“Health care that is safe, health care that works, and health care that leaves no one behind”

by Howard Ainsley, HHSC East Hawaii Regional CEO January 28, 2013

As a “Safety Net” quasi-public hospital network, the responsibility of Hawaii Health Systems Corporation (HHSC) is to provide residents and visitors across the state with access to quality health care. HHSC is the largest provider of health care services on the neighbor islands, and has been dealing with ongoing budget shortfalls, increasing operating and capital improvement costs and declining government subsidies. There are four primary concerns or trends impacting the hospitals’ ability to provide services and care to our communities.

• Medicare and Medicaid reimbursement will decrease this year, providing less revenue for the services provided.
• Decreasing patient volume at HHSC hospitals due to an increasing number of residents on the neighbor islands choosing to go to Oahu for care that they believe will be better, instead of being served by local hospitals.
• State officials and their constituents have a growing and reasonable interest in decreasing and eventually eliminating HHSC annual and substantial subsidies; and
• Some HHSC facilities and equipment are in need of repairs or major renovations and, in a few cases, need to be replaced as soon as possible. These are capital investments that HHSC can’t afford today.

Hilo Medical Center, the other thirteen HHSC facilities, and hospitals nationwide are being pushed to the brink of collapse, given the new health reform law changes. Health policy experts and healthcare futurists claim that one-third of the nation’s hospitals are unlikely to exist in 2020, as a result of these Federal Government mandates. The Supreme Court’s landmark decision on June 28 to uphold the Patient Protection and Affordable Care Act sets in motion numerous measures to revise the payment system for hospitals, physicians, and other providers. The law is unequivocally the most sweeping health reform bill since Medicare was enacted in 1965. Moody’s maintains a negative financial performance outlook for not-for-profit hospitals across the country in 2013.

According to the American Hospital Association, many hospitals across the country are considering some degree of affiliation with larger healthcare systems given the state of affairs. Mergers and acquisitions have steadily been increasing since the recession of 2007 – 2009. Nationally, there were 51 merger or acquisition deals in 2009, 75 in 2010, 86 in 2011, and considerably more in 2012. The consolidation trend is expected to continue as hospitals all over the county try to figure out how they can survive in this new healthcare reform era.

Another trend that is driving industry consolidation relates to the establishment of a continuum of care and includes the employment of physicians. A recent study by Accenture, notes that in 2009, 57 percent of the nation’s 750,000 physicians were “employed”. Today, approximately two-thirds of the nation’s physicians are employed and, as hospitals consolidate their employed physicians, groups merge into larger groups within the system.

Heretofore, healthcare providers have been reimbursed and rewarded for high volume, high profit margin services – regardless of value, outcomes, or appropriateness. The new reimbursement model rewards hospitals and others for their performance on selected quality measures – specific to surgical care, pneumonia care, and prevention of healthcare associated infections. All told, hospitals’ Medicare revenue is at risk, as they face further cuts (2% in 2013) and penalties for readmissions. Medicare envisions a healthcare system in which a single entity (i.e., Accountable Care Organization is accountable for the entire continuum of needs for a community’s patients.

This combination of decreased reimbursement, decreased volume, decreased capital, and the potential decreased state subsidy is a formula that will significantly erode our resources and the capability of HHSC hospitals to support our great doctors, nurses, and other health professionals. This damaging formula will force us to make painful choices about which services we can and can’t provide, based on diminishing resources.

Unequivocally, payment reform is here, and the traditional “fee-for-service” model will continue to dwindle. Payment (for hospitals and other providers) is largely going to be a zero sum game. There will not be more money, unfortunately, there will be less. The Feds overarching goal is to slow down or bend the cost curve downward.

So – one might ask – how do we manage under this new era of healthcare reform that is keenly focused on an improved cost structure and more efficient model of healthcare delivery?

Now is the time for our state hospitals to look at operational efficiency. In order to sustain ourselves and/or survive, hospitals must look at every operational aspect in order to be efficient providers: to evaluate patient thru-put, evaluate length of stay whereby it is at an appropriate level for patients to be in the hospital, evaluate new technology, evaluate in-home monitoring, etc. It is also necessary that we seek ways to prevent duplication and extreme fragmentation.

As we move into a new era of healthcare delivery, the relationship between physicians and hospitals is more important now than ever before. Success will require undertaking significant transformational efforts to organize our physicians and hospitals into the right structure with the right incentives.

In an effort to control its future and the delivery of healthcare, HHSC is looking at ways to improve quality and delivery including a public-private partnership that will help to reduce its dependence on state subsidies, provide access to private capital to expand access and service delivery, offer private sector compensation packages to retain qualified medical service personnel, create efficiencies of scale, and improve overall quality of services to the community.

The Hilo community can help our cause by being acutely aware of the challenges facing all hospitals. Our community is at the heart of our efforts to provide quality healthcare close to home. We urge you to give us feedback on your experiences and the quality of services delivered. We also ask that you make our facilities your first choice for healthcare whenever possible. And please support our legislative initiative this year to secure funds to move forward with our planned HHSC Primary Care Medical Training Program which is aimed at bringing more doctors to our community.

It’s true that the complexities within the healthcare and hospital environment can certainly affect the decision-making process. The largest challenge is not deciding what needs to be done, but HOW it will be done. Our community depends on us to get it right.

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Related: HHSC Exec Discusses Banner Partnership with Hilo MDs