HOSPITAL COLLABORATION

Last week, the board of directors of Southeast Missouri Hospital and St. Francis Medical Centera nnounced plans to pursue collaborative efforts in providing area health care services. In a joint interview with the Southeast Missourian last week, Jim Wente, administrator of Southeast, and John Fidler, president of St. Francis, shared their visions of the collaboration, as well as other health care issues. Following are excerpts from that interview.

When people say there's a health care problem, what does that mean?

FIDLER: Well, I think it's kind of two extremes. On one hand, we have the best health care system in the world. If you're truly about to die, this is the place to come. We create miracles every day. The problem is we have the best illness care system in the world and we spend too much of our resources caring for people after they fail to care for themselves. And so along that issue, if we're going to better treat illness, we need to work upstream on the problem.

We then have a problem with access the concept that there are many people without health insurance and they don't have regular avenues of access and so they utilize the hospital emergency rooms for that. And obviously they were never set up to be that, and it's a more expensive alternative.

So, in general, we have across the board an access problem. We also have a fact that many people access the health care system too late; we have an increase-in-cost problem. And then your other basic issue is that we have a payment structure which rewards illness. If you get sick enough, open heart surgery is covered. But how much is it covered to work preventively with you to help develop good eating habits, exercise habits, have a counselor who helps you live a healthier lifestyle to maybe avoid that. So if we're going to truly improve the health of our nation, then we have to turn around and redefine what health is. We have babies right now that should have immunizations that don't get immunizations until it's a requirement when they enter school.

So obviously one of the things the two hospitals can cooperate on together and with the schools and industry and with the physician community would be to provide better access and availability to immunizations. And some (insurance) programs aren't covering this, aren't properly paying for it. They'll pay for a baby that's sick at the point of dying, but they won't pay for well-baby care to keep the baby well...It's an insurance problem.

We've also in health care created a third party entity who is an insurer or somebody else who is not a health care provider, doesn't have the credentials, and yet is taking money out of the health care system. So eventually we have to come back to the partnership which is between the physician, patient, and the hospital, and eliminate a lot of the non-value-added cost.

Can this be done under the current health care system, with changes here and there? Or will it take more?

Fidler: We don't really have a health care system now. What we have are individual doctors; we have individual hospitals and we have individual other entities. A system would say that all these entitites are tied together, are coordinated, are working together in a more cohesive, coordinated fashion. So what we are trying to provide in this area, not only with Southeast and St. Francis but the other hospitals in the area, is an integrated system to where the area hospitals, the physicians, the business community, and the other aspects of the community would access the health care needs and collectively work together to address those needs in a more systematized fashion. Basically I think that's the exciting part because we're now seeing, at least on a national reform level, some pressure to create area health care networks that have the capability of delivering measurable, quality care to a large population. And to do that we're going to have to come together and create that integrated system.

I think there's a real opportunity in doing that and I think the savings and the effect in doing that will provide greater access of care to everyone. At the same time, if government is going to make health care a right, it also has to be a responsibility. Those two have to be balanced and people who do not currently have access to health care are going to have to be given some mechanism by which they can access health care, and the people who provide that health care (must) be compensated at least at the level of their cost of providing that care.

Did you have any comments along that line?

WENTE: No, there's nothing I can add other than to repeat what John said.

Will the collaborative effort being talked about between the two hospitals here become the national model, that we're going to see greater cooperation in the medical community? Do you think that's what's going to come out of the Clinton administration plan?

FIDLER: Both hospitals right now are working together to look at various means of accessing, together with the business community and the (Southeast Missouri State) university, the health care needs of the area. As we're talking with different consultants who can assist us in this process, we're finding many who say: `Hey, you're way ahead of everybody else, no one else is even considering doing this on a collaborative basis and I'll tell you right now in some cases we may not have yet the best instruments to do that, but we'd love to work with you on a pilot basis because we think this is exactly what's going to be needed.' Now this is coming from people all across the country...

You can't have healthy communities without healthy business. You can't have healthy schools without a healthy community and without a good supportive health care system. And as we look at this, we say what are we really charged to do. We're both community-based hospitals charged to improve the health of the community and ... the collaborative partnership is the way to do that....

But as you look at how can we work together ... there are a lot of issues we frankly can't talk about and we can't address, and barriers we have to work around just because we are, on one hand, such a regulated, constantly inspected, legally controlled entity, and at the same time we're trying to say, `Well, let's provide health care access to everybody.' And what we're saying is, we'd like to and we want to do that together in partnership with the community and with whatever national health care program comes forward. I think we're positioning ourselves to be able to do that.

The collaborative efforts, are we talking possibly about centralized purchasing and that kind of thing where you could share in some of the costs?

