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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.


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.




Thanks for your comments and insights.

Ascension in general, and their Dr. Jeff Rose specifically, have taught many of us (CMOs, CMIOs, CIOs) a lot about clinical transformation and quality. That's probably why the WSJ article bothered me so much it was really a distortion of what I deeply know to be their true values.

Fighting fair is always the best choice when it comes to vendor-client and interpersonal relationships. But selling in a competitive environment such as HCIT is another story. In general, you go for the win, with the exception of telling an outright lie. Every situation has its own set of ethics.

In terms of the media, you're right. The WSJ exacerbated the problems created when the hospital closed by confusing the issue. However, when being a consumer of the general news media, it's always a "buyer beware" marketplace. Some general news outlets have agendas, some have sloppy reporting, and still others just want to get the story "out there" first, regardless of whether the content is correct.

That's not to say there aren't good news operations, but their numbers are shrinking as consumers reach out to the Internet, etc., and the number of reporters/writers in newsrooms, particularly senior people, continues to decline. Still, the press continues, as always, to have the last word.

The bright spot concerns trade pubs. Because the audience for each is highly targeted, that audience generally receives a solid message based upon fact. Refreshing.

Across the healthcare industry, it seems to me that we are moving away from the unfair fights, although more must be done. Pressure is being brought from all sides to improve patient outcomes and safety. This has led to a growth in transparency.

But I digress, because we also need to address closing a hosptial in an impoverished neighborhood. Simply stated, the first goal of every business, even nonprofits, must be to stay in business. If that means closing business units or facilities that have a serious negative impact on the overall organization, then such action must be taken no matter how distasteful it may be for all concerned.

Far more patients and communities would suffer if organizations such as Ascension continued to support facilities operating in the red until its entire network imploded from the strain. And along the way, who can say how many would suffer from the decline in the quality of care along the way.

In spite of the fact we've all read the headlines about executive mismanagement of some of this nation's biggest, most powerful companies over the past few years, senior execs make the big bucks because they, for the most part, have the ability to make difficult decisions. I, for one, side with Ascension.