Third Meeting of UofL Hospital Operations Review Committee.

Finally some real data.

On April 5, the Ad Hoc Operations review committee of University Medical Center, Inc. (UMC) met for the third time. This was the first meeting in which substantive analysis was presented by the consultants of Dixon Hughes Goodman. Unfortunately, Committee attendance continues to dwindle. Only five of the 10 committee members attended, one of those by telephone. In the peanut public gallery were myself, reporter Patrick Howington, and someone from Brown-Forman. One additional meeting before a final meeting on May 9 is planned.

The entirety of the meeting was a PowerPoint presentation by the consultants with only a few questions and comments from committee members. No handouts were presented as the material was said to be a work in progress. I could not help but suspect there was also some desire that the information not be disseminated. Indeed, most of the data presented must have been disappointing to the University. In any event, I photographed the projected slides and they are available here.

Senior consultant Craig Anderson, Sr. gave an update on the status of the project and lead his team of two additional people through a brief review of the challenges facing all academic medical centers (AMCs), some themes and observations from initial interviews with Hospital and University personnel, and some initial data addressing four of the hypotheses to be tested: lack of physician alignment, quality of clinical care and operations, payer environment, and facility constraints.

Future of Academic Health Centers.
In speaking about AMCs in general, Mr. Anderson emphasized that such centers will be held to the same quality standards as all other hospitals and will be subject to the same financial penalties and bonuses from payers. There is a danger that expensive AMCs with less than competitive quality will be excluded as providers in networks of private payers. Future patients as individuals are likely to seek out cost-effective hospitals to minimize their out-of-pocket expenses. In an environment where hospitals are buying up all the practices of physicians, primary care doctors and other physicians will likely refer to their own networks. The old paradigms that one can improve quality by adding costs is no longer justifiable. It was suggested that stand-alone hospitals will have difficulty competing in the future. This of course has been the University’s position all along.

Mr. Anderson pointed out that in Louisville we already have a prominent participant in the movement towards integrated Accountable Care Organization. (The only one I know of is Norton Healthcare with its affiliation with Humana.) AMC’s have traditionally been specialty-driven organizations. It was suggested that future success of AMCs will require them to control the loyalties of more primary care physicians to serve as a feeder network. Like many AMCs of the past and present, the University of Louisville does not have such a primary care base.

The consultants have completed 24 of 30 planned interviews. Virtually all of the named individuals are senior University of Louisville or Hospital officials who were involved in the previous merger attempt with Catholic Health Initiatives. A number of unspecified individuals from several departments were also interviewed. No patients nor patient or community advocates were interviewed. The summaries of the interviews were therefore quite predictable and the usefulness of the process is diminished.

Interviewees believed that the principal value of University Hospital was as a safety net hospital and as an academic medical center. [What does that mean?] It was thought by interviewees that a partnership and/or merger is essential. The quality of clinical care was perceived as strong. It was believed that the status quo is unsustainable. Loss of QCCT funding was a big fear and there was concern about decreased funding from Medicaid and Medicare. Competition from other local hospitals is fierce. There were concerns about physician alignment– University faculty practice elsewhere. There were concerns the facility did not have enough equipment. There has been an institutional mindset that leads to increasing costs and a less nimble operational structure.

Objective Data.

Market share.
The consultants used Kentucky Hospital Association data to show that UofL’s market share is 14% and further broke down market share by product line and profitability of those various services. As we already knew, UofL’s share of profitable services is very low and its proportion of non-profitable services is very high. [The status quo for other Louisville hospitals might be very desirable indeed! These other hospitals have worked to keep it that way.] Of course some service lines such as trauma (which may be break-even at best) feed patients into more profitable services such as orthopedics or neurosurgery. Nevertheless, the data confirm what everyone already knows, that University Hospital is not a hospital of choice for most people in Louisville. Subsequent data may explain why.

Although one must admire the loyalty of the interviewees who perceived that clinical quality was strong, objective data collected by Medicare and from other sources show quite the opposite. Although the last recorded third quarter of 2011 showed some modest improvement (or declines) in several categories, the overall quality indicators for the last year were very disappointing. Of 15 standard quality indicators for which information was available, 12 were either worse or substantially worse than the desired target ranges. [It is hard to paper-over these deficiencies, and it is inappropriate to claim sicker patients as a justification. See below.] It was difficult for the consultants to whitewash this for the hospital. “Benchmarks are not where you’d like them to be.” “Not a great picture as a starting point.” “Alarming.” “It could be better.” While academic medical centers frequently score lower, “you are worse than other AMCs.” These were clearly not the kind of comments the hospital would like to have heard, nor do they reflect the kind of care our community deserves. Predictably, the senior University representative present had to point out that case mix index is not always factored in.