WENTE: Well, there's a variety of ways I think we could approach this and certainly those kinds of programs such as centralized purchasing, one that comes to mind, would be one way that we could further streamline our cost. So we can look at it from the standpoint of what can we do to better meet the needs for the community, i.e. provide quality services in a non-duplicative style in the most cost effective way.

Now there's a whole litany of things that could be looked at. I want to believe that we would have been exploring these kinds of options, these kinds of ways we could work together even if President Clinton wouldn't be president.

So the collaboration between the hospitals you announced yesterday is not directly in response to political discussions at the national level?

WENTE: When Mr. Fidler first came to the community and we first met each other and started sharing and talking with each other, we both acknowledged that we have two good, strong hospitals in the community and we both acknowledged that these hospitals represent community resources that have been developed over time and that are there to serve a need....And so from that standpoint, what I'm trying to say is, health care reform or not, which is a big issue in itself, there's two administrators here who wanted to try to find a way in consultation and with the leadership of the boards of both hospitals to see if we could find ways to do things a little bit differently.

The involvement of the other hospitals within our service area is critical and we have had dialogue with other hospital administrators as to how we can meet each other's needs. I think there will still be competition in health care, but it's going to be more system-oriented competition where systems of hospitals and networks of hospitals will be competing against each other in terms of quality from market sharing and so forth as opposed to individual (hospitals). And we feel that with the services that we have in both of our institutions, it represents an ideal focus, if you will, of establishing a network that can probably compete very strongly if we get into the things that are discussed in the current health care reform proposal such as managed competition, accountable health plans, whatever those things mean.

But we've got something here that we need to build on and work together to help continue to grow. There may be things that come down in the future in terms of technology that individually we may have a hard time bringing into the community now because we do believe there are going to be reductions in payments but by working together we might be able to bring technology in the community that we haven't even imagined yet.

I'm wondering at this point, first of all, how much of this is a hard collaboration, how much of this is a saying that there's a spirit here of wanting to work together but we don't know what that means?

FIDLER: I'd say it's a hard collaboration in terms of the commitment that collectively we're going to join hands and extend and increase an efficient umbrella of care over this area. I'd say that we've got the unanimous commitment of both of our boards. Why? Because it's the right thing to do.

WENTE: I think I would want to point out that there are physicians on both of those boards. The physicians are a key part of this and we do view the physicians as partners, it's not just the two hospitals marching off here on some unchartered course on their own. The hospitals, the physicians, together, really represent an intrical part that has to work together. I think we're going to find physicians' support as we go through this thing. Certainly the physicians on our board are supportive. My own medical executive committee that I've discussed this with seems to be very supportive of this and that represents a good cross section in specialties within the hospitals.

How soon would you think the area would see some specific examples of this collaboration? Are we talking within five years that we should see some specific cooperative effort? Five years, two years? How soon are we really going to see some payback?

WENTE: I think there's already immediate payback....I think the mere fact that the hospitals are saying, `We are really going to be community hospitals, we're going to make decisions for the benefit of the community,' already is a result of the payback.

Physician recruitment is an example. Mr. Fidler and I early on agreed that there was a shortage of physicians. I'll tell you what, if we were truly competitive, would have happened: Hospital A would have taken off on a venture to recruit physicians to use hospital A. And hospital B would have gone out to recruit the same kind of physicians to use hospital B.

It costs a lot of money to recruit a physician, a lot of money. We're talking $20,000-$25,000 a recruitment typically to bring executive talent into a business. So hospitals are sharing this. Physicians are sharing this. The physicians are going to be using both hospitals, are using both hospitals, and that's a plus for everybody. So you know there's immediate savings right now and there's other things that we have done and are exploring that people don't know about and don't see because it's not that obvious, but it results in savings and benefits to the hospitals.

FIDLER: Well, I think increasingly, too, as you see us in the community, increasingly you're seeing us not only side by side but many times promoting the same thing health, lifestyle habits, things of that nature.

I think one of the things people think about whenever you talk about collaborative efforts and looking at duplication of services, the one that always comes up from the general public, is that there's two air ambulance services. Is it possible down the road that we could have one aerial ambulance service that could serve both hospitals?

FIDLER: Basically we have two aerial services because we have two hospitals with busy emergency rooms who have a commitment, because of the physician resources and technological resources they have, to serve a broader area. I think it's worked very well and is very cost effectively. Now if you look at what is the model in the future, well, the model in the future would say that collectively whatever that next generation of aerial ambulance support is, that it would make sense for us to pool our talents and address that together whether that ends up with two bigger helicopters at each institution or three helicopters serving a much larger area.

