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Competition gains upper hand in health care

Integration and competition seem unlikely partners. But Rochester health care experts say the two herald a new era for a system long known for its cooperative complexion.
“I’m not sure if that’s going to mean more players or more intensity, but the competitive ethic is going to be stronger,” says Preferred Care president John Urban, echoing colleagues throughout the health care community.
Or, as Strong Memorial Hospital CEO Leo Brideau likes to say: “This (1996) is the Health Care Super Bowl.”
With hospital affiliations and hospital- physician partnerships making headlines, cooperation may seem ever stronger. Yet the moves might better be described as arming in preparation for battle–a couple of really big teams girding for heavy competition.
Strong Memorial and Highland hospitals are moving toward formal affiliation. Rochester General, Genesee and Newark-Wayne Community hospitals and related ventures have united under the Greater Rochester Health System.
Meanwhile, all of the area’s acute-care hospitals in recent years have started nursing homes or other senior living centers; opened satellite clinics or ambulatory-care facilities; and made other moves toward integrated delivery. And most have launched or plan to initiate hospital-based physician organizations.
Rising costs, looming Medicare and Medicaid cuts, the coming end of the state hospital-reimbursement system and rapid movement toward full managed care have put everyone on notice. Hospital occupancy is down, outpatient care is on the rise and the population is aging faster than ever.
Employers are pushing for lower insurance rates. Insurers are complying. And few disagree that fee-for-service payment is headed out the door. Health care providers instead will be paid capitated rates–set amounts per patient–which most agree puts incentives in the right place.
Part good business, part wake-up call, this competitive shift is expected to mean the end of community rating, the insurance-equity mantle Rochester has carried for decades.
Whether or not a for-profit HMO rides into Rochester on this competitive wave, community rating, Genesee Hospital’s president and CEO says, is doomed.
“Within the next 18 to 24 months, it will be virtually non-existent,” Joseph DeSilva predicts, echoing a number of others throughout the community.
DeSilva maintains that community rating as a foundation for the Rochester health care system is overrated–“a dinosaur.”
For years, in fact, several employers and other groups have cut their own insurance deals.
The president of Blue Cross and Blue Shield of the Rochester Area, reminding that community rating now is mandated by the state, does not see it that way. Community rating, Howard Berman says, will not be affected by the year’s coming changes.
Here is a look at some of those changes:
Health insurers
Berman and Urban see demands of increased accountability from purchasers of health care, as well as more scrutiny of how premium dollars are spent. Urban says the move to mandated Medicaid managed-care enrollment will have a significant impact throughout 1996. And Berman predicts an increased focus on disease management and analysis of clinical outcomes, as well as a sea change in the way technology is used in health care delivery.
“We think there’s a real opportunity to reshape the system without giving up what benefits we’ve got,” Berman says.
Urban, who says increased scrutiny is going to lead to heightened competition, has this to say about community rating: “We continue to think that it is very, very slowly eroding, but I don’t see any kind of dramatic event that is going to put an end to it (soon).”
While increased managed care, occupancy drops, layoff threats, cuts in Medicare and Medicaid, and the imminent end of the state hospital-reimbursement system all promise some sleepless nights for hospital workers and administrators, 1996 likely will bring some of the most exciting changes ever to shape the hospital industry.
As the centerpiece of emerging integrated-delivery systems, the hospital is under immense pressure to cut unnecessary costs, minimize inefficiencies and find income-producing alternatives for empty beds. (Strong Memorial, for instance, might consider contracting with a home-care company to provide on-site transitional care.)
At the same time, it will be increasingly important to keep services, equipment and physical plants competitive. And with the June 30 expiration of the state’s hospital-reimbursement program, hospitals for the first time in more than two decades will be setting their own rates and cutting negotiated deals with payers.
Collaboration will be the cornerstone of these new systems, administrators agree, predicting reduced costs through greater economies of scale and soup-to-nuts care in a tightly managed environment. That means partnerships–in the real, equitable sense of the word–with other hospitals, doctors and other individual providers, nursing homes, home-care companies and employers.
“We will need to focus on prevention and wellness, which is kind of an oxymoron, because the reason hospitals are in business is because of (people being sick),” DeSilva says.
Rene Reixach, executive director of the Finger Lakes Health Systems Agency, predicts “a real potential for capital-investment wars.” And questions must be answered, he adds, about what to do with the capital already invested in now-evolving facilities.
Yet even while hospitals team up for competition, a movement is under way to create an information network linking hospitals, doctors, employers and others (with varying degrees of access).
