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Too
many local hospitals on life support
With number of beds halved since 1980, state should alter its closings policy
By Alan Sager and Deborah Socolar, 3/3/2002
Massachusetts has lost almost half of its hospitals and patient beds. With
the state only a flu epidemic or plane crash away from an emergency room
crisis and bed shortage, it's time for action.
For a decade, state policy has encouraged hospital closings. This practice
stemmed from the belief that too many hospitals led to higher costs. The
industry and the state agreed to let market competition decide which hospitals
would survive.
Today, however, with no reserve capacity and with baby boomers aging, we
are fast reaching the point where patients' lives and safety are in jeopardy.
Many cities and towns are nearing a hospital bed shortage, and last year
ambulance diversions and emergency room delays hit new highs.
Public Health Commissioner Howard Koh warns that a bad flu season would spell
disaster. This year and last saw mild outbreaks, but Massachusetts can't
count on an extended winning streak at flu roulette.
Acting Governor Jane Swift should declare a public health emergency to prevent
another closing and to buy time. Legislators should then move to protect
all needed hospitals at an affordable cost.
Only 73 hospitals remain in Massachusetts, and 68 have closed since 1960.
The state eliminated half of its beds just since 1980, and 15 hospitals are
vulnerable. Care Group, owner of six area hospitals, recently announced the
closing of Deaconess-Waltham Hospital next month because it is expected to
lose as much as $9 million this year. Staff, community groups, and the city
are working to find new owners and financing to save the hospital. While
laudable, such private deals are complex and easily undermined.
Because stabilizing Waltham is vital, and time is short, staking its future
on just one strategy is too risky. A public effort must parallel the private
one.
Some state officials and health economists believe that more closings are
safe. Others advocate respecting the market. Both views are wrong. Waltham
handles 22,000 emergency room visits yearly and provides 43 increasingly
scarce psychiatric beds, plus standard medical-surgical capacity. If it closes,
ambulance travel time will increase, emergency room and inpatient crowding
will worsen at surviving hospitals.
Hospitals are not interchangeable parts in a health care machine. They have
deep ties to doctors, programs, patients, and communities. Some dislocated
nurses, for example, may decide to stop working in hospitals if theirs close,
which would worsen the nursing shortage.
Even if a last-minute private rescue saves Waltham, new state policies are
needed to forestall other closings. Koh and Massachusetts Attorney General
Thomas F. Reilly say that ''we cannot afford to lose'' another hospital.
They are right. Today, many hospitals have no empty beds. Rebuilding hospitals
will cost $500,000 to $1 million per bed.
How did this problem develop? For many years, some specialists thought
that
closing hospitals would save serious money. The state began deregulating
hospital payments in 1988, expecting that competition would shut inefficient
hospitals.
Deregulation did close hospitals but didn't save money. In 1988 hospital
costs per person here were 38.3 percent above the national average. In 2000,
after 26 closings, costs were 38.6 percent higher.
One reason closings didn't save money is that excess beds didn't cause high
costs here. Massachusetts has been below the US average in hospital beds
per 1,000 people since 1988. Also, the 26 hospitals closed since 1988 were
smaller or mid-sized community facilities. Massachusetts now leads the nation
in reliance on costly teaching hospitals.
After studying the causes of hospital closings in 51 US cities, w found
that the market doesn't work. Community hospitals are likelier to close -
even though they're more efficient - in part because they lack sufficient
physicians. Teaching hospitals and wealthier ones tend to survive.
Genuine free-market competition requires more than theory. It depends on
bankruptcies of inefficient producers and replacement by new hopefuls, no
dominant buyers or sellers, and good information about price and quality.
All are lacking in hospital care, so this market doesn't work. And there's
no limit to the hospitals it will close.
Closings and mergers actually foster regional monopolies, which extract
high
prices from insurers. Massachusetts General Hospital's surpluses totaled
$150 million in the past two years while its revenues rose 12 percent ($140
million) last year alone.
But many hospitals are losing money. The Massachusetts Hospital Association
blames low revenues, not high costs, a position that raises several concerns:
First, hospitals in this state would need $650 million more yearly
to make them as profitable as hospitals are nationally. Who would provide
this revenue? Washington and Beacon Hill face deficits. Family health insurance
premiums in Greater Boston have already risen 50 percent since 1998.
Second, the association's demand for higher payments to all its members would
use up the dollars needed for targeted relief to threatened hospitals.
Third, though many hospitals operate efficiently, the real proble statewide
is high cost. Too much care is delivered in costly outpatient departments
and teaching hospitals.
In 2000, Massachusetts hospitals spent $3.1 billion more than they would
have if they had spent at the national per-person average. The steady drain
of patients into expensive teaching hospitals is not warranted or affordable.
Patients here use costly hospital outpatient care (instead of office-based
physicians) 48 percent more than the national average - even though the state
leads the nation in doctors per person. That's 4.6 million extra visits.
And Massachusetts trains doctors at three times the US rate.
For a decade, the hospital association has fought proposals to empower state
government to identify and protect needed hospitals. It repeatedly claimed
that closings were not a problem and that the market would close unneeded
hospitals.
Recently, though, the association has decried closings and emergency
room gridlock - and has won large across-the-board hikes in state Medicaid
and free-care payments. Medicaid payments will probably rise by $100 million,
or 15 percent, this year and again next year. The 2002 state budget gives
hospitals $60 million in free-care relief.
Half the Medicaid increase goes to the state's 20 richest hospitals. While
the association talks about closings, its policies channel more public
money to its more prosperous and higher-dues-paying members.
Only $15 million was appropriated to provide targeted relief to financially
strapped hospitals this year, and Swift plans to freeze all but $5 million.
One year's rise in Medicaid payments to Springfield's Baystate Hospital or
Mass. General alone roughly equals the $5 million remaining in the distressed
hospital fund. Reallocating state dollars to that fund would save needed
hospitals today and save money tomorrow.
Government can take several steps to save Waltham now and other vulnerable hospitals shortly:
Swift should immediately declare a public health emergency to conserve and
stabilize care at Waltham. (Such a declaration was used in 1976 to safeguard
residents at a Merrimack Valley nursing home.) Each surviving hospital should
be deemed needed unless proven otherwise.
Under this emergency declaration, the state should appoint an administrator
with expertise in reviving distressed hospitals to run Deaconess-Waltham.
The state should back the new administrator with cash from the distressed-hospital fund.
The Legislature should provide for hospital receivership, timely detection
of hospitals at risk, identification of hospitals and services needed to
protect the public's health, and financing for short-term stabilization.
(Two years ago, an HMO receivership law helped to protect the Harvard-Pilgrim
HMO.)
State government should design payment methods that assure each needed and
efficient hospital enough money. This means capping revenue generation by
powerful hospitals and cushioning money-losing but needed hospitals.
To reverse the drift of patients with routine problems to high-cost teaching
hospitals, state government should work to enhance quality and promote use
of lower-cost hospitals.
Massachusetts has the world's costliest health care - $9 billion above the
US average, totaling $45 billion this year. That's double the state budget.
Current spending is enough to pay for care for all while stabilizing needed
caregivers.
Because the market has proved incapable of doing either job, government must
act. Otherwise, Massachusetts health care will face meltdown and chaos, with
less care for fewer people at greater cost.
This story ran on page D1 of the Boston Globe on 3/3/2002. © Copyright
2002 Globe Newspaper Company.
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