Are stand-alones an endangered species?

Today we read in the Post Standard that Auburn Memorial Hospital, Oneida Healthcare Center and probably "every hospital within 100 miles" is interested in some form of stronger affiliation with a larger health system.

In a very public way Community General Hospital has been pursuing its strategy of affiliating with another, stronger hospital since 2009.

The newspaper quotes Gary Fitzgerald, President of the Iroquois Healthcare Association:

Our region has a lot of . . . stand-alone hospitals. They just can’t afford to stay completely independent without exploring other options . . .

Last week Community General's board of directors approved a resolution that accepted Upstate’s offer to acquire our hospital and its affiliated companies. This represents progress in defining Community's future role in Central New York.

The board action is good news for the community that we serve, as well as our medical staff and hospital employees.

We are fortunate to have the opportunity to become part of SUNY Upstate's health system.

Upstate's important "eds and meds" role

In the discussion about the economic benefit of SUNY Upstate Medical University, an executive from Columbia University weighed in yesterday in the opinion pages of the Post-Standard.

Willaim Eimecke, Director of Executive Education at Columbia University’s School of International and Public Affairs, noted the "Brookings Institution recently concluded that the best strategy for stimulating the Central New York economy is investment in its educational and medical institutions; Upstate Medical (University) is both."

Dr. Eimecke urged that elected officials who seek to balance budget cuts with job creation should see SUNY Upstate and other teaching centers "as an investment, not just a cost."

Click here to read the full text of "Cutting health care in Upstate New York creates more pain than gain."

Scale and efficiency

At the CNYHSA meeting last month, there was one comment by a physician. Dr. Douglas Tucker works for MVP health plan so he was actually speaking as an insurer, rather than as a physician.

Dr. Tucker said that the acquisition of Community by Upstate would be “a catastrophe” because patient services at Upstate cost more than at Community. As a result, he asserted, the combined hospital would be more expensive for the community-at-large.

He wasn't speaking about hospital costs. He was talking about what insurers pay hospitals for care given to their beneficiaries. (Hospitals aren't able to disclose what we are paid by insurance companies. To do so would violate antitrust laws.)

Is Dr. Tucker's concern a valid one? Will the combination of Community and Upstate help or hurt the cost of care over the next five or ten or 15 years?

First, let's be clear about Community's prospects as an independent community hospital. They are not great, as has been widely reported, unless we become part of a larger hospital system.

So why are Community's prospects "not great" as a stand-alone, community hospital? There are several reasons. A loss of cases in profit-making services. A limited ability to cost-shift to private insurers when there is underpayment from government payers. The ever rising costs of the hospital business. And fewer physicians who replace themselves when they leave practice.

Community has lost profitable cases to free-standing ambulatory surgery centers. This profit-making volume helps a hospital like ours subsidize the money-losing services, such as medicine, psychiatry, and 24/7 emergency services.

Over the years some ambulatory surgery cases have migrated away from the hospital in favor of free-standing ambulatory surgery centers, which are typically owned by physicians. Why do physicians need the additional revenue? Because their incomes have been frozen or otherwise restricted for a number of years.

What about insurers, such as Dr. Tucker represents? Arguably, insurers have been paying more than their fair share to hospitals, given the increasing statutory and regulatory controls on Medicare and Medicaid. Like other hospitals, Community relies on private insurers to make up the difference. But private payers do not make up all the difference, and there is a limit to this cost-shift. Dave Oliker, MVP’s President, recently called the cost-shift a hidden tax.

With this pressure on hospital revenues, we have also seen hospital fixed costs going up. Hospitals shoulder the added cost of services no longer provided by private doctors (such as 24/7 hospitalist service). We've seen higher costs due to federally-mandated electronic medical records (EMRs). And there are greater capital costs as hospitals construct private rooms (the emerging standard) and update medical technology.

Add to that the problems of doctor practices. Many older physicians do not replace themselves when they leave practice. A shrinking supply of doctors means hospitals scramble to buy medical practices as a way of replenishing physicians (and not incidentally, as a way to avoid competing with doctors for ambulatory surgery cases).

