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Hospital building boom, and the scramble for paying patients

Does this remind you of any hospitals in your area?

Does this remind you of any hospitals in your area?

Here’s one game that I hope the new health care bill will help to stop — hospitals cherry-picking insured patients to improve their “payer mix.”

If there’s one easy-to-understand feature of our current health care industry, it’s that everyone is always complaining that they don’t have any money.  But that can’t possibly be right, can it?  Take hospitals.  For those of you in the USA, I’ll bet that if you sit back and think about the hospitals in your area, you’ll realize that most of them are putting up brand-new buildings, or are planning to, or have just done so.  Go ahead, think about it for just a second.  I’m right, aren’t I?

Now ask yourself: does it make sense that these hospitals are on the edge of bankruptcy?  To me, it doesn’t make any sense.  Call me naive, but I suspect that these hospitals are making money hand-over-fist.  After all, the average medical insurance premium for family coverage has gone from roughly $6000 per year to about $13,000.  All that money has to be going somewhere.

Let’s look at Chicago, for example.  A reader sent me this article from the Chicago Tribune about all the new hospital construction in the area (with the notable exception of the community hospitals on the West and South Sides of the city).  I saw this during my three years in Chicago doing my residency in emergency medicine.  Yet these hospitals keep telling us they’re starving to death.

It’s galling when the University of Chicago, for example, spends enormous sums on a new surgical ICU tower while at the same time trying to minimize the number of patients from the community that they treat in their ER.  The American College of Emergency Physicians went so far as to call that scheme “dangerously close to patient dumping.“  And it is.  We should all shake our heads at these hospitals and say “grrrr.”

But the problem doesn’t originate with the hospitals.  They’re just playing the game that everyone has to play in order to thrive in our current health care system.  When medical costs are high, and when some patients can afford to pay these high costs and others can’t, every hospital faces a choice: take care of poor patients and lose money, or “cherry-pick” the well-insured patients and make fortunes.  The stable middle ground is a vanishingly small target.

Take the University of Chicago, where I trained as an emergency physician.  In the ER, we were rightly concerned with taking care of everyone that showed up in the waiting room.  But hospital executives, not inappropriately, were focused on the hospital’s financial stability.  What kinds of patients, with what kinds of insurance, was the hospital treating?

Anyone concerned about Chicago’s payer mix can see that it makes sense to admit fewer people through the ER, because those patients are more often self-insured or on Medicaid, and they suffer from ailments that aren’t reimbursed very highly.  No hospital executive concerned about the bottom line wants to take care of another Medicaid patient with pneumonia.  No, what they want is to take care of more patients with exotic and advanced cancers that require high-tech surgery, and who are referred by private docs throughout the nation.  That’s the kind of patient the UofC is hoping to fill its new hospital pavilion with.  The same kind of thing is true for most hospitals that are putting up fancy new buildings.  Despite all this new hospital construction, the number of community hospital beds isn’t getting any higher.  Instead, these hospitals are filling their new buildings with specialty services like invasive cardiology, in an attempt to cherry-pick lucrative patients and improve their payer mix.

There’s a strong argument that all of this isn’t a bad thing, that the resources of an academic center like the University of Chicago are best devoted to high-tech treatment at the expense of community-acquired pneumonia and untreated diabetes.  But the justifiable anger over this obvious cherry-picking is probably one of the reasons the ex-head of Chicago’s medical center, James Madara, resigned.  Madara’s argument that run-of-the-mill community illnesses should be taken care of in community hospitals, so that the academic hospitals like his could focus on their special mission, may be true enough.  But there aren’t enough hospitals out there like Chicago’s Mt. Sinai (where I also trained) to make that trade happen.  So Madara came off looking like a troglodyte.

I take no position on whether James Madara lived in a figurative cave or not.  But he was, certainly, trying to cherry-pick patients.  He’s not unique in that regard.  You can’t succeed in the hospital business and not cherry-pick, unless you’re a publicly-funded or charitably-funded safety-net hospital that isn’t expected to make any money.

The healthcare bill, by going a long way toward covering everyone, might help to reduce this cherry-picking, and that’s something to applaud.

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