Sunday, October 24, 1999

Hospitals' deepest cuts still ahead


Red ink forcing consolidation, big changes

BY TIM BONFIELD
The Cincinnati Enquirer

        Five years of budget surgery hasn't cured the red-ink disease at Tristate hospitals, so many now are looking for new remedies.

        This time, however, the hospitals' patients are more likely to feel the results. That's because the next round of hospital changes will be less about administrative cuts and more about re-designing medical services and consolidating high-profile programs.

        “This is going to be the real hard stuff,” said Lynn Olman, president of the Greater Cincinnati Health Council. “Even though the consolidations have been painful in the past couple of years, the hardest cuts have yet to come.”

        New concerns about the financial stability of local hospitals emerged last week amid reshuffling at the Tristate's largest hospital group — Health Alliance of Greater Cincinnati. As part of a two-year turnaround plan, the alliance is dropping maternity services at Jewish Hospital in Kenwood, and Christ Hospital is studying whether to pull out of the group.

        But budget woes and potential consolidations spread far beyond the Health Alliance. Most hospitals in town depend on investment income and donations to stay afloat, because they are losing money from patient services.

        Hospital officials insist they are not getting paid enough from private and government insurance programs — issues that may take acts of Congress to resolve.

        They say continued hospital instability ultimately threatens the quality of health service in Greater Cincinnati. Hospitals that can't make ends meet cannot keep up with improving medical technology, or an aging population that demands more health care or the rising labor costs for nurses and other health professionals.

        Bad news for hospitals also can mean bad news for the local economy. The Tristate's hospitals have long ranked among the area's largest employers. Beyond the size of their payroll, hospitals also serve as a key source of well-paid, high-skill jobs.

        Doctors have watched the downsizing of hospitals even as they've faced heavy cost-cutting pressure of their own. The troubles with reimbursement have been enough to make some doctors think about joining unions and calling for government intervention.

        “I'm a Republican and I find myself encouraging government regulation of health-care reimbursement. It can't get any worse,” said Dr. Dean Kereiakes, a cardiologist and medical director of the Lindner Clinical Trials Center.

        “Affordability and availability were the buzzwords for health-care reform,” Dr. Kereiakes said. “But when you see health-insurance premiums going up on a yearly basis and reimbursement going down on a yearly basis, it's an untenable situation.”

        But not everyone agrees that hospitals are facing dire straits. Some say local hospitals still have plenty of ways to shave millions from their budgets without harming quality. In fact, some say the right kinds of hospital cuts could improve health-care quality.

        “All the hospitals have done is combine assets and join together to improve their negotiating strength (against managed-care health plans). They haven't really changed the way they deliver medical care yet,” said Jane Rollinson, managing partner and top health-care consultant for the Cincinnati office of William M. Mercer Inc.

        New technology — from genetics to robotics — is transforming medicine at a breakneck pace. And the Tristate population is shifting to new suburbs.

        Yet the locations of many large local hospitals were set a century ago and, even with refurbishings over the years, don't reflect the medical needs of the future, Ms. Rollinson said.

        “I think it's frustrating that hospitals are using their foundation money to sustain losses. With things like the human genome project going on, we are on the verge of some of the greatest breakthroughs in medical history,” she said. “That's where our money should go, not into maintaining the infrastructure of the past.”

        For several years, Tristate hospitals have been playing a multi-million-dollar game of musical chairs largely in response to cost-cutting pressure from large employers. One-time rivals have joined together to form the Health Alliance of Greater Cincinnati, TriHealth and Catholic Healthcare Partners, which have grown to include 18 of the region's 28 acute-care hospitals. (Area hospital groups)

        All three groups face big changes.

        Overall, the groups have saved millions of dollars — more than $90 million at the Health Alliance alone — in obvious ways, such as creating unified purchasing contracts and eliminating many duplicated administrative and clerical functions.

        But until very recently, the changes have not affected hospital core services, such as maternity care, cardiac care and cancer care.

        Even with the closing of the Jewish Hospital maternity unit, there are more maternity services in Greater Cincinnati than there were in 1994. New units have opened at Mercy Fairfield and the Mercy-Franciscan Hospital-Mount Airy. The unit at St. Luke Hospital West in Florence has been expanded.

        Many health-care observers say the single biggest obstacle to faster consolidation has been internal politics. It isn't easy to get people who came from as many as five different health organizations to agree on one way of doing things — especially when nobody wants to annoy powerful, well-established doctors who often control where patients go for hospital care.

        “More efficient services from hospitals can be a plus for patients, not a minus,” Mrs. Olman said.

        For some high-tech procedures — like open-heart surgery and organ transplantation — quality of treatment improves as volume goes up, Mrs. Olman said.

        “There are potentially big savings to come from eliminating entire departments, but those changes aren't easy,” Mrs. Olman said.

        Ultimately, entire communities from the city level to the national level face difficult choices about how much money to devote to health-care needs.

        And now, some of the business leaders who started Cincinnati's hospital consolidation wave in the early 1990s with a landmark study that compared hospital costs find themselves sitting in the late 1990s on hospital boards facing painful, unpopular cuts.

        “There is a growing realization that we have a very good health-care delivery system in this community,” said Thomas Petry, former chief executive of Eagle-Picher Industries who serves as chairman of the Christ Hospital board of trustees. “It's in everyone's long-term interest to preserve and enhance it. It's a common problem that needs a common solution.”

Area hospital groups



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