Community has been clear about what it wants from its affiliation with a larger hospital system: we seek to spread the fixed costs over a bigger base of operations, we seek to avoid duplicate and costly capital investment, we seek an integrated delivery system, and we seek better access to capital. Upstate provides these things.

The question about hospital system efficiency cannot be answered by looking at the hospital payment rates negotiated last year by the health insurers. Those rates represent the embedded costs of the old system. We are talking about future costs of a reconfigured system. Scale and efficiency are everything in the future system – only the larger, more efficient, and well integrated health care organizations will weather the storm.

Community General Hospital cannot build such a system. So we will join one.

We believe that Upstate’s investment in Community is a cost-effective way to best use the expensive assets in which this community has already invested.

We believe the combination with Upstate will foster a more efficient hospital system in the coming years -- and for decades.

LICH implications for Community?

A report in today's New York Times suggests that a takeover of Long Island College Hospital (LICH) by SUNY Downstate Medical Center might not happen. New York State is reportedly reconsidering its award of HEAL grant funds that were expected to be part of the overall financial transaction.

The Downstate-LICH transaction has some similarities to the proposed acquisition of Community General Hospital by SUNY Upstate Medical University. So a logical question is: does today's report about LICH have implications for Community?

Community recently finished a project involving a HEAL grant. Among other things, the grant funds made possible the Center for Orthopedics. The funds were awarded as part of the Berger Commission's recommendations for Community and Van Duyn Home & Hospital. They were not part of the proposed transaction with Upstate. The funds have mostly been expended (and reimbursed).

The Community-Upstate transaction is far smaller, as I understand it, and not as financially complex as Downstate-LICH.

Yesterday Dr. David Smith, President of Upstate Medical University, addressed the Upstate community on the overall subject of state budget cuts, university finances, and plans with Community General.

Dr. Smith reiterated Upstate plans for its acquisition of Community because doing so will help Upstate build capacity and will help “put the right patient in the right bed.”

Doctor and poet

Poetry may not be among today's most prominent art forms (except in popular music). However, poetry is such a part of the human condition, I suspect there are as many people writing today as there ever were, including physician poets.

You may know some of the famous physician poets, such as William Carlos Willaims (Complaint) or John Keats (Ode on a Grecian Urn).

Here is a physician you may know (he practices in Camillus, NY), but you may be surprised to learn about his passion for poetry. Dr. Dave Manfredi is primary care physician with Preventive Medicine Associates, PLLC. His poems have been published in literary and medical journals. One of his poems ("I Come Down in the Morning") was set to music by composer Carter Pann for the Skaneateles Festival (2009).

In “For Zizi” (Voices in Italian Americana), he writes with poignancy about an aged seamstress whose story is implied by the distance between youthful wine making in Sicily and her "life's fulfillment" serving “Dandelion salad to a whole generation of Americans.”

Not surprisingly, Dr. Manfredi writes about health, as well as life and death. He considers personal exercise in “Running” (Rattle) and the experience of disease in “Alzheimer’s” and “Tumor” (both in the Healing Muse).

“Doctor Patient” (Healing Muse) is an affectionate dialogue between the physician and noncompliant patient, “a man comfortable with himself” who kindly refuses to modify lifestyle to reduce health risks.

"Cut back on bread, rice, and pasta,” I say.
His eyebrows raise to unimaginable heights.
“How can that be. . . the staff of life?”

The poem “July” opens with this arresting image . . .

It’s 5 PM, late July on my deck
I sit with my brain in my lap . . .

. . . and concludes with an acceptance of mortality:

The greenery stares at me
Like the transient curio that I am
and I wait patiently to decompose

The existential question is important in Dr. Manfredi's poetry. Here is another example, from “The Grave” (Journal of the American Medical Association), where he sees in the beauty of nature a place of repose:

The grass is comforting and soft,
The green in me is oozing forth
Though I lay resting in my clothes
To its embrace I decompose.

Dr. Smith goes to Community

This morning I was meeting with Dr. David Smith, President of Upstate Medical University. He asked if we could spend a few minutes walking around Community General Hospital, just to see the facility and to meet people.

