Fiscal options for America's best hospitals.

A review of America's "best" teaching hospitals shows a huge disparity in their fiscal positions. Among the 15 hospitals studied, roughly half experience some fiscal distress. However, a somewhat similar fiscal analysis of the nation's largest investor-owned hospital chains, HMOs, and physician practice management corporations shows an even more serious weakness in operating margins and debt-equity ratios. Aside from raising possible ethical, quality, and cost issues, this financial analysis suggests that conversion from nonprofit to for-profit ownership of America's top teaching hospitals might not guarantee an improvement in their long-term fiscal outlook.

Commentary: public disclosure in the health field: is there a relevant option?

Steadily increasing numbers of private, not-for-profit, and public agencies are releasing quality of care and financial information to enhance the market power of those purchasing America's health services. These sources range widely from the Health Plan Employer Data and Information Set (HEDIS) to the federal Securities and Exchange Commission (SEC). A growing interest in publicly disclosing performance information that concerns providers, as recently recommended by the Institute of Medicine (IOM) report on patient safety, until now has only achieved a modest impact. A major exception is in those metropolitan areas where acute-care facilities experience intense competition for patient admissions. Although the comparative quality and cost information currently available is for the most part in the public interest, it is concluded that, in the foreseeable future, these report cards as now structured will not result in any significant enhancement in access, improvement in quality, or reduction in cost. Options to encourage more public disclosure explored in this paper are Congress potentially passing legislation (a) to establish a Center for Patient Safety within the US Department of Health and Human Services as recommended by the recent Institute of IOM study, or (b) empowering the SEC beyond its current mandate to collect and disseminate all pertinent quality of care and cost information on every provider in the United States. The latter alternative would include user-friendly, comparative analyses to be provided on the Internet and elsewhere and would make readily available information from HEDIS, the Joint Commission on the Accreditation of Healthcare Organization (JCAHO), coronary artery bypass graft (CABG) surgery studies, cost comparisons based on Medicare cost reports and SEC filings, and other similar sources.

Is vertical integration adding value to health systems?

Vertical integration is a concept used by health systems when attempting to achieve economies of scale, greater coordination of services, and improved market penetration. This article focuses on the actual outcomes of utilizing vertical integration in the health field and then compares these findings with those reported in other industries. This analysis concludes that this organizational model does not work particularly well in the health industry, as illustrated by health alliances' poor fiscal performance when they acquire physician practices or when they start their own HMO plans.

Management of integrated delivery systems in the next decade.

In an attempt to find some remedies within what is already a highly competitive and politically charged environment, this article's purpose is to specify some major steps that the management of integrated delivery systems might heed in the next decade to curtail their expenditures and better position themselves for the future.

How to enhance the efficacy of health network growth.

In almost every American metropolitan area, health executives are busily enhancing the efficacy of their health networks by corporately restructuring so that their organization can become a fiscally and politically powerful oligopoly or a regulated monopoly. When the formation of these alliances are initially announced by the local media, they are reported to be vehicles to enhance access, social equity and quality of care, and to reduce costs. Since an increasing number of these health networks are currently experiencing fiscal, cultural and other difficulties, it is critical to study: (a) what factors should be considered when developing an effective and efficient health network?; (b) what are the practical issues in their strategic formation and management so they eventually achieve their full potential?; and (c) why will some divestitures among these health networks occur and how will these corporate 'spin offs' impact on consumers, providers, insurers and governmental agencies? Within the next decade the United States will face some inevitable economic difficulties. At that time, enhancing access and reducing costs will become more critical issues for health networks. These alliances may then need to become more responsive to consumer pressures as the Americans shift their political proclivities from the current quasi-competitive to a more quasi-regulatory position. In this context, the use of global budgetary targets is discussed as a possible option in the United States to constrain costs, an approach used in almost all other western industrialized nations.

Horizontal mergers in the United States health field: some practical realities.

