never events such as wrong site surgery or leaving objects in patients by accident after surgery. Those should be never events that happen 0% of the time."
Reducing or eliminating complications such as blood clots are a completely different matter, says Haut, who is also on the faculty at the Johns Hopkins Armstrong Institute for Patient Safety and Quality.
"We are never going to be perfect in medicine. This is not a perfect assembly line where every widget is the same and comes out perfectly each time," he says. "Each patient comes with their comorbidities their sickness, their illnesses and whatever and we know when we do surgery there are risks. Blood clots are another example of this. We can't drive the rate of blood clots down to zero."
For the study, Haut and his team reviewed case records for 128 patients treated between July 2010 and June 2011 at The Johns Hopkins Hospital, and who developed hospital-acquired venous thromboembolism (VTE). All 128 were flagged by the Maryland Hospital Acquired Conditions pay-for-performance program. The researchers looked for evidence that the clots could have been prevented.
Thirty-six patients (28%) had non-preventable, catheter-related upper extremity clots, leaving 92 patients (72%) with clots that were potentially preventable with medicine. Of those, 45 had a clot in the leg, 43 had clot in the lungs and four had both types of clots. Seventy-nine (86%) of the 92 patients were prescribed clot-preventing medications, yet only 43 (47%) received "defect-free care," researchers found.
Of the 49 patients (53%) who received suboptimal care, 13 (27%) were not prescribed risk-appropriate clot-preventing drugs, and 36 (73%) missed at least one dose of appropriately prescribed medication, the researchers said.
The 'Bar is Too Low'
Part of the problem, Haut says, is that the "bar is too low" for quality reporting. The existing VTE care goal, set by the Joint Commission and the Centers for Medicare & Medicaid Services, is that one dose of clot-preventing medication is given to patients within the first day of hospitalization. Haut says that's not enough.
Under current guidelines, he says, "the best 100% perfect hospitals have clinical outcomes for DVT and PE that are exactly the same as the lowest quintile."
"You get credit currently for giving one dose when patients may be in the hospitals for two weeks and they should be getting doses three times a day. They are saying 'we will give you credit because you gave them one dose when they came in' and they don't care about the rest of the hospitalization. That is what we have to fight for."
Haut says the results of his study illustrates the need to re-evaluate venous thromboembolism outcomes and process measures. Nearly half of the VTE events identified in the Maryland study occurred even though patients received best-practice prevention. If hospitals and clinicians can demonstrate that they took every precaution, Haut says they should not be penalized.
'A Very Doable Goal'
"It's two pieces: First pick the right medicine. Second, that patient should receive every single dose while they are in the hospital," he says. "That is a very doable goal. The goal of preventing (deep vein thrombosis) and making that number zero is impossible. But if we can provide defect-free care to patients and they get every single dose of best-practice prophylactics, I'll sleep well at night knowing I did the best thing for the patients, provided the best evidence-based care, and provided every single medication. Some bad events might occur, but then it is not my fault."
"If a patient has a (pulmonary embolism) and dies and we'd missed doses I'd feel horrible. That in my mind is preventable if we had done a better job."
