Competition Mounts in Health Care Industry / Occupancy Rates Vary Widely among 11 Major Oklahoma County Hospitals

By Watkins, Robert | THE JOURNAL RECORD, July 16, 1987 | Go to article overview

Competition Mounts in Health Care Industry / Occupancy Rates Vary Widely among 11 Major Oklahoma County Hospitals


Watkins, Robert, THE JOURNAL RECORD


Eleven Oklahoma County hospitals reported occupancy rates ranging from 28 to 76 percent in the fiscal year ending in 1986.

The Oklahoma Hospital Association indicates that these 11 hospitals contain most of the licensed beds in the county.

Occupancy is but one measure of economic health, but administrators almost universally view it as a gauge of the modern hospital's vital signs.

Hospitals here, as elsewhere, encounter pressures from three powerful forces - consumer demand for the best possible health care, benefit restrictions imposed by cost-conscious employers and insurers, and a relentless squeeze by the federal government to limit payments for the care of Medicare beneficiaries.

For larger institutions, the path to survival has been navigable, though sometimes rocky. But in these times, smaller hospitals face uncertain futures. Moreover, all may find it increasingly difficult to care for the poor.

Executives at major medical centers in Oklahoma City appear to be in general agreement that the outlook for rural area hospitals and those in smaller communities is for a continuing struggle against harsh odds in the current climate. While no one likes to acknowledge a shift from friendly rivalry to a more competitive atmosphere, most now are willing to concede that competition, however vaguely defined, does exist.

Stanley F. Hupfeld, president and chief executive officer at Oklahoma Healthcare Corp., parent company of on-profit Baptist Medical Center, identifies two federal health policy initiatives as major influences in the changes affecting hospitals.

"Competition was low key until several years ago," says Hupfeld. "Most institutions had plenty of business.

"We were driven by unrelenting demand fueled by the health care system. It was an atmosphere that led to collegiality - a hospital is a hospital is a hospital."

The national health planning law requiring hospitals to face strenuous reviews before additional beds or new structures could be approved, Hupfeld notes, was a turning point.

"Certificate-of-need review (by state and local boards) tended to set hospitals against each other," he says. With expansion and new technology governed by need, as perceived by the planners, hospitals found themselves competing for expansionary opportunities.

In 1983, the federal government introduced prospective budgeting into the Medicare system, a change that altered dramatically the way hospitals were reimbursed for services to Medicare beneficiaries. With prospective budgeting came a new method of computing the levels of reimbursement - the classification of diseases under diagnostic-related groups (DRGs). The clear intent was to limit or control Medicare costs.

Coupled with efforts by private employers to restrict the use of health insurance benefits by employees, the joy ride began to wind down. As Hupfeld puts it, "increasing demand began to evaporate."

These events were compounded by debt-financed expansions and over capacity.

"All of a sudden," says Hupfeld, "institutional survival and jobs were on the line."

As the length of hospital stays turned downward, administrators began seeking ways to increase market shares. They also fine-tuned certain services and offered new ones - often to outpatients - in a renewed scramble for business.

Hupfeld, however, insists that competition, even as it's known now, isn't all bad.

"In general," he suggests, "competition has a salient effect. Much of what we do is fueled by our desire to do well. We know we have to treat patients well, and we also know that we have to treat doctors well; they have lots of options."

He acknowledges a down side to the ebb and flow in today's competitive health care economy: It makes it far more difficult for hospitals to work together, or share programs. …

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