During the past decade, 'merger mania' has been a striking trend in the US health field as a strategy to improve the integration of services, to reduce expenses, and to increase the ability of providers to manage risk-based payment. However, during the past quarter of a century limited operational and fiscal evidence has been published in both the health and general management literature that strongly supports the efficacy of horizontal mergers. This article further argues that a likely scenario over the next decade, in spite of disappointments among these mergers in effecting significant cost reductions, is for the US health networks to continue acquiring additional providers and insurers. After these alliances gain significant market penetration, they are expected to behave as oligopolists. For these mergers to eventually achieve their earlier projected savings, the health field's leadership will be forced to implement cost-cutting measures such as: more vigorously coordinating the network's key clinical services to reduce competition for revenues among the partners within an alliance, closing superfluous hospitals and centralizing expensive tertiary services, encouraging surplus physicians to relocate to under-served areas, and providing direction to carefully integrate the best elements of what the competitive and regulatory strategies are able to offer to improve access, social equity, quality of care, and to reduce total health expenditures.

Children at risk: outcome and cost measures needed.

Sporadic reports in the media focus on the difficulty of America's social welfare leadership to protect children at risk and to allocate scarce resources. These criticisms suggest the need for valid conclusions in both socio-psychological and economic terms for evaluating the efficacy of three key strategies used for children at risk: reunification, foster and kinship care, and adoption. This article calls for creating a comprehensive data base that supplies the most critical variables leading to reasonable successes and the average cost per case when comparing children reunified with a biological parent to those who are placed into out-of-home settings and to those who are adopted. This analysis to include public and private expenditures for services provided by human services--welfare, special education, judicial, correctional, mental health, medical, and other related organizations.

Attracting qualified physicians to underserved areas. Part 2. Pay physicians more to practice in underserved areas.

With health networks searching for additional market share and with a projected 30.2 million to be enrolled in Medicaid HMOs by 2000, more health executives will be weighing various strategies of how to attract qualified physicians to practice in poor inner-city and rural areas. Most frequently cited as solutions are supplying more physicians, encouraging more medical school graduates to pursue primary care residencies, and modifying the number of international medical graduates entering U.S. residency programs. Part I of this article, which appeared in the November/December issue of The Physician Executive, reviewed the efficacy of these approaches. The second part explores a more pragmatic option: to simply improve the working conditions and pay substantially more to physicians who practice in "less desirable" locations. Although this idea is consistent with economic principles, drawbacks must be considered, such as: (1) the American taxpayers' reluctance to finance a more costly health care delivery system for the poor; (2) the inherent conceptual difficulties of a capitated Medicaid HMO serving as the linchpin for organizing, financing, and delivering care for the underserved; and, (3) many providers being expected to react in a fairly litigious manner to such an approach.

Let's merge competitive and regulatory strategies to achieve cost containment.

Whether market-driven or government-driven approaches should be used to curtail future health care expenditures has become the debate of the decade on Capitol Hill and in state legislatures. After examining both the competitive and the regulatory models to constrain health care costs, it is argued that to achieve an effective and efficient health care system, a properly structured market-driven approach should be blended with a minimal number of safety and soundness regulations. To successfully implement such a half-competitive, half-regulatory system in the United States, it will be necessary, for example, to empower thirdparty payers and providers to negotiate prices without direct government involvement; to modify enormous regional differences in use rates and health care costs for various treatments with more rigid treatment protocols that are promulgated by the managed care plans; to minimize administrative-type expenditures that have no visible, beneficial effect in improving quality patient care; and to curtail the supply of underutilized health care resources as another means to constrain health care expenditures. These strategies would have significant political, social, economic, and patient care implications for the United States but might result in our health care cost dilemma appearing to the public as finally being "under control."

Attracting physicians to underserved communities: the role of health networks.

As health networks battle for additional market share and encourage additional Medicaid HMO subscribers to use their physicians and hospitals, more health executives are analyzing proposals of how to attract qualified doctors to practice in poor rural or inner-city communities. Supplying more physicians to those areas by increasing the number of medical schools, expanding the National Health Service Corps (NHSC) program, and allowing more international medical graduates (IMGs) to pursue residency training in the United States have been relatively unsuccessful strategies to improve America's geographic maldistribution of medical manpower. This article focuses on several approaches that health networks might use to increase market penetration and at the same time deliver enhanced health services to the underserved. Health networks may provide eminent leadership in the overall design and governance of soundly conceived Medicaid HMOs; strengthen existing or develop additional community health/primary care centers; interface more effectively with local schools to foster Medicaid HMOs for children of low-income families; and reimburse at "premium rates" primary care physicians who practice in underserved communities. The reluctance of physicians to practice in these areas and of middle-income and upper-income taxpayers, and therefore elected officials, to support increased spending or redirection of funds continue to be major barriers for health alliances to demonstrate willingness to invest additional resources in poor inner-city and rural environments.