WENTE: I think that ... people would come to the conclusion, `Well, we need to get those hospitals together and have one helicopter.' But they're assuming we only need one helicopter, and I'm going to suggest to you that on analysis there would be a very strong case made that this region needs two air ambulance services. Already, what the public may not recognize is that Lifebeat flies into St. Francis and Air Evac flies in Southeast. And the crews talk to each other. So, you know, do you have one service with two machines, or two services with one machine, or as John said, one service with three machines? Air ambulances is just one of the items that can be explored as to how we can do that better. That doesn't say we're doing it bad now. Both of those helicopters are flying.

FIDLER: But at the same time we then are also willing to look at what that next generation is, see if anyone is doing any better anywhere else ... and then, as opposed to engaging separate consultants, we would approach that together and what develops as the next generation would not be `just to Southeast or St. Francis' but would be to serve the total region. In fact, if you want to draw the region big enough, you could probably build a case where you might need three (air ambulances).

When you're talking about working, even beyond the two hospitals here, working with other hospitals in the region, what size region are we generally talking about?

FIDLER: The primary service area of the two hospitals is about 200,000 (in population). When you look at the entire service area ... we're looking at about 400,000.

WENTE: The hospitals within this immediate area (Southeast Missouri and Southern Illinois), we exchange patients now. We network together, share ideas.

What are the obstacles to making this work? You mentioned early on there are laws that you have to be careful about. Anything else?

FIDLER: We're each charged to do the best we can to improve the health care delivery system at each of our individual hospitals and to maintain their services and programs. So, in the final analysis this causes you to step above that, not only that, but the past, the history, the competition as opposed to collaboration. The other is the fact that we're both committed to care for the entire region. That means that if somebody wants to come in and only care for a paying segment of the area and skim off that business, so to speak, that hurts both of us. And so I think we have to make sure not only that it does not happen, but we also don't do that to each other.

WENTE: I guess one of the things that typically is mentioned as a concern or obstacle to the kind of things we'd like to explore would be the federal regulations and the kind of obstacles that you could bump into when you're trying to do things together. I believe our attitude about that is, `Yes, we need to be aware of those things and seek proper guidance as we deal with those things.' But when we look at our primary goal ... when we're doing something that's best for the community and we believe the community wants that we're talking about providing health care not selling cars (we believe) that what's right will prevail.

I've been an advocate of that for a long time. If you do it right and your objectives are high and there is a broader benefit to the community, then it should work. That's the way our boards are looking at it, that's the way John and I are looking at it, and to the extent there might be some minority group, there might be some question as to the appropriateness of this from the regulations point of view, we'll have to address that.

A few years ago there was some talk of the two hospitals merging and there were some concerns raised about possible restraint of trade. What's different about this new collaboration?

WENTE: The difference here is we're not talking about a business combination, we're not talking about a merger. We're talking about cooperation for the benefit of the community and what are the ways we can do that.

You still would have two separate entities or however many hospitals you work together with. But you could do some combined type of things such as centralized purchasing, right?

WENTE: That is an example of the kinds of things we can look at.

For the person on the street, what does the collaboration ultimately mean?

WENTE: It means cooperation, finding ways to do things better.... I want to say I think we have an excellent quality of health care now. That doesn't say you can't improve, and we will work to find ways to do things more effectively. Both hospitals are involved to a very large degree right now on the concept of total quality management and the objective there is to develop ways that we can do things right the first time and thereby do things better in a more cost effective way.

Quality isn't expensive, it's the most cost effective way of doing things....Given the passing of time as we do things together, learn from each other, there may be certain things John has in the system he has that we'd benefit from. Vice versa, there may be something at Southeast we might do a little bit differently that St. Francis could benefit from. As we look at all of these things, you would think that quality would improve, be more cost effective.

FIDLER: I think that you put a network together, a hospital of network physicians, then you have a support structure, which then allows that network to deliver health care services more efficiently over a large area. You improve access. You decrease cost due to the fact that you don't have to duplicate billing systems, support systems, and they all integrate and talk to one another. So you can be more efficient, so you can decrease cost. Then in terms of quality, there's the fact that everybody within the network is subject to peer review and constant review in terms of how to improve your network and delivery of services and they're actively involved in that in a participatory way. You're obviously going to continue to enhance the standard of care and improve quality. I think it's the only thing that makes sense in a world where there are limited resources and you're called on to provide a greater wealth of services to a larger population without substantial increases in cost.

You said earlier that this collaborative effort is the type of action that would be happening whether or not there was health care reform going on at the national level. Can you predict what, if any, health care plan will come out of Washington this year? And how does the deliberation there affect what you are doing here?

