Thursday, April 03, 2008

The Hospital Nobody Wanted

From the front page of today's Chicago Tribune:
In a stunning development underscoring the plight of non-profit hospitals struggling with the increase in uninsured patients, the Catholic ownership of St. Francis Hospital & Health Center on Wednesday said it will shutter the hospital because nobody would buy it.

The religious order of nuns that oversees St. Louis-based SSM Health Care said it could not even give the hospital away to other health facilities "for free."

Saddled with tens of millions of dollars in losses from uninsured patients who could not pay their medical bills, St. Francis would be abandoning its core mission of caring "for the people of its communities regardless of their ability to pay." SSM will seek a closing application with the state, a process that could take several months.


"Unfortunately, in spite of St. Francis' outstanding clinical reputation, reimbursement from commercial insurers could not cover the cost of providing care to the growing number of Medicaid and uninsured patients," said Sister Mary Jean Ryan, SSM's chief executive officer.

As health insurance companies and government health insurance programs reduce amounts they pay hospitals, hospital operators increasingly look to consolidate to gain economies of scale in the regions where they operate.

Some operators also try the increasingly controversial route of expanding or relocating to wealthier suburban areas in order to attract a higher number of commercially insured patients who can provide a steadier flow of revenue.

But SSM was stymied in its attempts to expand and does not have other hospitals in the area to rely upon. SSM said it tried to strengthen St. Francis, located in a blue-collar community that has suffered job losses, by expanding to more affluent Orland Park, which is partly in Will County.
But some were skeptical about the decision to shudder the hospital, it seems:
"If you can offset the losses to build a new hospital 10 miles away [in Orland Park] then why can't you offset the losses to keep this unprofitable hospital open with the profits from the parent organization?" asked Joe Novak, an Illinois hospital critic who rails against the non-profit industry on his blog, WhereTheMoneyGoes.com.

In south suburban Will County the building boom has pitted hospital against hospital for the right to build facilities in growth areas. Silver Cross Hospital in Joliet has drawn intense criticism from its city leaders and the community for plans to relocate to New Lenox, which has far fewer uninsured patients just a few miles away in a booming suburb.

North suburban Lake County, too, has been a hotbed of activity, with hospitals engaging in bidding wars to expand.

Lake Forest Hospital this year made an unsolicited offer to acquire Condell Medical Center in Libertyville just one day before Condell executives announced the signing of an exclusive agreement to merge with Advocate Health Care, the area's largest provider of medical care.

SSM said it puts its profits at St. Francis into new medical technology and capital improvements, pointing to $75 million in investments in the Blue Island facility since 2000 that included upgrades to mostly private rooms, new operating rooms and a same-day-surgery facility.

"We could locate this facility about anywhere in the country and it would attract physicians and patients," said Kris Zimmer, SSM's senior vice president of finance
.
It's like Road Warrior - where gasoline was the fuel that people killed for - now, due to the inability for fancy medical technology to attract physicians, the turf war has shifted...

... to the affluent patient.

And the hospital wars continue...

-Wes

6 comments:

TBTAM said...

I've been reading the book "the Middle Class Millionaire" that describes how the marketplace is responding to the demands of the affluent. Looks like they are impacting healthcare as well.

Here where I work we are adding an entire penthouse floor to the hospital for a special unit for the affluent self pay pts.

All very interesting to watch.

Josh S. said...

I see this as having similarities to issues a lot of non-profits face - how much money do you devote to securing more funding?

In theory, there's nothing wrong with a non-profit health care system taking a few steps to appeal to wealthy patients, and then using those funds to subsidize the other operations, on which they take a loss.

In practice, well, this post shows what can happen. And it happens with a number of other charitable organizations, not just in health care.

I'm not really sure what the solution is. It's easy to say that these hospitals should just keep their focus where it should be, but actually doing that under all of the pressures they face, is a different story.

Regulations can backfire. The Minneapolis/Saint Paul metro area put a cap on the number of hospital beds available in the area. In practice this just means if one of the hospital systems wants to open up a new hospital in a wealthy suburb (like Maple Grove), they HAVE to shut down an existing one.

So as much as I dislike this problem, I fear the solution as well.

Anonymous said...

jeez i grew up not to far from there. i wonder what all the affected workers will do. that is no good for the town.

Anonymous said...

But some were skeptical about the decision to shudder the hospital, it seems:


I think you meant: "shutter" the hospital

DrWes said...

Anony 12:25-

Movin' too fast. Thanks.

Anonymous said...

St Francis is in trouble in large part because management did not control ER costs and procedures.

They have been running the place into the ground for some time. Ask any front line worker. The management did not listen to front line employees- they could have heard of many ways to reduce costs in practical ways.

There is a 'gag' order- the termination manual says that employees can loose their jobs or severance pay if they say any bad things about the hospital