Profound changes shake up hospitals
Source: Detroit Free Press
By: Patricia Anstett, Medical Writer
Published: May 9, 2007
And that has them scrambling for your business
In changes as profound as those in the auto industry, metro Detroit hospital systems are in a whirlwind of restructuring, acquisitions and disagreements as medical systems fiercely compete for limited revenue, prime locations and the most lucrative, best-insured patients.
For consumers, the changes mean the likelihood of fewer medical services within Detroit, but top-of-the-line care and technology in the suburbs -- at a potentially higher cost.
Patients could lose their doctors as health systems compete for physicians, nurses, even billing clerks, and to train the next generation of doctors.
The shifting landscape explains disputes that burst into headlines, such as last year's negotiations between Wayne State University and the Detroit Medical Center over doctor residencies, or a lawsuit filed this month by DMC and Michigan AFSCME Council 25 against the Barbara Ann Karmanos Cancer Institute.
That lawsuit aims to stop the institute from moving off the DMC campus in Detroit and buying St. John Detroit Riverview Hospital. The union represents workers there.
It explains why a new medical school and a satellite campus are planned for metro Detroit to meet shortages of primary care doctors.
Oakland University and Beaumont Hospitals hope to start a medical school by 2010; Michigan State University's College of Osteopathic Medicine wants to open a satellite campus by July. Two final contenders, the Detroit Medical Center and Macomb Community College, both want the campus. In the latest development, they may team up to run the satellite program.
Every move a hospital system makes has a trade-off.
On the plus side: Patients fare better when care is concentrated at high-volume hospital systems, studies show.
Having fewer health care systems, rather than dozens of community hospitals, may enable employers and insurance companies to negotiate discounts from bigger hospital systems, argued Gerald Fitzgerald, president of the Dearborn-based Oakwood Healthcare Inc.
"We think, through the introduction of technology and the proper placement of facilities that are higher utilized, we'll create more efficient, better-performing facilities," he said. "The best should be rewarded in a competitive market."
The disadvantages include huge initial investments to build suburban facilities, which can drive up health costs and accelerate the exodus of services from Detroit.
"Survival of the fattest, not the fittest" is how Alan Sager, a Boston University public health professor, describes what is happening in the hospital industry, including in Detroit, Washington, St. Louis and Baltimore. Sager has studied hospital closings in 52 U.S. cities since 1936.
Every time a health system opens a new ambulatory care complex, it must pay for the land, buy equipment and hire staff, often at higher wages, compared with fixed costs in older facilities.
"We are slipping into health care anarchy, rising costs, rising health insurance premiums and rising taxes to pay for care, at the same time, more people are losing their insurance coverage," Sanger said. "This is a recipe for political and social trouble, and it's totally avoidable."
'Someone is going to pay'
Michael Slubowski, president for hospitals and health networks of Novi-based Trinity Health, said construction drives up health costs.
Trinity led a legal challenge, but failed, in stopping approval by the Legislature to allow two new hospitals in Oakland County. The Henry Ford Health System is building a $300-million, 300-bed hospital in West Bloomfield, to open next year. St. John Health is building a $224-million, 200-bed hospital in Novi that will open in phases, starting this year.
Each bed at a new hospital can cost up to $1.5 million, compared with $700,000 to $1.2 million a bed to renovate a hospital, Slubowski said, citing what he said are widely accepted industry figures.
"At the end of the day, someone is going to pay," he said.
Trinity estimates that its St. Joseph Mercy Oakland hospital in Pontiac, and others in Oakland and western Wayne counties, could lose $76 million in business to the two new Oakland County hospitals.
But Bob Riney, chief executive officer for Henry Ford Health System, said health systems can't pass along costs to customers or corporations.
"We have to make up costs through economies of scale," he said. "That requires intense discipline."
Competition may hurt other hospitals, but that's good for consumers who increasingly are educated and demand good care, he said.
A threat to Detroit, its residents
One of the biggest shifts is occurring in Detroit, which had 24 hospitals in 1937, according to Sager's research.
By June 30, if Riverview Hospital closes as expected, five Detroit hospitals will be left to carry the burden of caring for the city's greater population of uninsured and poorly insured patients. They are: Henry Ford Hospital in New Center; St. John Hospital & Medical Center, on the border with Grosse Pointe Woods; Harper/Hutzel Hospital and Detroit Receiving Hospital on the Detroit Medical Center campus in Midtown, and Sinai-Grace Hospital, a DMC hospital in northwest Detroit.
The problem of uninsured care would worsen June 1 with 6% across-the-board cuts to Medicaid providers, including hospitals and physicians, now under consideration by Gov. Jennifer Granholm to help offset the state's budget deficit.
The cuts pose a serious threat to Detroit's comeback and raise societal questions, said Kurt Metzger, research director for the United Way for Southeastern Michigan.
"Where you live determines so much of your life's trajectory, whether you have decent schools, jobs or quality health care," he said.
Hospitals are working to relax Michigan laws, known as certificate of need (CON) regulations, to allow more growth in the suburbs, but face business and labor opposition. Certificate of need rules restrict new hospital construction and equipment purchases based on a population formula in order to control health spending.
"If these health systems are successful in bypassing current CON rules and expanding in the outlying suburbs, that would harm the financial stability and viability of hospitals that have long served" Detroit and older suburbs, said Larry Horwitz, president of the Economic Alliance of Michigan, a state labor and business coalition.
T.J. Bucholz, spokesman for the Michigan Department of Community Health, the state partner of the Michigan CON Commission, said Michigan's system "ensures we have equitable distribution of health care resources.
Without it, "health care would look very different in Michigan. It would be driven solely for profit and not for people."
