Tuesday, October 12, 2004

Hospitals worry about money

One executive proposes
rationing some services

By Matt Leingang
Enquirer staff writer

CORRYVILLE - Hospitals in Greater Cincinnati may be forced to ration certain services if problems afflicting health care in the United States are not resolved, a top hospital executive said Monday.

Profit margins are thin because the business model is broken, said Ken Hanover, chief executive office of the Health Alliance, a group of six hospitals that includes University Hospital.

Speaking at the annual meeting on the state of health care in Greater Cincinnati, Hanover predicted that the region's 34 hospitals won't make dramatic cuts soon, but warned that hard decisions must be made on money-losing programs.

These include birthing services, trauma care, neonatal intensive care and programs that treat chronic diseases such as diabetes.

"As bottom lines continue to deteriorate, we'll have to look at how these services can be rationed. We must talk about collaboration," Hanover told a group of business leaders and health-care professionals at the Kingsgate Conference Center.

The region's hospitals have shown a willingness to collaborate on issues ranging from obesity programs to bioterror preparedness, but getting them to part with certain high-profile programs is difficult because hospital executives fear losing a competitive edge in the marketplace, said Lynn Olman, president of the Greater Cincinnati Health Council.

"When it comes time to have these hard discussions, we'd like to help hospitals find a good business case for why they should collaborate,'' Olman said.

"What we want is a win-win situation where it's good for the institution and good for the community," Olman continued.

The forces creating a health-care crisis in Greater Cincinnati are the same ones intensifying across the country, Hanover said.

An aging population is driving demand for services, Hanover said. At the same time, a shortage of nurses and specialty physicians means that hospitals are struggling to meet those needs.

In addition, people without health insurance are increasingly relying on hospital emergency rooms for their primary health care.

That drives up costs because ERs are the most expensive form of health care.

Throw in the financial strain of malpractice insurance - along with soaring government deficits which threaten to reduce payments from Medicaid, the federal-state program for the poor and disabled - and hospitals are concerned about their future.

The situation was worse in the late 1990s.

For example, the six Health Alliance hospitals - University, Christ, St. Luke East, St. Luke West, Jewish and Fort Hamilton - had a $52 million operating loss in 1998. Reimbursements have improved to the point where the system posted a $31 million gain in 2003.

Taken as a whole, the average profit margin for Greater Cincinnati hospitals in the past 10 years is minus 0.1 percent compared to 2.3 percent at other hospitals throughout the Midwest, Hanover said.

Americans need to have a serious talk about fixing health care, said Al Tuchfarber, a professor of political science at the University of Cincinnati and former director of the Institute for Health Policy.

The presidential campaigns of John Kerry and George Bush are merely focusing on pieces of the problem, Tuchfarber said.

"Our health-care system was put in place after World War II, and we've never really rethought the system," Tuchfarber said.

Monday's meeting wasn't all doom and gloom.

Hanover praised advances in medical technology. He also noted a recent report that indicates the shortage of nurses in Greater Cincinnati has lessened considerably in the past year, as have vacancy rates for several other hard-to-fill health jobs.

E-mail mleingang@enquirer.com

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