An effort was made to quantify quality and value in a slide that was not easy for me to to follow. The University of Louisville scored 28 out of 100 where 100 was good. I believe the principal point of the slide was that the deficiency in quality was going to cost the hospital money in a new world where reimbursement will be linked with quality.

Operational Efficiency and Financial Status.
A slide with an assortment of statistics included a number of operational parameters such as supply chain and purchasing efficiencies was presented. Compared to the perception of interviewees that University Hospital was more expensive to run than other AHC’s, the consultants positioned the hospital at “about average.” All hospitals are going to have to reduce their costs and improve efficiencies and the consultants hope to suggest some ways to do this.

Payer mix.
These were results I was particularly interested in seeing. Based on patient volume (not receipts) the patient mix at University Hospital in 2011 was as follows:

  • Medicare     19%
  • Medicaid     17%
  • Humana       3%
  • Anthem        10%
  • Commercial   9%
  • Other             8%
  • Charity/
    Self-pay        34%

An attempt was made to compare with payer mix in 2009 to show increases in Medicare, Medicaid, and charity patients, but I believe this comparison is invalid because a major category (Reference Laboratory- 15%) was not included in 2011. Such numbers are important, but the slide was an apple-to-oranges comparison. Additionally, attention must be paid to the definition of charity care. The usual definition is for patients for whom no payment is expected, nor for whom a bill is submitted. Patients who are covered by the QCCT fund are not “charity patients” by the standard definition but I am assuming that is where they were placed in the slide. Patients insured by Humana were low, but from Humana advertisements that I have seen, University Hospital is not in their network.  I do not know why.

It surely must make the hospital nervous that in the health care reform legislation currently under review by the Supreme Court, future payments to hospitals for indigent care support are scheduled to diminish beginning in 2014, and that Medicaid and Medicare payments to hospitals are also likely to decrease. However these are challenges that all hospitals and AMCs will have to face. On a more positive note, University Hospital receives tens of millions of dollars of support for its medical education activities (GME) and in its clinical care for the disadvantaged (DSH). For example, in 2012 the hospital has budgeted:

  • QCCT payments $31.7 million
  • Medicaid DSH $36 million
  • Kentucky Medicaid UPL $10.2 million
  • Passport urban trauma $26.7 million
  • Kentucky Medicaid GME $5.3 million

In addition to the above amounts are additional millions in Medicare DSH and Medicare GME. This is not chump change.

Adequacy of Facilities.
The consultant’s last slide addressed the hypothesis that facility constraints are inhibiting University Hospital growth. The Hospital is currently operating at 80% of its capacity at the inpatient level. I did not follow how the comparison of group of 31 other hospitals was chosen, but University Hospital was really right in the middle. The conclusion was that there is not a lot of room to bring more patients in. All hospitals are going to be required to do more with less.

Questions and Comments At Meeting.
There was some discussion around the concept of whether doing nothing was an option. [Obviously doing nothing differently would be foolish.] Although no one in the healthcare industry, or indeed any industry is going to do everything just the same, I believe the consensus is that University Hospital will need to do many things very differently. [I agree with that.] Hospital president Taylor commented that this was the story we tried to tell during the previous merger effort, but perhaps didn’t tell it very well. Committee member Hayes commented that regardless of the various legal theories used, that “people see this hospital as a public trust,” and suggested that we adopt some very different communication strategies. [I agree with this position too.] Although the community and its hospitals appear to want to keep University Hospital around [why wouldn’t they?], the public is having some difficulty in providing the money to sustain what it has done in the past. The size of the medical pie is likely to remain the same, but it is going to be cut into many more pieces. All hospitals are facing the same problems. The question was asked if the University of Louisville could attract a different kind of patient. Another (hopefully hypothetical) question was asked, should we discontinue unprofitable services?

My comments.
I have already included some of my thoughts in brackets above. I thought this was an interesting and valuable session. The consultants seem willing to tell the University things that it might wish not want to hear. There was not, however, a whole lot of discussion. The University representatives on the committee continue to talk about the need of the hospital to provide financial and other support to the University, but it seems to me the higher priority is to improve the clinical operation of the hospital. One cannot provide quality medical education in a hospital where quality of care is not excellent.

Two of the external committee members, State Economic Development Secretary Larry Hayes and Louisville Mayor Chief of Staff Ellen Hessen have attended every meeting. I view them as critical members of the committee. Their viewpoints and assumptions are obviously different from the committee “insiders.” This is no doubt because they have a responsibility to a broader constituency, which I think is essential for this debate. I think the dialogue these committee members are having in these small sessions needs to be amplified in the community as a whole. These are our disadvantaged neighbors whose care is in question, our Kentucky students who are being trained, and it is our tax and premium dollars that are in play.