Contact PATRICIA ANSTETT at 313-222-5021 or panstett@freepress.com
By: Patricia Anstett, Medical Writer
Published: May 9, 2007
And that has them scrambling for your business
In changes as profound as those in the auto industry, metro Detroit hospital systems are in a whirlwind of restructuring, acquisitions and disagreements as medical systems fiercely compete for limited revenue, prime locations and the most lucrative, best-insured patients.
For consumers, the changes mean the likelihood of fewer medical services within Detroit, but top-of-the-line care and technology in the suburbs -- at a potentially higher cost.
Patients could lose their doctors as health systems compete for physicians, nurses, even billing clerks, and to train the next generation of doctors.
The shifting landscape explains disputes that burst into headlines, such as last year's negotiations between Wayne State University and the Detroit Medical Center over doctor residencies, or a lawsuit filed this month by DMC and Michigan AFSCME Council 25 against the Barbara Ann Karmanos Cancer Institute.
That lawsuit aims to stop the institute from moving off the DMC campus in Detroit and buying St. John Detroit Riverview Hospital. The union represents workers there.
It explains why a new medical school and a satellite campus are planned for metro Detroit to meet shortages of primary care doctors.
Oakland University and Beaumont Hospitals hope to start a medical school by 2010; Michigan State University's College of Osteopathic Medicine wants to open a satellite campus by July. Two final contenders, the Detroit Medical Center and Macomb Community College, both want the campus. In the latest development, they may team up to run the satellite program.
Every move a hospital system makes has a trade-off.
On the plus side: Patients fare better when care is concentrated at high-volume hospital systems, studies show.
Having fewer health care systems, rather than dozens of community hospitals, may enable employers and insurance companies to negotiate discounts from bigger hospital systems, argued Gerald Fitzgerald, president of the Dearborn-based Oakwood Healthcare Inc.
"We think, through the introduction of technology and the proper placement of facilities that are higher utilized, we'll create more efficient, better-performing facilities," he said. "The best should be rewarded in a competitive market."
The disadvantages include huge initial investments to build suburban facilities, which can drive up health costs and accelerate the exodus of services from Detroit.
"Survival of the fattest, not the fittest" is how Alan Sager, a Boston University public health professor, describes what is happening in the hospital industry, including in Detroit, Washington, St. Louis and Baltimore. Sager has studied hospital closings in 52 U.S. cities since 1936.
Every time a health system opens a new ambulatory care complex, it must pay for the land, buy equipment and hire staff, often at higher wages, compared with fixed costs in older facilities.
"We are slipping into health care anarchy, rising costs, rising health insurance premiums and rising taxes to pay for care, at the same time, more people are losing their insurance coverage," Sanger said. "This is a recipe for political and social trouble, and it's totally avoidable."
'Someone is going to pay'
Michael Slubowski, president for hospitals and health networks of Novi-based Trinity Health, said construction drives up health costs.
Trinity led a legal challenge, but failed, in stopping approval by the Legislature to allow two new hospitals in Oakland County. The Henry Ford Health System is building a $300-million, 300-bed hospital in West Bloomfield, to open next year. St. John Health is building a $224-million, 200-bed hospital in Novi that will open in phases, starting this year.
Each bed at a new hospital can cost up to $1.5 million, compared with $700,000 to $1.2 million a bed to renovate a hospital, Slubowski said, citing what he said are widely accepted industry figures.
"At the end of the day, someone is going to pay," he said.
Trinity estimates that its St. Joseph Mercy Oakland hospital in Pontiac, and others in Oakland and western Wayne counties, could lose $76 million in business to the two new Oakland County hospitals.
But Bob Riney, chief executive officer for Henry Ford Health System, said health systems can't pass along costs to customers or corporations.
"We have to make up costs through economies of scale," he said. "That requires intense discipline."
Competition may hurt other hospitals, but that's good for consumers who increasingly are educated and demand good care, he said.
A threat to Detroit, its residents
One of the biggest shifts is occurring in Detroit, which had 24 hospitals in 1937, according to Sager's research.
By June 30, if Riverview Hospital closes as expected, five Detroit hospitals will be left to carry the burden of caring for the city's greater population of uninsured and poorly insured patients. They are: Henry Ford Hospital in New Center; St. John Hospital & Medical Center, on the border with Grosse Pointe Woods; Harper/Hutzel Hospital and Detroit Receiving Hospital on the Detroit Medical Center campus in Midtown, and Sinai-Grace Hospital, a DMC hospital in northwest Detroit.
The problem of uninsured care would worsen June 1 with 6% across-the-board cuts to Medicaid providers, including hospitals and physicians, now under consideration by Gov. Jennifer Granholm to help offset the state's budget deficit.
The cuts pose a serious threat to Detroit's comeback and raise societal questions, said Kurt Metzger, research director for the United Way for Southeastern Michigan.
"Where you live determines so much of your life's trajectory, whether you have decent schools, jobs or quality health care," he said.
Hospitals are working to relax Michigan laws, known as certificate of need (CON) regulations, to allow more growth in the suburbs, but face business and labor opposition. Certificate of need rules restrict new hospital construction and equipment purchases based on a population formula in order to control health spending.
"If these health systems are successful in bypassing current CON rules and expanding in the outlying suburbs, that would harm the financial stability and viability of hospitals that have long served" Detroit and older suburbs, said Larry Horwitz, president of the Economic Alliance of Michigan, a state labor and business coalition.
T.J. Bucholz, spokesman for the Michigan Department of Community Health, the state partner of the Michigan CON Commission, said Michigan's system "ensures we have equitable distribution of health care resources.
Without it, "health care would look very different in Michigan. It would be driven solely for profit and not for people."
Contact PATRICIA ANSTETT at 313-222-5021 or panstett@freepress.com
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