CBJ Health Care Summit panelists address health care costs, competition

A group of local health care panelists fielded a series of questions from Corridor Business Journal publisher John Lohman at the CBJ’s annual Health Care Summit Feb. 10 at the DoubleTree by Hilton in downtown Cedar Rapids. Panelists included Eric Dalton, chief executive officer of Physicians’ Clinic of Iowa; Timothy Quinn, president and chief executive officer of Mercy Medical Center in Cedar Rapids; and Casey Greene, vice president and chief operating officer of UnityPoint Health in Cedar Rapids. Here, in lightly edited form, is a sampling of questions and responses from the panelists. CBJ: Year over year, while funding is down, travel costs, wages and inflation are rising. Concurrently, the cost of pandemic care further constrain the profit margin. How do each of the hospitals plan to navigate the financial difficulties that are likely to arise? Mr. Quinn: First and foremost, I would say there are two fundamental assumptions about health care nationwide that are erroneous. One is that the government threw all these dollars out, so health care sits in great shape. The truth is the COVID dollars that came through maybe covered half of the costs related to COVID. So while there was an offset in some of those dollars, it came nowhere near the hit in revenue and expenses that we faced. So that's myth number one. Myth number two is that you have a situation where we continue to be able to easily adapt. All businesses are in a rapidly escalating pricing-per-cost environment, but our prices are dictated by Medicare and by insurance companies. So while inflation and labor costs are going up, our revenue stays the same – in fact, relative to inflation, it’s a multiple fraction. Huge challenges out there. Mr. Greene: It's certainly challenging. We’ve seen double-digit cost increases in our margin. If there is (a margin), it’s very, very slim, even prior to COVID, and even more so now. One of the biggest challenges we have is our rising expenses, specifically with labor and staffing. Our labor situation is not sustainable, certainly. We've had to leverage with travelers agency staff. If you don't know the expense of it, an average traveler is four times that of our standard RN. That's what we're paying, and that's what we have to do to meet the needs of the community. It's certainly a concern. I think it should be a concern for our community members. Our ability to staff our floors, our emergency room, our ORs, depends on that and our ability to provide care obviously depends on our ability to keep our staff. We look forward to  turning the corner here with COVID. We've certainly seen that it's almost become a new normal environment. Mr. Dalton: We are not impacted by the traveling component of nursing. We certainly are impacted by the nursing shortage, but not to the degree that the hospitals are. We are facing inflationary costs the likes of which we haven't seen in a long time. So that certainly makes it challenging. The only way to make it up is on volume, and we're not here to order tests and procedures unnecessarily. So, definitely a challenge that we will continue to work through for the foreseeable future. https://corridorbusiness.com/health-care-summit-speaker-parallel-integration-can-address-crisis/ CBJ: Some argue that the University of Iowa Hospitals is moving into the community hospital space. What will this do to the health care market in the Corridor? Mr. Greene: I worked at Mercy Iowa City prior to coming to St. Luke’s. I believe in community hospitals. My wife still works at Mercy Iowa City. With that opening, the university is a great asset. They provide resources, obviously, and also a tertiary perspective. It’s great to have a partner like that, and we need the university for that reason, of course. The concern is the destabilization. Not-for-profit hospitals like ourselves rely on a very small margin, if there is a margin, because we provide a scope of services that others may not be willing to provide. So as an example, we need a thriving orthopedic business in order to provide three inpatient behavioral health units in our hospital. Those types of services allow us as a community hospital to make connections to those other units in our hospital that others may choose not to provide. So as the university veers from its lane, it creates a challenge for us trying to provide services to our communities and to those of you that want (those services) as close to your home as possible. Mr. Quinn: We have strong hospitals in this town. We have great health care with PCI. (This) has the fundamental potential to create segmentation and increased costs. You know, I was at the university for 12 years. I'm very grateful for their resources, and their academic research is incredible. They're training providers, which is an incredible resource. But when you start leaning out of that lane, particularly in a publicly funded institution, and start competing in places where we don’t have those sorts of resources, that's where it starts to touch a little bit of a nerve, and really threatens us and tangentially Mercy Iowa City. So while we're very dependent on and collaborate with them, let’s make sure our tax dollars are focused on the fundamental (services) they should be providing. Mr. Dalton: They're a world-class institution, located in the state of Iowa, right here in our backyard. But again, they have a place, and that's primarily the tertiary and quaternary care that we can’t provide. We're all about competition. We're not afraid of competition, because we're pretty confident in our model and with the care and the patient experience that we provide, so long as it’s on a relatively level playing field. We're a for-profit institution, (but) we don't have some of the resources and the margins that they do. CBJ: North Liberty is getting a new UIHC hospital, and Steindler is building a new facility in North Liberty. Is the certificate of need process antiquated today? Mr. Quinn: There's a state council that’s monitored (certificate of need applications) for three decades or so. The intent is to try and control costs of care in the state and not just have crazy development going on. I think it's still very relevant because it regulates outside venture capital companies coming in and just plopping in an MRI machine. There are things that investors can do that would totally fragment care and be a total disaster from our standpoint. It's taken us decades to get to a point where we have medical records that we share and you can see X-rays and reports and documentation from different places. That would all go away. So from that standpoint, it’s incredibly important. There are two nuances that are a little bit challenging. There is codified, preferential treatment for (the UIHC) application for this North Liberty campus. They basically said “well, state law says that whatever we ask for, we get,” and that's kind of how that went. So we talk about fair competition. If the (Certificate of Need) is delegated in a way that is a level playing field, and we have good sense around that, I think it has a continued great application. Mr. Greene: I can see that it serves a purpose and should be respected and I think it helps keep the cost of care lower. In the case of developments down south, they were approved, obviously, for a certain amount, and we've all seen in the press what's happened since then. That's not something we’d be able to do as a not-for-profit, in terms of budgeting and expenses.

– Compiled by Richard Pratt