A blended strategy using competitive and regulatory models.

Whether the health field in the United States should have more competition or more government regulation is now at the center of the public policy debate. After examining the market-driven and regulatory models to constrain cost and improve access to care, this article argues against supporting either extreme and instead favors a blended approach where the emphasis is on practicality rather than ideological exactness. Such a mixed strategy is predicted to eventually gain acceptance, legitimacy, and momentum, since such a hybrid design is more consistent with America's cultural and political values.

Mergers: enhancing human resources management.

The health care industry is experiencing merger mania, but the majority of its current leadership underestimates the importance that significant differences in corporate culture and employee morale play among physicians and others in implementing such organizational objectives as enhancing access, reducing cost, and improving quality of care. The key human resources management issues are discussed that are too often overlooked and frequently sidetracked in the formation of powerful health networks now so prevalent in almost every metropolitan region. The authors conclude that in America's intensely competitive managed care environment, there are a number of critical human resources management ingredients that deal makers need to achieve from these mergers in order to ensure their perceived objectives: (1) paying far greater attention to variations in corporate culture and employee morale; (2) reducing total salary and fringe benefit costs; and, (3) concurrently recruiting and maintaining a qualified and stable workforce that focuses more decisively on clinical-fiscal concerns so as to improve quality of patient care at a lower cost.

Merger mania: physicians beware.

Corporate consolidations, mergers, and acquisitions would seem to provide immense promise in furthering the development of health networking because they affect the governance of entire organizations, rather than simply establishing revised arrangements for specific services or patients. Yet, a limited number of empirical studies have been published to date that explore whether hospital mergers actually improve access, reduce cost, or improve quality of care; and, among the reports available, the conclusions are somewhat equivocal. Physicians should be cautious of these mergers, since they seem to focus either on eliminating a direct competitor or on forming a large horizontally and vertically diversified health network that then can become a major player in gaining exclusivity in managed care contracting. With either of these merger strategies, there are antitrust-type concerns that competition among physicians and other providers will be significantly curtailed, and that consumers will end up with fewer choices in obtaining cost effective, quality patient care.

Implications of new organizational relationships and fiscal incentives on health information managers.

Whether the health field in the United States should be dominated by more competition or by more government regulation is now at the center of the public policy debate. After examining the market-driven and regulatory models to constrain cost, improve quality, and enhance access to care, the article argues that our current centrist political philosophy can be expected to continue on Capitol Hill and among the state legislatures. As a result, this will force health information managers to labor within a blended approach that is partially market driven and partially governed by regulations. How such a hybrid system will affect the future role of health information professionals, integrated information systems, and other related topics is also discussed.

Regulating managed care plans: is the telecommunications industry a possible model?

Merger mania has been a striking trend in the health and managed care fields during the last decade, promising to improve integration of services, decrease excess capacity, enhance price competition, and increase the ability of providers and insurers to handle risk-based payment. In view of these promises, our first argument in this paper is that undoubtedly strong, well-financed managed care plans and health networks will continue to utilize the merger concept to acquire additional insurers and providers, eventually gaining more control over the organization and the financing of a region's health care delivery system. Our second thesis is that the quasicompetitive, quasiregulatory authority inherent in the Telecommunications Act of 1996, somewhat similar in concept to the American Hospital Association's earlier Ameriplan (1970), might serve as an appropriate model for Congress to use in designing future managed care, health field, and federal/state governmental interrelationships.

Attracting qualified physicians to underserved areas. Part 1: Why has the U.S. experienced such difficulty?

With health networks searching for additional market share and with a projected 30.2 million to be enrolled in Medicaid HMOs by 2000, more health executives will be weighing various strategies of how to attract qualified physicians to practice in poor inner-city and rural areas. Most frequently cited as solutions are: supplying more physicians, encouraging more medical school graduates to pursue primary care residencies, and modifying the number of international medical graduates entering U.S. residency programs. Part 1 of this article reviews the efficacy of these approaches, while the second part, which will appear in the January/February 1999 issue, explores a more pragmatic option: to simply improve the working conditions and just pay substantially more to physicians who practice in "less desirable" locations.