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When The Givers Just Can't Keep Giving

October 18, 2008
by Joe Bormel
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When The Givers Just Can’t Keep Giving


Even Nonprofit Hospitals Have Sustainability Limits






A front page headline on the October 14 edition of the WSJ, read: “

Nonprofit Hospitals Leave The City for Greener Pastures” by Barbara Martinez.




Here’s a brief excerpt from WSJ Health Blog, posted by Sarah Rubenstein:





Ascension’s approach to the Detroit market is an increasingly common strategy among nonprofit hospital systems: Close money-losing facilities in poor areas where many patients are uninsured, and build or refurbish hospitals in affluent places where people have coverage. Nonprofit hospital systems have closed facilities from Los Angeles to Chicago to Newark, N.J., while spending billions on suburban expansions. Meanwhile, large nonprofit chains have been enjoying some of their most prosperous times ever.





Ascension’s Detroit-area subsidiary, says Riverview lost $16 million in 2006, just before it announced the closing. Uninsured patients were using Riverview’s emergency room for all sorts of care — an expensive and inefficient approach, the chain’s local subsidiary said. The neighborhood’s real need isn’t for a hospital but for more primary care doctors. The system is studying ways to provide more of that kind of care there, though critics say shutting down Riverview drove doctors away.




My reaction is that the coverage clearly strove to be balanced and provided much needed detail. That said, it took a complex situation and

made it worse by violating “fair-fighting rules.” Specifically, #9 below, argue about one issue at a time, was violated.




The issues of executive compensation, revenue from investments, and some of the other context used in the WSJ story seemed to distract from the essential problem which is – from a market-driven or societal service perspective – loosing the viability to deliver services that used to be sustainable for nonprofit hospitals.





FAIR-FIGHTING RULES (

applies to all relationships, including couples, or parties in conflict):


1. Take Responsibility.


2. Don't escalate.


3. Use "I" speech.


4. Learn when to walk away – productively.


5. Avoid – and defend against – hurtful speech.


6. Stay calm.


7. Use words, not actions.


8. Be as specific as possible – with examples.


9. Argue about only one issue at a time.


10. Don't generalize.


11. Avoid "make believe.”


12. Don't wait.


13. Don't clam up.


14. Agree to ground rules.




What was lacking was clarity of the problem and the solutions available. Specifically, the providers and society (local, state and national governments) need to

define the triad of cost, access and quality to which they mutually agree. Currently, all three seem to be a bit open ended. (I'm deliberately not using the language 'benefits' in an effort to have a no-spin zone.)




The reimbursements, after adjusting for the tax benefit of being a non-profit, need to be in excess of costs, so that there is a fair-and-reasonable profit to allow sustainability. A quick look at

AHD.com demonstrates that this basic profitability issue is not met for significant portions of the Medicare business. The text of the WSJ article suggests that Medicare is their best payer by far.





The graphic below depicts exemplary Medicare data (public) from a representative Detroit hospital a few years back. If the number of Inpatients is enlarged to all patients, and the 'Average Reimbursed' is adjusted down to reflect the payer mix described in the article, the actual picture is likely to be much worse than DRG 416. In DRG 416, costs are much greater than reimbursements.









On the access side, we’ve

covered this topic before, including using Average ER Waiting Times (August 9) as an access and quality measure (per CDC findings). There are excellent existing historical data. As we previously discussed, including W. H. Peters’ comment on that post, open access clinic concepts are available and proven models. They're also under-utilized.




Quality is the third element of the triad; defining the covered services and metrics are necessary to establish and manage to a cost model that is self-sustaining.




The article did establish, along with other evidence, that providers are opting out of non-sustainable economic relationships, regardless of profit or nonprofit status. Non-sustainable, unlimited cross-subsidy expectations seems to be the largest, unspoken issue.




We need to frame and discuss improving healthcare and its delivery by creating clarity on a fair-and-reasonable cost/quality/access basis, and move away from unfair fights – vilifying the parties with distracting, unrelated issues, no matter how important they may be. Fair Fighting is needed to clearly define the problem, so that a sustainable solution is possible.






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