COREROTARY PRESENTATION
Michael Curtin
THE CASE AGAINST “BOUTIQUE” HOSPITALS
DRAFT:
November 3, 2002
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Thank
you, Ann.
And thank you, members of the Rotary Club of Columbus, for this opportunity for that generous introduction … and thank
you for the opportunity to
share
with you some thoughts about how our health care landscape is changing … and
about what these changes mean today for both the consumers and providers of
health care services.speak with you on an issue that is vitally important to our community’s quality of life.
I am the board chairman of Mt. Carmel Health
System. I am a strong advocate for our full-service,
nonprofit community hospitals – hospitals that have serve this area, our state and most of
the nation very well for over a century.
And I have no need to balance hats here because The Dispatch and the
Wolfe family – for many decades – have been strong advocates along with many of
the institutions and families represented in this room – in building this excellent
system we enjoy.
In central Ohio, these hospitals include on behalf of all of our local
non-profit full-service community hospitals – Children’s Hospital; Mount Carmel East, West and
St. Ann’s; the local OhioHealth
hospitals – Doctors Hospital, Grant Medical Center and Riverside Methodist
Hospitals; and The Ohio State University Health System – OSU
Medical Center, OSU East, and The Arthur G. James Cancer Hospital & Richard
J. Solove Research Institute.
I am here to sound the alarm before it’s too late about an emerging
trend in health care that threatens great and lasting
harm -- by has the potential to erodinge our the community’s access to the full range of healthcare services we
need.
[I’D PREFER
TO GET RIGHT TO THE POINT OF THE ISSUE]At the dawn
of the 21st century … many of the most deadly diseases of 100
years ago are being routinely cured … or at least managed. In contrast to the
norm in 1902 … cancer, kidney disease, cirrhosis, pneumonia, cholera
tuberculosis, the flu and even heart disease are no longer relentless
killers. And the hospital is no longer
a place where people go to die.
There are many explanations for these changes. In part, they reflect our success in
dramatically cutting the number of vaccine preventable diseases. They point to the fact that our drugs today
are smarter … our surgical tools are more powerful … and our diagnostic tests
are amazingly precise.
To be sure … we are winning over sickness. But we also are discovering that it is far
more important … and possible … to avoid sickness and disease.
These changes are reshaping healthcare … the things
we do and the results we try to achieve.
But they are NOT the only important changes that
are transforming health care today … because those changes extend to the
organizations through which health care services are being provided.
One
of the most important changes in the delivery of health care services is
reflected inI’m referring to the emergence of for-profit,
limited-service hospitals in
which specialty doctors have an
ownership interest – often referred to as “specialty” or “boutique”
hospitals. Approximately 30 orthopedic surgeons have begun
construction on are building an orthopedic boutique hospital in New Albany – and there are reportedly other
boutique hospitals
such facilities being planned or
discussed in our
area.
Most often, the rationale given for these so-called
“boutique” hospitals is found in the
competitive forces of a free market … with claims of[I DON’T
THINK WE SHOULD BRING UP THE FREE MARKET ISSUE UNLESS WE’RE WILLING TO ADDRESS
IT IN DETAIL…JUST BE
PREPARED FOR SUCH QUESTIONS IN THE Q&A SESSION AFTERWARD] that they
will provide better services and higher quality
care.
But Tthe evidence suggests
that most of these claims are bogus exaggerated if not untrue altogether … They are smokescreens
for investors’ belief that ,
in a new and unregulated environment for hospital facilities, they have health care
offers tremendous opportunities to create wealth for creating wealth themselves by referring the best-insured, best-paying patients to hospitals they
own, steering those patients away from our nonprofit, community hospitals.for a few at the expense of
patients.
And
mMost of these
claims ignore the fact that for-profit hospitals can erode
community access to quality health care … particularly for
“unprofitableThey
would leave for the nonprofit, community
hospitals …the care of the sick . . . the poor . .
.the under-insured. . . the uninsured . . . .those people with limited ability to pay for needed health-care
services.
