Whether or not you’re employed in healthcare, one of the trends you have likely heard about, as well as the possibility of even being impacted by, is the influx of acquisition activity at all levels of the industry. From large health systems purchasing small hospitals, to hospitals purchasing physician practices, private equity firms buying large urgent care chains, etc. The new mentality in this industry is eat or be eaten. But are we truly improving healthcare delivery? Are we improving patient satisfaction? Are we reducing the costs of healthcare? I will examine each of these questions, prefacing what follows with an apology, as some may be offended by my analysis. Rather than being offensive, I hope it will encourage positive thought and reconsideration of how you are executing your strategic planning.
About five years ago, when speaking with colleagues in healthcare, I would get on my soapbox of where I proclaimed healthcare was headed. My opinion was that large health systems would become larger, through the purchase of smaller health systems, and as a result, all that would be left are these very large systems. I continued in saying that the large health systems would dominate a region; not region in the sense of Western New York, but as in the Tri-State area of New York, Pennsylvania and Ohio, for example. In the earlier part of that five years, when I said this, people thought I was crazy. Until now, when we are actually seeing that unfold. Just over the weekend, I read an article about UPMC, who is preparing to expand further into Pennsylvania and New York, as well as into Ohio and Maryland. And what about Cleveland Clinic, who already has a presence in Toronto, Florida and even Dubai!
As an entrepreneur, I completely understand the need to grow. I love the aggressiveness of UPMC, and the speed to market, of which is atypical to most health systems, who tend to move at glacier speed. And I could cite a number of initiatives by other health systems that I absolutely love, such as Cleveland’s customer service model. Another example, is what Mayo Clinic is doing in the wellness arena. Where I am struggling though, because I truly do care about the patient, is what is being done to ensure patient satisfaction is of utmost concern, and through these growth efforts, what is being done about the healthcare economic crisis. It’s no secret that a private physician who today has a reimbursement of x, if owned by a health system tomorrow, that “x” will double or trouble. And thus, rising health insurance premiums. In previous endeavors, as the owner of a private urgent care, this was one of my favorite things to market against. We were in competition with a local hospital urgent care. Something patients are unaware of, until they get a bill anyway, is they can receive the same care at either of those two urgent care locations, but the hospital location comes with a significantly higher price. If you are the patient with a high deductible plan, that’s a big deal. Not to mention, healthcare spending is already a big issue nationally, and now we’re adding to the problem.
The rising cost is one aspect of how the patient is impacted. From what I have seen locally (Western New York), the cost is only the beginning. Before elaborating on the impacts imposed on the patient as a result of acquisition, let’s talk about the healthcare staff who are effected. My staff and I hear regularly from healthcare professionals (both clinical and non-clinical) who are desperate for a new opportunity, for a new employer who is not owned by a health system. We hear stories of acquired physician practices who lose all of the former staff, because they cannot handle the newly imposed burdens of the physician being double and triple booked, not enough staff to help, and a manager they may only see once or twice per month. And if that’s not enough, this comes after losing all of their built up PTO, to be re-hired under the health system, and be put on a benefit plan that matches the hospital. So for physician practices that are closed on holidays, the staff must use PTO in order to get paid for the day off. As the physician tries to deal with these new burdens, as well as try to calm down their staff of which is dwindling, they are also arguing with the health system that promised x, y, and z before the acquisition, and only one of those promises gets delivered after the acquisition. And let’s not forget about the hospital staff, and all of their new expectations, of which despite how busy the staff becomes on their shift, they must complete everything within their designated timeframe, whether it be 8 or 12 hours, and nothing beyond that. Even the most veteran staff struggle with this, and some have given up, going somewhere else.
In saying all of this, you can’t tell me patient quality isn’t suffering. Of course it is. The staff is expected to do more with less. I’m all about operating lean and driving throughput, as long as there is a process in place that guarantees efficiency, and doesn’t overburden staff, or worse yet, create a potentially dangerous environment for the patient. Please note, I recognize that there are health systems, such as the Cleveland Clinic for example, who have all of the above down to a science. Unfortunately however, there are other health systems, who understand the need to acquire, but have no idea how to manage those acquisitions as they come in. Or, they grow quicker than they can handle. The problem with that, beyond the obvious, is the competitor is no longer just the other local health system. A looming competitor is the newly forming, private equity backed, healthcare companies. They possess many of the skill sets that don’t often exist under the health system/hospital umbrella, one being speed to market. And they absolutely grasp the need for customer service. As a member of the healthcare industry, I know these organizations are not always known for doing what’s best for the patient, or possessing the best clinicians. However, the patient does not know this! The patient is focused on their marketing ad that says they have a slushie machine in the waiting room. And speaking of ads, these organizations have millions of dollars to out-market their competitors.
Okay, a lot has been said, so I guess I should vocalize a few solutions, as well as some predictions. Health systems, you know you have to continue to acquire. As I stated in the beginning of this blog, it’s eat or be eaten. When acquiring, I would keep in mind that hospitals as we know them, are a way of the past. In saying that, it’s all about the outpatient world. You want speed to market in your secondary and tertiary markets? Stop buying old hospitals, and identify a great location for an outpatient campus, then re-purpose the old hospital building for senior living or something. Everyone loves outpatient campuses…patients, doctors, insurance companies, etc. It’ll cost you less to produce a 60,000 square foot brand new building, then to try and reinvent the old bricks and mortar. Additionally, when buying these small community hospitals, consider what you are inheriting. There’s one health system I think of in particular, that has done a lot of this. They buy these small community hospitals, get the communities excited that they’re going to send out some of their specialists, of which never happens, and they buy all of the problems. All they really do is change the sign on the door, and spend lots of time putting out fires. Also, I would consider partnering with a management company, to help properly manage the practices you acquire. If you’re looking for one, we’d love to tell you about what makes us different from our competitors.
If you grasp the need to move to an outpatient model, also grasp the need to move away from the sick model! We need to be progressive, and move into the well model. There are so many great well models out there. Akron General and Mayo Clinic are two leaders in wellness models that immediately come to mind. This is also a great way to reduce costs. With all of the knowledge of how to combat diseases such as Diabetes and High Blood Pressure, consider the reduction of cost if our first option for the patient wasn’t to prescribe them a pill.
Some predictions…these private equity backed companies are going to continue to pose a real threat to health systems. Also, local to CM Healthcare, I suspect within the next five years, there will be only one health system in Rochester, NY (currently there are two). I know one of those two health systems is working to create a presence in Buffalo, NY. They made an offer to buy one of the practices we recently opened there, as well as manage, stating they would buy it in two years, when they plan to have a strong presence there. I think Kaleida Health System has threats coming from all around. From Rochester, and I would have to assume UPMC, who has already stated publically, that they intend to move further into New York. Well, they already own WCA in Jamestown, making Buffalo the next natural progression. And we can’t forget about Cleveland, who is just up the thruway from Buffalo, and just over the border in Toronto. Actually, whenever I speak with Rochester physicians, who are interested to capture advanced cases from Buffalo, I inform them that their real competitor for these advanced cases is not Kaleida Health, but actually Cleveland Clinic.
There’s much more I could elaborate on above in the discussion of solutions and predictions. If interested to discuss further, I’d be happy to arrange a phone call or in-person meeting. CM Healthcare Innovations is an entrepreneurial healthcare consulting and management company that is prepared to ally with the right health systems, to help them compete in this new market. We have opened and manage multiple practices in New York, as well as the Greater Philadelphia Region. I have included my contact information below. Send me an email, so we can talk further!
Melissa Marsocci, MHSA
President/Owner, CM Healthcare Innovations