I know from many years of volunteer and fundraising work that people in our communities care deeply about their local hospitals. Businesses too tend to recognize the hospitals’ critical role in providing a safe environment for the workforce and are usually generous supporters. The hospitals reciprocate by stimulating the local economy as large employers and consumers of a wide variety of goods and services. During our current recession, the hospital segment has been nearly alone in expanding its work force here in the state.
Most local hospitals are ingrained in the fabric of their communities in a way that transcends their medical mission. The era of reform which has now begun will cause considerable change in this venerable relationship and those of us who care should be aware of all the consequences.
Our role is not merely to resist reform, indeed it is necessary, but to guide it in enlightened ways that preserve the very nature of this essential service while making it economically sustainable.
It is now apparent the “supercommittee” appointed by Congress to reduce our national deficit will not reach a consensus solution. Among cuts they were considering were reductions in payments to hospitals in Rhode Island that could total more than $600 million in the coming decade according to an analysis by the Hospital Association of Rhode Island. Their failure now raises the possibility of automatic cuts of about 2 percent in program payments. If implemented, even this scenario would devastate the network of acute care providers we have come to know. Most are currently operating at a deficit, and several have more severe fiscal instability.
Optimistic businesspeople may be accustomed to such market disruptions and consider them a bitter but necessary correction of a business model that has become bloated over time. That would be true of more commercial endeavors, but the consequences of such a disorderly realignment of the hospital network could have very serious patient safety and quality implications we should consider.
Failing businesses are often challenged to maintain product quality in the face of insufficient revenue. I don’t think any of us would feel comfortable with a loved one as a critically ill patient in a bankrupt hospital. The alternative is that we must plan or engineer a more orderly transition from the present model to a more-efficient network we can afford.
In the past few years our state has twice legislated the establishment of a comprehensive health-planning body, most recently as part of the Insurance Exchange Executive Order. Serious follow through on the structure, authority and operation of this body is critical as the overall health care system evolves from the treatment of illness to managing the health status of the population.
The truth is our hospitals could operate much more efficiently. The free-market, competitive model in which they have operated for many years now could be streamlined considerably by collaboration among the now competing facilities.
Health care reformers have for years advocated a business model called Centers of Excellence in which redundant, expensive technology and programs are eliminated, common support services are shared, and patients are directed to the facilities best suited to deal with their individual condition.
In fact, several strategically located new and larger facilities could replace twice as many (or more) older facilities which could be closed or re-purposed.
Federal grants, part of the Affordable Care Act, might be available for such an innovative demonstration project as a “waiver” from the Medicare/Medicaid system which now funds well over half of all hospital income. Savings would be dramatic, but what authority exists to conduct such an intricate symphony of change?
Recognizing that the collective or political process, or indeed the will for change of this magnitude is almost always limited, perhaps it is valuable to consider the alternatives and consequences of our expected inaction. By evaluating the current financial condition of our hospitals, it is realistic to expect that a consolidation of some sort of the hospital network will take place one way or another regardless, and indeed may already be under way.
The adverse investment climate of the recent period has allowed latent buildup of private equity and other speculative investment funds prepared to take a shot at health care reform in general and hospitals specifically.
We have already seen the pending acquisition of one failing hospital by a for-profit enterprise. The truth is they will need others to effect their consolidation strategy, and they are not the only private suitor in the market. The nonprofit sector too is reorganizing, as we have seen. Whether they have the vision and resources to effect a complete consolidation of the network, even assuming the anti-trust questions could be addressed, is uncertain at best.
So, yes we can oppose cuts to funding of our beloved hospitals, and we probably should, but we clearly need to do more. To suggest we can through our political resistance/intransigence somehow preserve the status quo is an illusion.
Health care costs, of which hospital costs are the largest segment, as well as the economic activity of our hospital sector, have a fundamental impact on our overall economy. We need to come together as a community and as a state to deal with this looming financial issue with the same determination and conviction now devoted to pension reform and other crises. •
Ted Almon is president and CEO of Warwick-based
Claflin Co.
