Sunday, August 10, 2003

Local hospitals falling behind

Buildings tired and cramped; some equipment lacking

By Tim Bonfield
The Cincinnati Enquirer

Greater Cincinnati's health care system has fallen behind others in Ohio in the race to keep up with medical technology.

Since 1995, hospitals and doctors have pumped $591 million into medical projects from Pill Hill - the complex of hospitals orbiting the University of Cincinnati - to Northern Kentucky and Butler and Warren counties.

But during those years, health organizations in the Columbus and Cleveland areas spent more than $800 million each to advance services. And the region ranked fifth in the state when spending was measured per person, spending $290 per resident on improvements compared to $434 per capita in Dayton and $394 in Toledo.

The gap in capital spending raises questions about whether Greater Cincinnati hospitals can stay competitive as health technology evolves at a breakneck pace and the steadily aging population demands more health services.

"What we're seeing is a ticking time bomb. The lack of investment in the health care infrastructure in Greater Cincinnati is a very serious problem," says Warren Falberg, president and chief executive of the Visiting Nurse Association and former longtime CEO of Jewish Hospital. "The real question is, what will it take to turn it around? This has been going on for so long that the numbers involved will be enormous."

While the industry raises concern, some cost-conscious area employers and HMOs point to other factors, including hospital overspending.

The Enquirer reviewed public reports on more than 1,400 projects between 1995 through mid-2003, including required notices of intent filed with state health departments in Ohio and Kentucky and announcements of large health projects in southeast Indiana, where notices are not required.

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"The average age of hospital physical plants has been increasing. That's not a good sign," says Lynn Olman, president of the Greater Cincinnati Health Council, which represents hospitals.

For most of the 1990s, Cincinnati hospitals were newer than average. By 2000, however, that trend flipped, according to the Health Council. As hospitals statewide were getting younger, local hospitals were getting older.

In 1996, the average age of Cincinnati-area hospitals was 9.2 years, a full year younger than the Ohio statewide average of 10.27 years. But in 2000 - the most recent statewide data available - the average age of Cincinnati area hospitals crept up to 10.39 years while the state average dropped to 9.94 years.

Quality concerns

Lower capital spending does not necessarily mean lower quality care. In fact, Greater Cincinnati hospitals continue to report lower-than-average mortality rates.

But as in the auto industry - where once-unheard-of features like anti-lock brakes and air bags have become standard - the definition of health care quality changes.

"Which makes you feel more comfortable, getting a test or a procedure done using equipment that's eight years old or two years old? We do not feel that we're investing what we need to be investing to keep up with technology," says Steve Schwalbe, vice president of strategic planning at the TriHealth hospital group.

The effect on patient care plays out in many ways.

Some signs are as visible as scuffed walls or aging carpets. Other signs are nearly invisible to patients - such as computer systems aching to be upgraded or cramped operating rooms that don't meet modern size standards.

Yet executives say many people don't fully grasp that it can cost millions to deal with mundane projects - from repairing roofs to building parking garages to refurbishing intensive care units.

"People think an operating room is an operating room is an operating room. Well, it isn't," says Ken Hanover, chief executive for the Health Alliance of Greater Cincinnati.

Greater Cincinnati patients sometimes wait longer than patients in other cities for access to the latest technology.

Hospitals in Columbus - and more than 100 other cities - installed robotic cardiac bypass surgery systems before the first one arrived in Cincinnati this year.

For linear accelerators, which provide radiation treatments for cancer patients, improvements available as long as six years ago began emerging here only in the past two years, doctors say.

While not every patient - even those with potentially fatal illnesses - needs the very latest technology, there is an expectation that large metropolitan areas have such equipment available. That expectation comes from the public and from doctors, who often gravitate to cutting-edge institutions.

In a city where doctors already complain of low reimbursement rates, aging hospitals don't help.

"Some of this is inter-related," said Olman. "You can't expect physicians to come here if we don't have the latest technology."

Some doctors find themselves paying for special equipment that hospitals say they cannot afford. Orthopedic surgeon Paul Favorito has spent more than $10,000 in the past two years on specialty tools to perform minimally invasive surgery to repair rotator cuff injuries.

The equipment allows the doctor to repair an injured shoulder with smaller incisions. That, in turn, requires shorter hospital stays and causes less post-operative pain.

Favorito says hospitals are reluctant to buy the equipment he wants in part because most insurers don't pay enough to justify the expense.

"I don't have to have every new gadget that comes along, but you want to stay on top of your profession," Favorito said.

Why spending slowed

The slower spending in Cincinnati reflects the weakened financial position of the region's largest local hospital groups, which spent much of the 1990s losing money on patient care.

"During the 1990s, hospitals simply didn't have the ability to borrow money to pay for projects," Hanover said. "Major projects just got put on hold because they couldn't take additional debt on their balance sheets."

Many factors that affect hospital financial strength are beyond local control, such as changes in federal Medicare payment rates or in statewide Medicaid policy. Hospitals also must cope with industry-wide trends, such as the exploding costs of new medications and technology and the rising costs of hiring nurses.

But one factor contributed heavily to the local hospital slowdown in capital spending.

"Those other cites didn't have Iameter," Falberg said.

The Iameter project was launched in 1991 by four of the Tristate's biggest employers - Procter & Gamble, GE Aircraft Engines, Cincinnati Bell and Kroger. Deeply concerned about rising health benefit costs at the time, the employers hired a consulting company from California, called Iameter Inc., to analyze hospital costs.