The Rochester Area Community Healthcare Information System, a project of a for- profit subsidiary of the Hospital Consortium of Greater Rochester, is expected to be used for transmitting data on referred or transferred patients, providing access to vast medical resources and other functions.
Stephen Mershon, director of systems development for Rochester Healthcare Information Group Inc., and the system’s project director, sees the network as a crucial tool in making strategic and clinical decisions: “We’re going to see an increased need for (such information).”
For Jay Pomerantz M.D., greater integration, increased competition and more managed care represent both good and bad. Good because physicians will need to be more responsible for the quality and cost of care they provide. Bad because they will face exclusion from health plans and loss of patients to “approved” doctors; have to choose loyalties and change referral patterns; possibly be forced to make decisions placing cost above quality; and find themselves holding the ball as insurers tighten benefits plans and change policies to accommodate employer demands.
“Doctors are going to be in a very precarious position–being seen as an advocate for policies they may not agree with,” says this internist, also president of the Monroe County Medical Society. He notes the importance of everyone–providers, insurers, employers and consumers themselves–sharing responsibility for informing consumers of changes and educating them on ways to help stem rising costs.
Demand management, then, which addresses the consumer part of the equation, needs to be a top priority. So does a concerted effort to look at medical issues not in isolation but in their larger context.
For instance, when insurance companies began applying criteria to reduce the length of after-birth hospital stays for new mothers, they failed to consider the consequences, Pomerantz says. Now, he adds, talk of legislating longer stays could fall into the same trap unless decision makers take into account the effects a unilateral mandate may have on the whole system.
“It’s a fixed pot of dollars,” Pomerantz contends. “Something has to give.”
In the Rochester system’s more cooperative days, the internist says, such an issue might have been easier to resolve. But with employers pushing for free-market health care, and insurers hurrying to comply, Rochester–and its community-rated health care–will never be the same again.
“The future,” he says, “is for a much more tightly controlled system.”
Nurses, nurse practitioners and other non-M.D. health care providers
Non-physician health care providers face many of the same issues as do their M.D. counterparts–and a few of their own. For years, many have felt the system treats them as second-class citizens–merely support staff for the doctors. Restrictive reimbursement and supervisory policies, and impressions that they are less qualified to provide primary care, have contributed to this perceived secondary standing.
But increased managed care–and its core emphasis on primary care–may bring new roles for these providers. Nurses, in particular, are likely to benefit from the increase in primary-care satellite clinics and other ambulatory-care facilities.
Nurses and others should prosper as well from an increased recognition of how cost-effective it is to use non-physician providers for less-complex care and treatment, says Mary Eileen Callan, a family nurse practitioner who manages a satellite clinic for Highland Hospital.
Callan, immediate past president of the New York State Nurses Association, thinks much can be gained as well by identifying and fighting what non-M.D. providers see as unfair practices.
The state nurses association, in fact, has filed a complaint with the Federal Trade Commission against Rochester Community Individual Practice Association, the physicians organization that contracts with Blue Choice for patient-care services. The association alleges that RCIPA’s practice of requiring physician oversight of nurse practitioners is discriminatory and contrary to state law.
Rochester Individual Practice Association, which contracts with Preferred Care, does not have such a policy, Callan says.
Home health care
and long-term care
With an aging population and the ability to manage chronic diseases longer than ever before, the home-health and long-term-care industries are at no risk of facing a dwindling clientele. But neither are they facing an easy ride.
Medicare and Medicaid cuts threaten their financing, and managed care is likely to throw a few curveballs. Long-term-care advocates continue to fight for comprehensive insurance programs. And both long-term-care and home-health providers have perfected the art of streamlining and case management.
On the flip side are affiliations–with each other and hospitals–and innovative programs that capitalize on shorter hospital stays, more ambulatory surgery and an increasingly integrated system.
Visiting Nurse Service of Rochester and Monroe County Inc., for instance, will team up with Genesee Region Home Care and Hospice to run One Caring Place, a transitional-care facility to open in April in Penfield. Reflecting a nationwide trend, this state demonstration facility might be used, for instance, by people needing short-term after-hospital care but lacking someone at home to provide it, VNS president and CEO Sally Leiter says.
Fran Weisberg, president and CEO of Lifespan, agrees with this trend toward integrated delivery and a seamless system of care. But she feels strongly that without seamless insurance coverage–including a comprehensive long-term-care program–it will not be possible to have full integration, and thus full care of the individual.


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