It was a great suggestion.

On our impromptu walk Dr. Smith had the opportunity to meet and speak with perhaps 80 or 90 people.

He thanked everyone for the work they do and said our work at Community will continue to be important after we join with Upstate.

Dr. Smith commented several times about the good care a member of his family received at Community during a hospitalization two years ago. He spoke about Upstate's teaching mission, about changes in the medical staff bylaws to support the ongoing private practice of medicine here, and about respecting Community's identity within the Upstate system.

There were a number of questions, mostly about jobs but also about the mission of the hospital.

Dr. Smith said that different employment models are under consideration, and he acknowledged the concerns of employees, saying Upstate is working to address the concerns.

One nurse observed that Upstate must be interested in Community's available square footage. Dr. Smith said, "We're interested in the workers. What you do is important. We're interested in keeping 1,100 jobs and in continuing the high quality care you are known for."

Since his walk-through, several employees told me they were impressed with Dr. Smith's friendliness and his uplifting words.

There have been several questions about Upstate's organization, specifically how does Dr. Smith relate to Dr. John McCabe? Many employees have met Dr. McCabe in my employee meetings last year.

Upstate Medical University (UMU) is a large organization, a university, not just a hospital. Part of the State University of New York (SUNY) system, UMU has four colleges, plus University Hospital.

Dr. Smith is the President of SUNY UMU, the entire university. Dr. McCabe is the head of University Hospital. Dr. McCabe's official title is CEO at Upstate University Hospital and Senior Vice President of Hospital Affairs at Upstate Medical University.

Last week, when I met with the Auxiliary to Community General Hospital, one of the Auxiliary board members told me of the time she met Dr. Smith. It was several years ago when he was President of Texas Tech University. She saw him throw out the puck at a hockey game and asked him where he learned to skate. Dr. Smith told her he spent his early childhood in Toronto and learned to skate there. Later, as a student at Cornell University, he was a member of its hockey team.

Dr. Smith is a man of accomplishment. A pediatrician, he is also an avid outdoorsman. And he is a past Commissioner of Health for the State of Texas.

"A huge thing"

A recent comment on this blog observed that Community's intention to join with Upstate "is a huge thing" and employees "have every right to be scared."

It is a big deal, and not only for employees, but for the medical staff and for the community-at-large. It's a big deal in response to the big changes affecting all health care providers. There is an ongoing, significant consolidation in health care.

Look at what has happened to doctors in our community. A number of medical practices have merged, some doctors have left practice, and some groups have been acquired by hospitals. These changes over a number of years have consequences on services available at hospitals and on how much it costs hospitals to provide the services.

Add to that the higher costs of running a hospital (hospitalists, for example); the higher cost of mandates (such as electronic medical records); the cost of new technology; the restrictions, rules, the cost containment we have seen (and will continue to see) in Medicare and Medicaid, (and the limited ability of insurers and employers to make up the difference) -- these forces are inexorable, and they make the financial situations of stand-alone, community hospitals very difficult indeed.

We have seen this coming for a number of years. As I pointed out in my remarks before the Central New York Health Systems Agency (CNYHSA), the Syracuse hospitals have been considering mergers and consolidations since the 1990's.

I used the slide (above) to remind the CNYHSA about the various studies and reports that have recommended that Syracuse hospitals consolidate. You can find my full presentation here (click on "Tom Quinn's PowerPoint").

Community General Hospital is part of this industry-wide consolidation, and I expect such consolidation to continue, even increase, among New York's hospitals in coming years.

The question is not whether we can avoid such consolidation. The question is, given the massive changes in health care, what is best for our community and for the health care people caring for our community?

That’s why Community has sought a merger partner, first with Crouse Hospital and ultimately with Upstate Medical University. That is our Board’s responsibility – to assess the situation and, given the changes and the realities, to determine how Community General should best serve the community-at-large in the future.

There are and will be many technical and legal issues affecting the Community General combination with Upstate. All these issues have not yet been resolved. I believe our path with Upstate makes the most sense for our community, for Community’s employees, and for the medical staff.

