The Genesys Health System plans to close its four hospitals in
Genesee County, Mich., and replace them with a single streamlined
hospital, with 439 patient beds, half as many as the old
Genesys, based in Flint, is shrinking to get ready for the new
world of managed competition in health care under which hospitals
and doctors may have to bid against one another for insured
groups of patients. And it is struggling to make health care more
affordable so that the county's dominant employer, the General
Motors Corp., will not close any additional local factories,
further reducing its potential pool of patients.
Under an avalanche of economic and political pressures,
hospitals nationwide are reinventing themselves. In addition to
cutting costs and delivering care more efficiently, they are
providing services unheard of in the past like making house calls
and competing with insurers in processing claims.
At stake is their survival. As cost-conscious employers and
insurance companies pushed for shorter hospital stays, occupancy
in the nation's hospitals dropped to 66 percent by 1991 from 76
percent a decade earlier, according to the American Hospital
Association's latest survey. Since 1980, about 1,000 hospitals
have closed or merged as a result.
In the latest large merger, Galen Health Care agreed earlier
this month to a $4.1 billion deal to merge its 73 hospitals with
the Columbia Hospital Corp., based in Fort Worth, which has 26
hospitals. After previous acquisitions, Columbia closed a number
of hospitals in cities where it would up with more than one.
Galen, based in Louisville, Ky., was created in March to take
over the Humana's for-profit hospitals.
And industry executives say hundreds more hospitals will
disappear in the next few years because of continuing pressure
from big payers and now, from the government. The shrinkage will
accelerate, hospital executives say, if the Clinton
administration succeeds in putting government limits on
"The hospitals' worry beads are well worn," said Gary
Ahlquist, a managing vice president at Booz-Allen Health Care
Inc., a consulting firm.
According to Michael D. Bromberg, executive director of the
Federation of American Health Systems, a trade association in
Washington, "In a four-hospital town, No. 4 is gone unless it can
change." He said the survivors will also be smaller because
increasingly patients are seeking less expensive care in doctor's
offices and walk-in clinics.
So how are hospitals preparing for the new world?
Perhaps the most sweeping change is that a growing number of
them are allying with networks of primary-care physicians, giving
these family practitioners, internists and pediatricians greater
influence in the health maintenance organizations and other
medical networks that predominate under managed care.
Formerly these doctors had taken a back seat to surgeons and
specialists in most cities. But now, they are typically deciding
which hospital to use for routine treatments. And their
authorization is often required before a patient consults a
As a result, MacNeal Hospital in Berwyn, Ill., a blue-collar
suburb of Chicago, actively woos family physicians to help keep
its 427 beds occupied. MacNeal will pay the doctors a salary or,
if they prefer, provide an office and assistants in a
neighborhood where doctors are scarce, said Luke McGuinness,
Many doctors look forward to warmer ties with hospitals,
instead of the "sometimes hostile relations" of the past, said
Dr. Nancy Dickey, a family physician in Richmond, Texas, a small
city 35 miles from Houston. Doctors and hospitals will probably
"share much more closely in the risks and benefits," she said.
Insurance companies also see the changes.
"Hospitals used to be the center of the universe," said David
Willis, who is in charge of policy and programs for more than 200
physician and hospital networks for the Aetna Life and Casualty