No one would blame you for believing that hospitals are looking for rental storage units to store all of their excess cash after reading the April 4 article in the Wall Street Journal.

On the whole, that is not the case according to a study (pdf) reported in the same newspaper. Here’s the gist from the Kaiser Network:

For the study, researchers examined the finances of 3,861 of the 4,900 short-term, acute-care hospitals nationwide and found that 2,044 of the facilities do not make a profit from the treatment of patients. In addition, 744 of the hospitals that do make a profit from the treatment of patients lack adequate funds to make improvements or finance daily operations, according to the study. The study also found that capital expenses for the hospitals are underfunded by $10 billion to $20 billion because the facilities have used those funds to finance daily operations.

This from the WSJ Health Blog:

“Similar to competitive markets in other industries, second and third-tier competitors (small and mid-size urban hospitals) are rapidly losing ground to the dominant medical centers and integrated delivery systems in their service areas,” the report says.

It will be interesting to see where this goes. My assumption is that we will find a way to keep these hospitals in business for the foreseeable future. In many communities, the presence of the local hospital means the difference between community growth and stagnation—or worse. It is very similar to the way rural communities try to hang on to their schools instead of consolidating with area towns. Once the school is lost, the city has trouble sustaining itself. So will we see government help to update the infrastructure at these hospitals? Will we see an extension of the critical access hospital program?

But the other possible path is to let the hospitals try to survive on their own. We’ve seen a hospital close recently, mostly due to a poor payer mix. The pressures are only going to tighten: more uninsured (and now underinsured) patients, lower reimbursements, and rising costs. And it is conceivable to see hospitals close due to a lack of patients. Consider outpatient services (both hospital affiliated and not) continuing to move business away from hospitals. Retail clinics have the ability to diagnose quickly—long before a patient may need to be admitted. New delivery models like concierge medicine and the coming innovation-in-delivery boom could further reduce the need for inpatient beds.

Here is something to consider strongly: Gerald Gline, a bankruptcy attorney at Cole, Schotz, Meisel, Forman & Leonard, said in the WSJ article, “There are just too many hospitals.”

Maggie Mahar at Health Beat is doing a series on health care spending related to hospitals; Part I and Part II. Here is a snippet from Part II (go read the rest, it is quite informative):

In recent years, much new construction has been designed to house new technology or upgrade amenities rather than add to the number of hospital beds. There is just one exception to that rule: the suburbs.

“When hospitals do increase inpatient beds,” Paul Ginsburg, the president of the Center for Health System Change notes, “the new construction typically occurs in rapidly growing suburbs, where well-insured patients live.”

In its March 2008 report, the Medicare Payment Advisory Commission supports Ginsburg’s observation: “much of the added capacity is located in suburban areas and in particular specialties, raising the possibility that health care costs will increase without significantly improving access to services in lower income areas.”

While having a hospital in every suburb might seem like a convenient idea, the fact is that we cannot afford to duplicate multi-million dollar equipment that is available in a large city 45 minutes away. Here, I am not talking about emergency equipment or trauma centers; I’m talking about positron emission tomography (PET) machines and neo-natal intensive care units.

In order to offset notorious money-losing locations (read: depressed areas) health systems have built hospitals in suburban areas where the payer mix is much more likely to be profitable. It’s really a smart business decision, but as Ms. Mahar notes, the redundant and expensive technology is sending health care costs up. That’s a problem, but here is something else to consider: what happens when Americans stop moving to the suburbs?

Would people really do that?

They are. The Atlantic had an article in March that noted the emergence of suburban slums:

The decline of places like Windy Ridge and Franklin Reserve is usually attributed to the subprime-mortgage crisis, with its wave of foreclosures. And the crisis has indeed catalyzed or intensified social problems in many communities. But the story of vacant suburban homes and declining suburban neighborhoods did not begin with the crisis, and will not end with it. A structural change is under way in the housing market—a major shift in the way many Americans want to live and work. It has shaped the current downturn, steering some of the worst problems away from the cities and toward the suburban fringes. And its effects will be felt more strongly, and more broadly, as the years pass. Its ultimate impact on the suburbs, and the cities, will be profound.

Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today.

For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s—slums characterized by poverty, crime, and decay.

Richard Florida writes on a host of issues including regional development, quotes a San Francisco Chronicle article on his blog:

When asked if the edge suburbs are turning into slums, Florida concurs with Leinberger’s ominous vision. “Yes, they are already well on their way,” he says. “The knowledge workers can’t afford the time cost, they can’t afford the commuting time.” …Florida and Leinberger say that retooling the suburbs is going to make urban renewal look like a walk in the park. “Suburb development is really fragile,” Leinberger explains. “It’s going to be very complex to rebuild.”

A CNNMoney.com article from 2006 notes that it is not just young urban professionals who no longer want to live in suburbia:

Retirees, empty nesters and young professionals usually have little in common, but they’re all in the vanguard of a recent trend - they’re repatriating center cities.

The trend, which began in the late 1990s, marks a reversal of the post-war urban flight to the suburbs. Now, it’s strengthening.

Young professionals make up a big part of the trend. “It’s carefree living,” says Caparo. “Young professionals just want to put the key in the door and go to bed at night and lock it up again in the morning.” It’s also where the action is, professionally and socially. “For them, there’s lots of DNA to hook up with,” says McIlwain.

Retirees love the museums, restaurants and, most important, access to the best health care. Empty nesters get to live near work.

“For years people traded a commute for affordable housing,” says Jim Gillespie, CEO of Coldwell Banker. The further out in the suburbs, the more affordable the homes. But as suburbs expanded and got more crowded, road construction did not, could not, keep up. Congestion grew worse.

So what is the problem? The closing of SSM St. Francis Hospital and Health Center is a start. Hospital closings are rare, their economic impacts are very important to the communities they serve. Jane Sarasohn-Kahn at Health Populi writes about those difficulties:

Always remember that one worker’s income is another one’s cost. For some communities, the hospital is the local monopsony providing the lion’s share of meaningful employment.

The chart on the right from the AHA study illustrates that in many states, hospitals provide at least 1 in 10 jobs: this is true for Maine, North Dakota, Pennsylvania, and nearly 1 in 10 for Massachusetts, Michigan, Missouri, Ohio and West Virginia, among others.

The microeconomy of the hospital is thus a major contributor to the States’ and nation’s macroeconomy.
When there’s talking of closing hospitals, there’s no doubt why it’s so tough to do so. Financing hospitals, appropriately, has implications well beyond “the bed” and the individual patient.

So localities will fight to keep their hospitals open even as population shifts render their locations irrelevant and unnecessary.  Not necessarily a good thing.  The more unnecessary hospitals we have, likely the more unnecessary hospital spending that will occur.

Ms. Mahar sums it up best:

Granted, out West, there are states where hospitals are too far apart. But in the Northeast, on the West Coast, and in many areas in the South, research shows that we already have too many hospitals—leading to supply-driven over-spending and over-treatment. (“Build the beds and they will come.”)

Here is what we need ask ourselves: are we building responsibly?  What happens when (we’re approaching unsustainable spending levels) government decides to say to hospitals “you made your bed, now sleep in it?”

Quality of care (and by proxy medical errors) is probably topic number two behind insurance reform on the nation’s health care agenda.  The Institute for Healthcare Improvement’s 100,000 Lives Campaign was dramatically successful.  In fact, since reaching the 100,000 lives threshold, IHI has introduced The 5 Million Lives Campaign (“a voluntary initiative to protect patients from five million incidents of medical harm over the next two years”).

Medical errors happen (a lot).  But we don’t always hear a personalized story.  And the story is often what brings the issue into focus.  So with great interest, I’ve been following the events of multiple medical errors at the non-health care blog Nine Shift.  It’s an amazing account of a series of improbable events.  Thankfully, the story has concluded positively.  Go, here to read it (you can probably figure out what to do from there but just in case: successive posts here, here, here, here, here, here, here, here).