” populations such as the sick
… the poor … the under-insured … and people with limited ability to pay for
needed health care services .
This
is the issue we are here to consider today.
And I want to begin my remarks with a brief story.
It is told
that when There’s
a story about the the great late JJustice Oliver Wendell
Holmes, as he was was approaching his 90th
birthday. He was on , he was on a
train one day and couldn’t find his ticket.
The conductor recognized the distinguished jurist and told him not to
worry … and if he found his ticket later, he could mail it to the railroad.
“You
don’t understand,” the worried Justice said.
“The problem isn’t where my ticket is. The problem is where am I going?”
Justice
Holmes’ question is the one I want to pose today … and it’s the question all of
us need to educate
ourselves on, and finally
answer.
Our
primary concern todayThe centralurgent questions for our community
are is not
… w”What are for-profit,
limited-serviceboutique hospitals?” … and “wWhy are they
emerging in Central Ohio?”
Rather,
the most
important questions isare … “wWhere are will these so-called
“boutique” hospitals takeing us?” … and “dDo we want our
community to go in that direction?”…and, if we do, “What will the ultimate impact be on our
community?”
I
believe that the answer is clear … At the conclusion of my remarks, I bhope elieve thathat you’ll agree that
this issue is worth more
of your time and
study. I hope you
will agree that it’s an issue that is too important not to investigate further.
If you do, I am confident that a great majority of
you will come to conclude that is NOT the
road that we want to travel the boutique hospital road is
one we don’t want to follow.
That
instead of improving health care, … and
tThat “boutique” hospitals
offer few if any benefits for our community.…And that boutique hospitals they will do lasting damage to
our community’s access to the full range of needed – instead of improving healthcare -- may actually hinder our community’s access to
needed healthcare services.
services.
Let me tell
you why.
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For more than
50 years
many decades, , Ggreater Columbus
has been served well by a system of non-profitnot-for-profit
hospitals – hospitals
with a charitable, community mission – providing that offers a
single high-quality standard of affordable care for ALL citizens … regardless
of their ability to pay.
In this
respect, Columbus stands as a
model . . . being one of the largest communites
in the nation that provides this alone as the largest
community in the nation that provides this kind of high-quality care – a
single, high-quality standard of affordable care for all citizens – without
local tax support. Without a hospital levy. This is a record we should be very proud of.
This is This is not an
insignificant achievement.
It
stands in sharp contrast, for example, to the situation in Cincinnati, where
local tax levies generate $30 million a year for care that is provided in
“charity” hospitals that serve medically indigent patients. In Cleveland, local
tax levies generate $26 million a year. In Dayton, the number is $4 million a year for charity care. And the This story is repeated
in scores
of many communities
across the nation.
But not
in Columbus … largely because our community hospitals are sharing the
responsibility for charity care. Last year, Children’s Hospital, Mount Carmel,
OhioHealth and The Ohio State University Health System provided more than $21600 million in uncompensated care for
the community.
This
is why the decision of about 30 orthopedic surgeons to construct a 30-bed,
for-profit orthopedic hospital in New Albany has generated so much
attention. It is why the actions of
these physicians … who will own a 60 percent interest in this so-called
“boutique” hospital … have raised so many concerns … and produced so much
opposition.
The
New Albany hospital project has been given a lot of labels … everything from a
“knife fight” to a 21st
century battle between David and Goliath.
I
prefer to call it something else.
Non-profitNot-for-profit full-service
hospitals take the long view in planning for, and preparing to meet, the
community’s
healthcare needs -- not only for today but well into the future. Our community hospitals ask themselves, “How will what we do
today affect what we do in the future – 5 years from now…10 years from now…20
years from now…And beyond?” The oldest hospitals in the Columbus area have been serving the community for more
than 100 years, and we have the fine healthcare system we have today because their forefathers our predecessors asked these kinds of
questions in their day.
Our system of full-service, nonprofit, community
hospitals did not develop by accident.
