Hospitals Take Stpes to Survive Industry Reforms

By Freudenheim, Mike | THE JOURNAL RECORD, June 29, 1993 | Go to article overview

Hospitals Take Stpes to Survive Industry Reforms


Freudenheim, Mike, THE JOURNAL RECORD


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 hospitals.

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 health-care spending.

"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 specialist.

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, MacNeal's president.

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 Co. …

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