FIDLER: Well, we obviously follow it because with one stupid change in the health care law, you can rewrite health care at the local level. At the same time, we're charged every day to save lives in this community and use the resources we have in the most caring, cost effective way. That's what we've got to focus on, and increasingly we find in the outlying areas that they're having more difficulty in recruiting physicians than we are. They have a real shortage of specialists and everything else, and increasingly are having to look to other areas than Cape for those specialty services. And so we have to find a better way to support our physicians, our specialists and provide outlying areas greater access. So all of those things, regardless of what happens on the national basis, makes sense.

I think you've got a number of things that have to get aligned (in any national legislation). Number one, you have strong union support. We've had rich benefit packages. Six of 10 strike-related issues are for retention of health care benefits. So I think there's a pretty good probability that whatever package they put out, it has to be liberal enough to support that. A number of things they're talking about are currently not provided under Medicare....What about catastrophic insurance? We all know what happened with that a while ago. It quickly got passed and then when the elderly realized they'd be paying for a portion of it, it quickly got repealed. The businesses' ability to compete with very narrow margins, 1 percent or less in terms of profit or loss. Suddenly you start talking of a 6 to 8 percent payroll tax impacting them....So I think there has to be some kind of a pooling of risk, a phasing in of those things.

You obviously can't take 37 million people, some people would say 20 percent of the population, provide them health care access and not have an increase in cost unless you found a lot better way of providing health care....I think what we anticipate is there will be a pluralistic system and there will be another payer source for people who currently don't have ready access to either a Medicaid program or some other form of health insurance.

WENTE: I'm just really concerned that when all of this shakes out, that whatever we have in this country is going to very closely come to the Canadian system. The concern I have about that is, I don't believe the constituency in our country really understands that they still are going to pay for that. It's going to be, like Mr. Fidler said, through high payroll taxes. There's going to be less money in those paychecks because to finance the health care for this country under a system that is patterned after the Canadian universal system of health care is going to cost a lot of money. And, if it isn't appropriately funded ... I think that people are going to decry that system and there's going to be yet another reform that is going to try and bring back free choice, less costly services into the system.

It may take 20 years for the whole cycle to happen but I think if we really do move towards universal health care that there's going to be a greater access problem; I think there's going to be younger people who are going to be less likely to go into medicine because they'll earn better livings in other professions, and it's going to be very, very costly. And speaking of cost, I think one of the issues that has led to this question of health care reform, one of them is access. The other one is cost.

It is very interesting to me that there is very little discussion about what the government has contributed to the cost problem through their own reimbursement programs. I just want to share a couple of numbers with you. In 1983, when we started the DRG system or TEFRA, Tax Equity Fiscal Responsibility Act, that DRG system was intended to resolve the rising health care cost issue, deal with the federal budget problems relative to entitlement programs, i.e. specifically Medicare, and give the providers the incentive that if they could control their cost and be cost effective, they could earn a profit off the Medicare patients; but those that were not effective would lose money and given the passing of time, the weak would fall aside, the strong would rise, and there would be regionalized centers of health care. That is what I thought was going to happen.

In 1984, Southeast Hospital had a .27 percent margin on Medicare patients. That meant we got 100.27 percent of cost. We had 3,156 Medicare patients and we made $7.32 on each one of them on average. In 1992, we lost 22.4 percent on Medicare. In other words, for every dollar we spent in caring for the Medicare patient, we got 77.5 cents back. We lost on every Medicare patient and there were 3,042 of them in '92. We lost $1,766.88 (per patient) on average. That's cost not charges writing checks for the payroll, for the supplies, etc. The actual loss on Medicare was $5,374,819 in 1992. Our cost of taking care of Medicare patients in 1992, our actual cost, not charges, was $23,955,948. Medicare paid us $18,581,129. So that results in a loss of $5,374,000....I guess the thing I want to share, it's important for the public to know that if the Medicare people, Medicaid is another example, will just pay the cost in providing that care, this health care issue of cost would be a lot less than it is. We could reduce our charges by a third and still maintain our same operation.

I realize that's not exactly what we were talking about here, but I think the way it ties in is, we don't see this getting any better. And so if you multiply that by two, these two hospitals probably together made a social contribution of over $10 million last year to provide care. And, if we're looking at health care reform and we're looking at changes and further reductions, coupled with more people in the system, if we don't find a way to work together Cape Girardeau and the surrounding area could lose an awful lot of good things that have taken years to develop.

Many local business have joined together to try to address the issue of health care costs in a new group, which just recently selected a common insurance provider. What do you think of this group, the Southeast Missouri Business Group on Health, and what they are trying to do?

WENTE: My quick thought is that I believe they're sincere in wanting to address health care cost from their perspective and we're looking forward to working with them to see what we can help them do to address their concerns.

FIDLER: My only concern was that they kind of ignored the health care providers and we weren't allowed to be full members and work in a more active partnership with them. My plea would be just that they re-examine that and I think if we're going to solve the health care problem, we're going to have to do it collectively together as equal partners.