By the way, while we’re somewhat on topic, look into their book (”Nine Shift - Work, life and education in the 21st century”), “Nine Shift explores the uncanny parallels between today and 100 years ago, examining the changes between the two transition periods and the forces that restructure society in the new economic era. Discover each of the major nine shifts currently taking place and find out the implications of each shift for business and work, life and education.”  The book was one of my earliest introductions to the topic of universal health care.

Thank you William Draves for sharing your family’s very personal story, our thoughts and prayers are with all.

Have you noticed the number of hospital expansion projects in your area? Odds are quite good that you have. If not, read here, here, here, here, here, and here. That’s a small sample.

I realize that some hospitals have finally reached a strong enough financial position and can now expand after putting off the need for years. And that our population is aging: to prepare we need more capacity.

What if the expansion is due to a medical arms race? A Health Affairs article says, “Hospitals are increasing capacity in high-end and high-volume product lines, to compete with other hospitals and freestanding outpatient facilities.”

That makes sense financially, but is not necessarily good for the patient.

What are we going to do with all the capacity when the retirees are no longer so numerous? Another Health Affairs article says, “Ultimately, a great deal of added cost to the health care system will result from recent construction activity, some of which might be attributable to costly duplicative and underused capacity.”

And this should be sobering. This article in the Journal of the American Medical Association says that when a cardiac hospital opens, heart surgery in the Medicare population within that community increases. In other words, capacity creates demand. If things stay the same (doubtful, I know…but for the argument’s sake) we won’t need to worry about excess capacity because those beds will be filled…potentially with patients who really don’t need to be there.

I’m all for hospitals growing with a purpose, it just scares me of the managerial (and cost!) problems these expansion projects could leave us with in 30 years.

Some good reading related to hospital expansion.

Medicare’s Diagnostic Related Group (DRG) classification system changed (again) recently.  My (basic) understanding of the change means better reimbursement for hospitals (specifically academic medical centers) and less reimbursement for ambulatory surgery centers (ASC).

ASCs have been criticized in the past for operating on the best cases (low complications, highly reimbursed procedures, some even call 911 if complications arise during surgery because they don’t have emergency capacity).  However, an argument on the efficiency impact can’t be ignored.  The learning impact for providers who operate on similar cases on a daily basis should raise quality, something we obviously need.  The majority of patients who receive services from ASCs do just fine.

Regardless of what actually was intended by the DRG change or what happens in the future, what are your thoughts on ASCs?  Is the service they provide a benefit to our health care system?  Are they taking business away from hospitals?  Do they force hospitals to be more efficient? (As always this gets a little more complicated than asking a few simple questions: I think some other issues are at work here like physician ownership and referral patterns.)

Whether it is a function of less access to primary care physicians or the importance of the always-burgeoning internet…Web 2.0 has hit health care. Actually, this post is pretty late to the party…

What is Health 2.0? Go here. Some examples: iMedix, RevoultionHealth, Medstory, Healia, Xoova, Organized Wisdom, and (less 2.0 than the others) the industry’s gray lady: WebMD.

Its impact, I feel, to this point has been muted. But its time is coming. What will be the impact of Health 2.0 on health systems?

Hospitals will have to take into account the impact of these websites on the delivery of care. It is this notion of the
patient as a partner in the deliverance of care. Obviously it is the way it should be–patients participating in tandem with their providers.

But there are some consequences. With added knowledgeable in tow, more questions will be asked as patients feel better informed, which will increase the likelihood of lengthier conversations with providers. All good. But providers will need to spend more time with patients (like more than five minutes) and that means patient throughput will decrease. Given the current state of reimbursement in this country where we reward for more care, not better care, providers may not be able to see as many patients in the same amount of time.

Health 2.0 means changes for hospitals and providers, can we explore what some of them are?

BTW: adenoma.

Remember the days when a house visit by a physician was the primary way of caring for a patient?

The service seems to be making a comeback. It’s not just something they do in France, either (for those of you who have seen Sicko).

I have come across two websites (one–this service seems really cool–, two) in the past few days of physicians who are more than willing to make house calls (after seeing this story in the New York Times in September). For those types of illnesses that don’t require significant medical technology it can be a great thing. The issue, as always, comes with cost. In the (mostly) free market that is the United States health care system, that means those who are able pay for the house visits and individual attention, do so.