This system was the result of much hard work, much deliberation, much
consensus-building, much philanthropy, voted bond issues by your parents and
grandparents, and careful public policymaking in the General Assembly.
Many members of this Rotary Club were instrumental in building the system we enjoy
today. This
community collaborative included civic leaders named Huntington, Lazarus, McCoy, Ready, Sayre, Vorys
and Wolfe.
The result of their efforts was a system of community hospitals – first-rate community
hospitals.
Community, in every sense of the word. Hospitals founded with a charitable, nonprofit
mission.
It
is the tip of an iceberg … the surfacing ofBut for-profit
boutique hospitals represent a new kind of hospital … one that
is investor-driven … defined
by doing what’s necessary to meet the next quarter’s profitability targets.
The Center for Studying Health System Change
recently stated this
about the physician
ventures popping up all over the country: “This is really about docs not being happy with
their income, and the fact that they’re feeling squeezed.’’
trapped by “next quarter-it
is” … and focused on “making our numbersa certain level profit” this
quarter and every quarter by doing whatever it takes.
This
new for-profit hospital rejects the view of our traditional non-profit community hospital
system, which makes community health and customer service Priority Number 1 …
even for “unprofitable” populations, including those who are sick and in need …
even though they may not have the ability to pay for quality care.
To
be sure, New Albany is a single hospital.
Yet, there are reports that additional for-profit, boutique hospitals
are either in development or in the planning stages … here in Central Ohio.
This is NOT
an isolated situation … and Columbus is NOT alone in facing it. Besides Ohio, boutique hospitals are
emerging Boutique
hospitals are emerging in increasing numbers in such many states -- as Arkansas,
California, Florida, Idaho, Louisiana, Indiana, Kansas, North
Dakota, Oklahoma, Wisconsin, to name a few.
In just the last two years, approximately 120
speciality hospitals were built in the U.S., at a combined cost of $7 billion. The number of physician-owned
specialty hospitals is expected to double in the next 2 to 5 years.
and elsewhere.…And those communities are
grappling with this issue just as we are.On March 20, the chairman of
the U.S. House Ways and Means Committee, Bill Thomas, a Republican from
California, said that boutique hospitals should be called cash-cow hospitals
because they focus only on medical services designed to maximize their profits.
The goal of the owners of boutique hospitals is to strip away the few profit margins that currently exist in community hospitals. Like strip-mining. And when
you strip-mine hospitals, you will change the health-care landscape forever.
So the
question is … what can be done to preserve the special balance that our
community has achieved? What can
we do
to ensure that for-profit hospitals don’t come in and divert millions of
dollars in revenues from our community hospitals?
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First, we We should not allow Ohio to be
taken in this direction. need understand why for-profit, limited-service
hospitals are taking us in a direction that our community should not allow
itself to go. I believe there are THREE REASONS.
REASON ONE. Certainly we shouldn’t without a full debate, full
consideration, a full exploration of where this ride would take us.
Boutique hospitals can will undermine this a community’s
access to high-quality, affordable health, which is essential to the well-being
of all of our citizens and the community as a whole.
How? It’s fairly simple.
For-profit,
limited-service hospitals begin by “cherry-picking”
the most profitable patients, leaving community hospitals with those patients
who need the most complicated and costly care.
It is no wonder why the
majority of boutique hospitals specialize in cardiac care and orthopedics.
Those two specialities typically account for about 30 to 40 percent of hospital
revenues.
Cardiac care is a $150 billion
a year revenue stream in this country. Orthopedics is a $100 billion a year
revenue stream. Some
specialty doctors increasingly
want to divert those streams from our nonprofit, community hospitals to
themselves.
But those are the very revenue streams that support
a comprehensive, full-service hospital in which most services barely support
themselves or don’t
support themselves at all. It is those few profitable streams that enable, full-service,
nonprofit community hospitals to operate emergency rooms, trauma units, burn
units, poison
centers, community outreach, programs, charity care and the like.
