Patient needs vs. cost to business

Health care across Maine and the nation is going through a period of tremendous challenge. Reimbursement for hospitals and physicians, especially from state (Medicaid) and federal (Medicare) sources, is not sufficient to cover the cost of providing care for many patients with increasingly complex illnesses. Commercial payers also continue to want to pay hospitals less and less in order to assist businesses in reducing their health insurance premiums. No one wants to pay hospitals as much as it costs to care for patients.

Physicians have been taking the same financial hits as hospitals. They are working longer hours for dwindling compensation, malpractice insurance premium rates are skyrocketing, the physician population is aging, and it is hard to recruit new doctors to Maine. This is all leading to increased physician dissatisfaction and burnout, and some of that frustration has been directed at hospitals, where physicians do part of their work.

Many physicians are less able and less willing to put in large numbers of uncompensated clinical or administrative hours at the hospital, and are turning to hospitals for financial support. Others are willing to simply give up private practice and are asking to become hospital employees. Hospitals in turn are hard pressed to respond favorably. They have fewer dollars to spare, and there are federally imposed legal limits on what hospitals can do to help private practice physicians financially. The end result is growing stress between hospitals and physicians, who ideally should be partners in effectively meeting the needs of the communities they serve.

Our costs at Eastern Maine Medical Center, like yours, are going up. Tops among them are the cost of new medicines and treatments; there is a new drug out for severe infections that can cost up to $10,000 per patient. Tiny stents coated with medicine that fit inside blocked arteries around the heart to help keep them open can cost $2,000 apiece, with the average patient getting two or three.

At the same time EMMC faces these difficult financial constraints it cannot stand still. It must continue to invest in new medical technology, in new training, in tomorrow’s healthcare. These investments include our “Patient First” program, a complete work redesign effort that will dramatically improve processes while installing computer-based, quality-enhancing features in our patient care units. This multi-million dollar project is an investment in your health and safety, it is the right thing to do, but it must be paid for. We are undertaking this and other steps to meet the quality expectations of insurers and large employers in Maine and around the country.

EMMC must also continue to invest in its staff. We have the increasing costs of retaining and recruiting professional staff in a time of growing shortages of nurses, doctors, and other hospital professional staff. We believe our employees must have competitive compensation and benefits if we are to have them here when you need them.

Recently 44 physicians requested assistance from Eastern Maine Healthcare to develop another physician office building on the EMMC campus. This building, which will be paid for by these physicians, not EMMC, will increase the efficiency of these physicians’ work and help bring business to EMMC. That increased business in turn helps us keep our costs down, and by extension, your costs. That is why it sometimes makes sense to spend money at a time when you need to save money.

Other physicians are requesting assistance, but not in the form of office buildings. They are either asking for various forms of financial assistance to support their private practice, or they are asking to become employees of EMMC (eighteen local physicians from seven different groups have asked EMMC to consider employing them). Laws designed to curb government health care expenditures limit the type of assistance that hospitals can provide to private physicians. We are, however, employing more physicians directly and, in areas where we can provide financial assistance, such as physician recruitment, we are doing so. In the past, hospital finances and those of private practice physicians were wholly separate, and these requests are an entirely new cost burden on EMMC’s operations.

These stresses on hospitals and doctors are exacerbated by the high expectations of American patients. As Americans we expect the newest lifesaving technology, the newest pharmaceuticals, and all of the healthcare professionals necessary to meet all of our needs, and we want it today, not six to twelve months from now. One would think that public policy on healthcare would reflect these expectations of the public, but that is not the case. Our leaders in Washington and Augusta have failed to adequately fund health care and meet the prior commitments they made to the senior and poor citizens who depend upon Medicare and Medicaid. In fact, none of us would appear to want to pay for the healthcare we expect.

The disparity between the healthcare we want and the health care we are willing to pay for cannot be ignored. Without enough money to cover the cost of services, doctors begin refusing to take Medicare and Medicaid patients and hospitals begin cutting services or face closure. Across the state of Maine today many hospitals are in financial difficulty, and will only survive by cutting back programs their patients want and need. Like it or not, this is a kind of rationing by limitation of health care access.

So there it is – increasing costs, dwindling reimbursement, the need to stay current, the need to support physicians and other professional staff – EMMC has to do all of that and stay economically healthy if we are to take care of this region’s patients. The EMMC Board of Trustees has charged EMMC’s management with maintaining a strong financial position while continuing our clearly stated mission to “care for patients, families, communities and one another.” We are the region’s tertiary (highly specialized) medical center, and if we do not serve that mission, no hospital will. To accomplish this mission within the economic limits we face, EMMC will have to change and streamline operations, while continuing to make investments that will secure our patients and our position in the future. Although strong financially, EMMC plans to be very conservative in planning budgets for the next few years because the times are too uncertain not to be. We are no different than many of you are in that regard.

Due to that conservatism, EMMC’s decision to reduce our expenses by 5 percent in the fiscal year beginning Oct. 1, 2002 made headlines recently, but that story was not the whole story. EMMC’s normal expenses for the next year will be close to those for the past year. The 5 percent reduction we are planning for the 2003 fiscal year simply makes up for some of the increases in costs.

I have discussed some of these costs, such as physician support, nursing wage increases and medications. Accompanying this column is a table showing some of these specific costs.

If we put these expenses into our budget without comparable cuts to other services or costs, the resulting cost would be shifted to private payers – largely insurers and employers – who commonly cover the gap left by government payers. In our many discussions with insurers and local business leaders, we are hearing from them that this is not acceptable, and we agree.

For that reason, EMMC is committed to keeping its total expenses in line with available reimbursement. Managing a $16 million difference between expenses from this last year to the next fiscal year will require us to change how we organize some operations. This will be done carefully in order to retain the core services that are the foundation of our mission. That means hard work and hard changes, and yes, some of that will be painful. History demonstrates that the only constant in healthcare is change. EMMC will face these challenges the same way it has faced them for the past 110 years: successfully. We want to be there when you need us, providing care as close to home as possible.

Norman A. Ledwin is president and chief executive officer of Eastern Maine Healthcare and Eastern Maine Medical Center. For more information see www.emmc.org.

Significant Cost Increases Increases from 2002 Dollars

Existing Expenses

Nursing Wages $2,336,000

Employee Health Insurance $2,692,000

Pension Benefit Expense $1,032,000

FICA/Medicare $908,000

Pharmaceuticals $1,625,000

New Expenses

“Access to care”, i.e. physician

salaries, recruitment and related expenses $7,959,000

TOTAL $16,552,000