What followed was the rapid expansion of managed care plans in Greater Cincinnati, slower increases and some outright reductions in payments to hospitals and doctors, a massive consolidation of hospitals into larger groups and, ultimately, the closing of four acute-care hospitals.

While many of these trends also were occurring in other cities, the cost-cutting pressure in Cincinnati was so aggressive that the Iameter project was held up during the Clinton administration as an example of how private-market health reform could control rising costs without the need for a massive national health reform package.

Through the late 1990s and into the new century, the Health Alliance of Greater Cincinnati, TriHealth and Mercy Health Partners regularly reported losses on patient care services, including some historically bad years. The Health Alliance lost $52 million in 1998. Mercy Health Partners lost $51.9 million in 2000. TriHealth lost $34 million in 2000.

Waste remains in system

A decade ago, big insurers and big employers frequently argued that Greater Cincinnati had far too many hospitals.

In 1994, Dr. Daniel Gregorie, then CEO of ChoiceCare, one of the city's two largest HMOs, said that as many as two-thirds of Greater Cincinnati's hospitals could and should be closed.

To this day, sources in the private sector say hospitals still waste money, often in misguided attempts to capture market share.

Larry Savage, president and CEO of Humana Health Plan of Ohio Inc., said Humana and other health plans have recently increased what they pay hospitals, which he said should go a long way toward preventing a crisis of aging facilities.

Still, he criticizes hospitals for how they spend the money they have. For example, several hospitals have launched competing open-heart surgery programs even though national studies have shown that fewer centers serving more patients tend to provide higher quality care.

"There's no reason for this city to have eight open-heart surgery programs," Savage said.

All four employer sponsors of the Iameter project referred comment to Sharron DiMario, executive director of the Employer Health Care Alliance, who says it isn't fair to blame employers entirely for hospital budget problems.

"It's far-fetched to say one single initiative is what sent everything to hell in a handbasket. The Iameter project may have been a factor. But many of the things that are happening here are happening to hospitals elsewhere in the country," DiMario said.

Employers want high quality health care at a reasonable cost, she says. Yet the costs haven't stayed reasonable.

Many employers have experienced years of double-digit increases in health insurance expenses. They expect more increases next year. They can't be expected to pay rising bills forever, she said. Some employers believe the general public needs to become much more aware of the costs of health care, and much more reasonable about the services they use.

"Patients frequently want unlimited access to providers and services at little or no cost,'' she said.

Dependence on gifts

Another unhealthy symptom of weak hospital capital spending has emerged - a dependence on gifts rather than loans to get projects done. Relying on donations is considered risky.

The Tristate's biggest health construction project begun since 1995 - the $77 million cardiac wing at Christ Hospital - was funded entirely by a gift from the hospital's charitable foundation.

And a recent $29 million renovation at Bethesda North hospital - the biggest recent expansion for the TriHealth hospital group - relied on $20 million in gifts.

Healthy hospitals normally finance big projects by issuing county-backed bonds that are repaid through revenue from patient care. But hospital executives say that option hasn't been available for several big projects because profit margins from patient care services were so thin for so long that the hospitals couldn't prove they could repay the bonds.

"We're spending less than other cities and a lot of what we are spending is possible only through donations," Schwalbe said. "What does that say about our system being able to keep itself healthy?"

At TriHealth, managers say they should be spending about $35 million a year on capital projects and upkeep. TriHealth actually spent $12 million in 2000, $8 million in 2001, $24 million in 2002 and budgeted $29 million for 2003.

"Things are getting better but it still isn't enough," Schwalbe said. "It's a lot like home repairs. You don't have the money to replace the roof this year. Then next year, it's the roof and the driveway. Sooner or later, you have to pay the piper."

In January, the Health Alliance of Greater Cincinnati reported that the average age of its six hospital facilities grew nearly 40 percent from about eight years in 1996 to 11.7 years in 2002. That's about 40 percent older than the national average of 8.7 years, as reported by the American Hospital Association.

Health Alliance officials say they need to spend $500 million in the next five years to keep up with technology. That's almost as much as all of the capital improvement spending at nearly 30 Tristate hospitals in the past eight years.

Yet even if the Health Alliance really spends that much, the average age of its facilities would still grow to 12.9 years, officials say.

Call for public forums

One lingering concern about the health care system in Cincinnati is that no organization - public or semi-public - is openly involved in determining how many hospitals and what sorts of health services the Tristate really needs.

Since a peak in 1984, inpatient hospital capacity has dropped about 48 percent even though the population grew 12 percent during those years. Was that too deep a cut? Are existing hospital services located in the best places? Are institutions prepared to meet the rising demands of aging baby boomers?

Much of the battle over the future of health care - in Cincinnati and nationwide - goes on behind the scenes: in corporate board rooms, across negotiating tables between insurers and service providers, and in lobbying battles at federal and state levels. Some argue the consumer's voice has not been clearly heard.

"I think the community needs to talk about this in much more public forums,'' says Falberg. "There's an idea of entitlement to health care, that anything that is available out there should be available to all of us. Yet we don't understand the impact of that idea. We haven't decided what we'll pay for and who should pay."


Local hospitals falling behind
Tell us your thoughts on health care
What old hospitals cost to you
Biggest Tristate health projects

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