Disease Severity.
The issue of disease severity was brought up several times. It is customary when criticized for quality or cost that a hospital will claim that its patients are sicker and that somehow a less favorable or more expensive outcome is justified. If such claims are to be made, they need to be backed up with hard data. Unfortunately such data is equally hard to come by. The most commonly available standard is the so-called case mix index (CMI) calculated by the federal government for its Medicare patients discharged from acute care hospitals. It is essentially a calculation derived from the severity of the individual diagnoses submitted on the bill. Current indexes do not support the University’s position that its patients are sicker than anyone else’s. In fact, the CMI for UofL, Norton, and Jewish are identical. Not surprisingly, the index for Baptist East is considerably less. It is noteworthy is that the CMI for the University of Kentucky Hospital is highest of all.

Case Mix Index (Transfer Adjusted)

  • UofL      1.84
  • Norton  1.83
  • Jewish  1.82
  • Baptist  1.62
  • UK         1.96

I reviewed the CMIs back as far as 2002 and they have not changed that much, save that Norton’s has increased and Jewish Hospital’s has decreased somewhat. It must be kept in mind that these measures of severity refer to Medicare patients only but they are generally used as a proxy for the acute inpatient environment. In any event, these numbers show that UofL’s Medicare patients are no sicker than anybody else’s in town except Baptist East. If there are objective numbers that allow us to look at non-Medicare patients, I would love to see them.

I hope also to see more comparisons of market share between the Louisville hospitals.  To my rough calculation, the three downtown hospitals are similar in their Medicaid, Medicare and privately insured patients.  In 2011, 30% of University Hospital admissions were non-federal, non-charity cases.  That’s pretty good and seems comparable to its sister hospitals downtown.  Norton Kosair Children’s Hospital must have a huge charitable care responsibility but receives no support from the QCCT fund.  Why these adjacent hospitals sharing the same campus and with similar patients have not been able to play together better is a mystery and a great disappointment to me.  I think it has been influenced by personalities as much as anything.  Remember when former Jewish Hospital CEO Hank Wagner publicly called Norton a “failed healthcare organization?”  That was before Norton ate Jewish’s lunch.  I blame the University too for playing one off the other for so long.  If the committee wants to compare to benchmark hospitals, I suggest it should include its neighbors, including the University of Kentucky.

Final Comments
Hospital and University officials both have concluded that the status quo is not acceptable. I agree. However, to my mind, just putting more money into the same structure is essentially the same as preserving the status quo.  I fear we are squandering a once in a generation opportunity to rethink how we care for our neighbors in a dignified manner not tainted by economic or ethnic segregation.

Since the University faculty does not support University Hospital, why should the Hospital support the University? Why does some $250 million of clinical money or more appear to be transferred annually into University of Louisville accounts? Explain to me again why UofL does not have enough money to run its hospital. I agree again, the status quo must change.

How would/will a merger with Jewish Hospital change anything? I maintain it would have made things worse. The faculty would have continued to practice in hospitals other than University Hospital, and insured patients would have been seen at Jewish. History bears out my contention. Until recent years, Jewish and Norton co-managed University Hospital and look what happened. Faculty had a perfect excuse not to use University Hospital. When UofL traded its cardiology service to Jewish Hospital in exchange for research space and money, all the paying cardiology patients were transferred to Jewish. What did UofL expect would happen when it made these deals? I know that UofL had higher priorities than providing the best clinical care for its captive patients. When the University put all its money into research at the expense of its clinical departments, what did it expect would happen?

The University of Louisville has not been a particularly good partner to its sister hospitals, but neither have these others been particularly good to University. The relationship of University physicians to other community physicians is at least as bad as in other town-gown situations and probably worse. UofL will have to do things very differently if it hopes to capture the support of non-University physicians or the community at large. If (as I believe is still its goal) the University aligns itself intimately with Jewish Hospital or any other healthcare system, it will further limit its ability to work with the medical community of Louisville as a whole. If University Hospital is a public trust as Secretary Hayes and I both believe, than it must not enter exclusionary arrangements with other institutions.  It must certainly not enter agreements in which it barters away its medical, ethical, and academic freedom.

I have written enough today. Several hundred people look at these pages weekly. What do you think?

Peter Hasselbacher, MD
April 6, 2012

Formation of Committee, and Initial call
Meeting of Feb 21, 2012.  and Minutes
Meeting of Mar 12, 2012  and Minutes