Hospital Craziness

The dynamics of the Arkansas health care industry are changing more rapidly than we can possibly digest, and Northwest Arkansas is caught up in the middle of it.

As outsiders who are primarily concerned with quality care with the lowest possible insurance premiums, we can feel pretty good about the developments in the short-term. Competitive forces generally have benefited consumers and businesses in terms of cost and quality of service.

The insiders must be considered high-risk candidates for heart attacks as they deal with the stress of making all the right moves through the land mines in the health care field.

Somehow or another, I thought we were in an era of fewer hospital beds, lower insurance premiums through efficiencies of managed health care and consolidation of hospitals in larger markets.

What we’re seeing in Arkansas is a different picture.

Hospital construction – new facilities and expansions – is rampant. In Northwest Arkansas alone:

~ Washington Regional Medical Center is moving forward with plans for an additional facility.

~ Northwest Medical Center has grown with new facilities.

~ Columbia/HCA appears poised to build a facility if it can’t buy a hospital in the region.

~ In central Arkansas, the Arkansas Heart Hospital recently opened in Little Rock and Baptist Medical Center is building a new North Little Rock location. At least a dozen other hospitals have expanded throughout the state.

Insurance premiums that held steady in fierce competition are rising again because insurers are losing money. When even the state’s dominant team of Arkansas Blue Cross and Blue Shield and Baptist Health is in the red with managed care, it’s clear there are problems.

Community hospitals for the most part seem determined to resist consolidation with bigger operations, although they are joining managed care alliances. As usual in this state, local control takes precedence over economies of scale.

Columbia/HCA Healthcare Corp., the national for-profit provider whose Arkansas flagship is Columbia Doctors Hospital in Little Rock, is eager to grow in the state but has been spurned by area hospitals time and again. The local, not-for-profit facilities don’t like the notion of corporate ownership.

I’m not sure many people distinguish between the for-profit and not-for-profit hospitals anymore, except for the way people are still willing to donate money and volunteer time to not-for-profits.

The not-for-profits carry a religious denomination affiliation or are county-owned. “Profits” by those institutions end up in emergency reserves and in new construction and equipment.

Columbia/HCA and other health care companies use profits for the same things, plus acquisitions and dividends to stockholders. They are national in scope and can’t be focused on individual communities like their local counterparts can.

The common denominator for either entity as it strategizes is a steady stream of patient services revenue and strong relationships with good physicians.

The Physicians Factor

The physicians I talk to these days have all sorts of opinions about what’s going on in health care.

They see specialists suffering from managed care companies, which offer lucrative incentives to family practitioners who don’t refer patients to costly specialists and minimize procedures. One might even say that good family practice clinics are the star of the health care show.

Doctors see an opportunity to force hospitals to compete for their business, and this makes them big players in the game when Arkansas Heart Hospital comes to town or Columbia/HCA becomes determined to move into a market like, say, Northwest Arkansas.

Finally, physician groups continue to join forces and impact the direction and various affiliations of their local hospitals.

Progress in Cost Control?

I don’t see any evidence that the health care industry is controlling itself.

We’ll have to pay for all the expansions. We’ll have to make up the insurance company losses. We’ll have to pay for the duplication of services.

What we still haven’t seen on a large scale is consolidation of managed-care operations in Arkansas, and virtually everyone in the industry says that is inevitable. And eventual cutbacks in federal Medicare funding will shut down small hospitals or force them into sales.

The evolution of Arkansas health care appears certain to bring more and more interesting developments, particularly here in Northwest Arkansas in the next few months.