TThese new hospitals
don’t offer these
services. They may pay lip service to them, but with them it’s really only about the bottom line.
If the specialty docs are
successful with their boutique hospitals, our current model for providing these
important community services simply cannot stand.
many of the
services that are available at non-profitnot-for-profit,
full-service community hospitals. Typically, they don’t have emergency rooms,
burn units and poison centers – and they don’t provide the level of charity care
for the poor and underserved populations that our non-profit full-service community hospitals do.
What this means is that for-profit,
limited serviceboutique hospitals siphon off millions
of dollars from full-service community hospitals by concentrating on the most
profitable services. And that leaves the full-service community hospitals
without the dollars they now use to help pay for such things as poison centers,
free health screenings for children and pregnant women, trauma care, child
abuse prevention programs and charity care for the poor.
This also means that these
unprofitable, yet essential, services will be jeopardized. The
job security of health professionals employed at many of Central Ohio’s
non-profit hospitals will be threatened. And boutique hospitals will drain
talented specialists from our community hospitals … making referrals difficult
for other physicians … and jeopardizing many citizens’ access to high-quality
care.
It’s at this
point that the Ssupporters of boutique hospitals –
including the New Albany facility – like to argue that community hospitals are
exaggerating the threat. We typically
hear from these doctors and their investor friends that this is nothing more
than a battle between David and Goliath, and that they are in the underdog role. And these folks quickly grab the mantle of
David … and announce their willingness to defend themselves with a measly
slingshot.
You
don’t need to fear for the friends of for-profit hospitals … and don’t need to
buy into the supposed benefits of boutique providers.
A quick
look at the experiences of other communities provides clear evidence that this
is not a fight between David and Goliath.
Far
from it!
Take Indianapolis,
just next door, for example.
.
As a
result of the opening of four for-profit heart hospitals, several non-profitnot-for-profit,
community hospitals are in
financial crisis. teetering today on the edge of serious financial
crisis. Clarian Health Partners, which includes Methodist, Indiana
University and Riley hospitals, had a 52% drop in revenue in 2001. St. Francis
Hospital and Health Centers saw its net income fall 26%.
A bit further to the west, in Wichita, Kansas, the
proliferation of cardiac and other for-profit, boutique hospitals chopped into
Via Christi Regional Medical Center’s revenues – reducing its net operating
income by 60% in 2001.
Via Christi in the city’s seventh largest employer,
so we are not talking about a minor inconvenience. Instead, we are talking about a major impact on the community’s
physical and financial health.
In Idaho, the non-profitnot-for-profit Logan
Regional Medical Center saw its revenues decrease by 10 percent immediately
after the Cache Valley boutique hospital opened in 2000.
And In in Louisiana, four in ten today, 38 percent of
the state’s non-profitnot-for-profit
community hospitals now are
losing money to for-profit boutique hospitals. For example In Rushton, Louisiana, a , in Ruston … a town
where a group of 35 physicians have announced plans to construct a for-profit
surgical hospital … representatives at the town's only community hospital,
Lincoln General, say they expect to lose $1.6 million in surgical and imaging
revenue this year – that
‘s $300,000 more than the hospital’s entire profit margin of . The
hospital ended last year with a $1.3 million.
margin
These are not isolated situations.
Similar examples can be found in Texas, Arizona, North
Dakota, Oklahoma, Wisconsin, Utah and elsewhere.
across the country.
In fact, the Health Care Advisory Board … a research organization
serving health executives of more than 2,000 leading health systems and medical
centers … has estimated that 35% to 45% of hospital revenues could be are jeopardized by
for-profit, limited-service hospitals.
Revenue loss of
this scale . . And this kind of revenue loss … rresulting from the
cherry-picking of the most profitable and lowest-risk patients by boutique
hospitals and the doctors who own them … jeopardizes the ability of community
hospitals to offer the full scope of health care services that their
communities need.
We cannot allow this to happen, for three fundamental
reasons.