We are working with Upstate to assure that Community’s mission, services and jobs continue as part of Upstate's larger organization and purpose. Let me call attention to the guiding principles, developed by Community and Upstate (available here), in which the importance of the existing workforces is recognized at both organizations. Upstate is a fair and honorable partner for Community, and I have confidence that the combination will ultimately be in the best interests of Community's employees.

For the most up-to-date information regarding affiliation and workforce issues, please see the Q&A section of the Community-Upstate website.

You read it here first

Yesterday I made the case for Community joining Upstate at an evening meeting of the Board of the Central New York Health Systems Agency (HSA). The HSA is a health planning agency for the region.

The HSA heard from Community and from Dr. John McCabe, Upstate University Hospital's CEO, as well as from the public. Among those speaking were members of Community's Board of Directors, employees from Community, and officials from 1199SEIU.

You can view the PowerPoint presentations from Dr. McCabe and me by going to the combined Community-Upstate website.

Also addressing the meeting was Ron Lagoe, Executive Director of the Hospital Executive Council (HEC). For almost 30 years the HEC has been the cooperative arm of the four Syracuse hospitals, working together to improve the health care system. The HEC members are Community General Hospital, Crouse Hospital, St. Joseph's Hospital Health Center, and Upstate University Hospital. Last evening the HEC said "the acquisition of Community General Hospital by University Hospital is consistent with the Hospital Executive Council objectives of improving efficiency and outcomes for regional health services..."

Following the public discussion, the HSA Board of Directors voted unanimously in support of a resolution that supports "the process and development of the proposed affiliation and acquisition of Community General Hospital by Upstate Medical University." The resolution is predicated on continuing services at Community's campus, enhancing the role and mission of Upstate, integrating private practice and teaching responsibilities, considering the suggestions of the public, and continuing to engage the HSA.

Last evening's public discussion was covered by the Post-Standard, YNN, WSYR, and CNY Central, but the news media left before the HSA Board voted -- so you read about it here first.

Earlier this week, I participated in a half-hour discussion about the CGH-Upstate combination with George Kilpatrick, along with Dr. David Duggan, Upstate's Chief Medical Officer. You can see that discussion on WCNY's Central Issues.

"A smart move"

Yesterday's Post-Standard published an editorial supportive of the proposed combination of Community General Hospital with Upstate University Hospital.

Here's the link to the editorial.

There is also a joint Community-Upstate website on this topic, and you can find that here.

A lot has been written about this already -- and no doubt there will be a lot more.

Our opportunity with Upstate

Today's Post-Standard has a story about Community's financial condition, based on a recent report by Moody’s Investor Services.

The Moody's report considers the flat population in Central New York, Community's smallest market share, and the cost of competing in the four-hospital Syracuse market. Moody’s concludes, correctly, that it will be difficult for Community to invest properly in the hospital in the future.

These are among the factors the Board of Directors considered in 2009 when it decided that -- as a strategy to better serve patients and our community -- Community should become part of a larger hospital system. And in a somewhat public way, we have been seeking the right hospital partner ever since.

Our discussions with Crouse Hospital were announced in the fall, 2009. They did not work out, but our planning with Upstate is going well.

We have largely completed many of the legal and financial reviews (“due diligence” process) that are necessary, and we have been able to add to Community's medical staff a number of physicians from Upstate, even in advance of a formal combination. These are good signs of progress.

Community has a strong medical staff and workforce and an excellent physical plant. We operate on a 42-acre suburban site. Our patient services are strong. Today's newspaper notes that Community has "the lowest rate in inpatient complications of any hospital in the city." Last year, Consumer Reports acknowledged us for low infection rates. HealthGrades recently awarded us for the sixth straight year, its overall excellence award in New York State for orthopedics care. Yes, that's in New York State.

And . . .Community was recently re-accreditated by the Joint Commission.

These advantages bring value to Upstate as it meets its academic, clinical and research missions in the broader Central New York region.

Remember, there is an old saw about risk and opportunity. The Moody’s report identifies risk for Community. Community and Upstate see the opportunity in doing something important for our community.