House visits are a great idea. We just need more physicians to start. And that means lowering the cost so that demand is greater. And that means the reimbursement function needs to be completely rethought. And that means…

I appreciate the innovation and would like to see the model continue to expand.

This caught my attention.

Healthcare Analytics is working on a “sort-of” medical credit rating the likes of which banks (and many other institutions) currently use to judge a consumer’s credit worthiness. Hospitals will use the score to determine patient’s likelihood of paying medical bills. The company says the score will only be used after care has been delivered.

Here’s my issue: patients often come back to hospitals/clinics. How are those hospitals/clinics going to prevent discrimination against patients who have had trouble paying bills in the past? Will treatment be refused? I know that is illegal in ERs but what about in the hospital or clinic setting? At the least, will low-score patients’ care be of the same quality as those patients with higher scores?

Some critics have raised security and privacy issues with the data. But this doesn’t concern me as much–I think workable solutions can be found to limit data and identity theft.

But some good: hospitals could better predict collection rates. And if this data could be used before a patient is treated, it would allow health systems to better allocate charity care instead of those charges ending up in the bad debt category on the balance sheet.

Here is some more.

Do you have any reservations?

A surprisingly popular story around the web this week was the policy implementation at Saint Mary’s Duluth Clinic in Duluth, Minn., to effectively ban any product (pens, clocks, clipboard, medical models, etc.) with pharmaceutical logos. All I can think about is the number of pens SMDC will now have to purchase…

I think it is a needed, ethical, step in the right direction. Removing the (however minute) influence these products may have on doctors’ prescribing patterns is a good thing, especially as we see more issues arise regarding the safety of some drugs. Forcing decisions to be made through the use of objective information is always a good thing.

The policy is outlined here in the Duluth News Tribune. Some banter here.

We’ve incorporated it here.

Thoughts?

We were discussing community benefit in class the other day. If you don’t know what community benefit is the Catholic Health Association’s website is a good place to start. This website goes more in depth. Basically (says Senator Grassley’s website) (it is my understanding that he started the look into community benefit in 2005) “providing community benefit is required for hospitals seeking and retaining tax-exempt status as charities.”

The CHA says community benefit includes the following:
-Charity care
-Government-sponsored indigent health care—unpaid costs of public programs (Medicaid, SCHIP, medically indigent programs)
-Community Benefit Services (I guess this is the extensive “other” category–dw)

And does not include the following:
-Bad debt
-Contractual allowances or quick-pay discounts
-Any portion of charity care costs already included in the subsidized health care services category
-Medicare shortfall (this can be included in other financial reports but not in a community benefit report)

But as far as I understand community benefit is not limited to just these broad categories…one of the issues is that exactly how to define community benefit is a matter of contention.

In 2005 there was a big uproar concerning the tax-exempt status of not-for-profit hospitals and whether or not they provide enough benefits to the communities they serve. Hospital associations around the country with the help of the aforementioned CHA quickly put together a reporting system to outline provided benefits. Some associations seem to be reporting an extensive amount of community benefit (I’m using CB from here on out).

The American Hospital Association deems the tax-exempt status of not-for-profit hospitals an “issue” but you have to be a member in order to access any releases (sorry, I’m on a student income and unable to afford such a luxury at this time so I can’t even summarize).

Since then, it has been rather quiet on the CB front. However, in July the IRS released an interim report (pdf) that apparently outlined a not-so-good effort by not-for-profit hospitals to provide CB. And most recently the IRS updated its Form 990 that not-for-profits use to claim their CB (side note: kind of ironic that a non-taxed entity submits forms to the government agency responsible for taxation. I guess someone has to watch over us…).

I’m sure this story hasn’t ended quite yet. CB is a very important function hospitals provide to the communities they serve. Hopefully the amount of CB provided won’t have to be mandated by the federal government…stay tuned.

Do you think hospitals currently provide sufficient community benefit (any examples)? What do you think is an appropriate policy for providing community benefit at our own system?