It’s been less than a month since Hahnemann University Hospital in Philadelphia, the primary teaching hospital for Drexel University College of Medicine, announced that it will close in September. (A judge this week ordered the hospital to remain open while final bankruptcy and closure plans are approved.) The hospital was acquired by for-profit firm American Academic Health System (AAHS) from Tenet Healthcare Corp. just last year. AAHS cited untenable and irreversible financial losses as the reason for closure.
Hahnemann’s shuttering not only deprives the city of a 150-year old institution providing a large portion of its healthcare safety net, but also displaces 570 resident physicians, many of whom just arrived to begin training. The Philadelphia Inquirer eloquently captured the personal stories behind and implications of the closure. Many industry experts, including us, have questioned whether the country may be better served by fewer, larger teaching and research centers. With four medical schools, Philadelphia is a market where there may be too many academic medical centers, each operating at suboptimal scale.
But the Hahnemann saga illustrates the myriad difficulties of actually closing a financially-strained teaching hospital: challenges of for-profit “turnaround” management and performance goals, disruption for hundreds of trainees, and impact on access for the neediest patients. Getting to the right academic training and care delivery model for a region won’t come from reactive responses to abrupt closures, but will require community, government, academic and hospital leaders across organizations to collaborate on a long-term plan aimed at delivering greater value, scale and productivity.
Despite a volatile investment market, the median funded status of defined benefit pension plans for nonprofit healthcare organizations in 2018 was 85%, increasing nearly 5% due to a higher bond rate, according to an S&P Global Ratings report released Thursday afternoon.
Among nonprofit providers, Ponoma Valley Hospital Medical Center in California led the way with a 144.5% funding status, followed by Jackson County Schneck Memorial Hospital in Indiana and Northwestern Memorial Hospital in Illinois.
The lowest funded pension plans were at Northern Inyo County Hospital District in California, with a 44.6% funding status, followed by Kaiser Foundation Health Plan in California and Catholic Health System in New York.
The report found that most pension costs for Financial Accounting Standards Board (FASB) issuers are still low while Governmental Accounting Standards Board (GASB) issuers have dealt with cost as a credit pressure on the organization.
“In our view, most hospitals and health systems have managed their pension burdens well, with no credit implications,” the report stated. “However, we believe that even without a direct negative credit impact, in some circumstances, a high funding burden has inhibited improvement in credit quality.”
The report continued: “Furthermore, not all hospitals’ pension funding improved in 2018, and for providers already struggling with thin income statements and balance sheets, underfunded pension plans could contribute to credit
Looking at the short-term, nonprofit providers are slated to experience a boost to their respective financial profiles due to a higher funded status resulting in “lower statutory minimum contributions” to defined benefit plans.
Conversely, the S&P report indicated that underfunded or soon-to-be underfunded defined benefit plans posed a credit risk for nonprofit providers.
As with other lingering financial challenges that health systems face, the looming pension crisis poses a substantial risk to long-term solvency and the ability to attract clinical talent.
According to the S&P report, the majority of issuers have closed plan offerings to new employees or eliminated plans to lower risk, while some have used debt funding to prop up plans despite an increased market risk.
A Philadelphia Common Pleas judge granted part of a preliminary injunction request sought by the city to stop Hahnemann University Hospital from closing, but the Philadelphia hospital plans to continue scaling back services this week.
Judge Nina Padilla granted the injunction, which stops Hahnemann’s owners from shutting down the hospital without a closure plan authorized by the Philadelphia health commissioner. The injunction specifically prohibits Hahnemann’s owners “from closing, ceasing operations, or in any way further reducing or disrupting services” at the hospital’s emergency room until the health commissioner signs off on the closure plan, according to KYW Newsradio.
Hahnemann is diverting high-level trauma cases, but the hospital’s ER will remain open to treat patients with minor health issues, Marcel Pratt, city solicitor of Philadelphia, told KYW Newsradio.
Although the ER will remain open, Hahnemann plans to scale back other services this week. The hospital said it will stop all nonemergency surgeries and procedures, including child deliveries, on July 12, according to CBS Philly.
Philadelphia Academic Health System, which entered Chapter 11 bankruptcy June 30, plans to close Hahnemann University Hospital by Sept. 6.
There needs to be more frank talk and better explanations about the costs and trade-offs of plans like Medicare for All.
Health care took up a decent portion of the Democratic presidential debates this week. For all of the verbiage, we didn’t learn much new. Everybody wants universal coverage, but they have different ideas about how to get there. One group, led Vermont Senator Bernie Sanders, want a single-payer system like “Medicare for All”; others, including former Vice President Joe Biden, prefer various flavors of a public option that co-exists with elements of the status quo.
Nonetheless, there were a few moments that drew attention to important issues that could (or should) shape the health-care discussion going forward:
THE BIG TRADE-OFF: “People who have health under Medicare for All will have no premiums, no deductibles, no co-payments, no out-of-pocket expenses,” Sanders said during Wednesday’s debate. “Yes, they will pay more in taxes, but less in health care for what they get.” Sanders was responding to a question about whether his policies would mean higher taxes for middle-class Americans; his answer elucidated an essential truth that’s still lost on many voters.
Medicare for All is at its core a shift in how America finances health care. Right now, people pay big chunks of their health costs themselves – especially when they’re sick. Sanders’s plan would replace that out-of-pocket spending with taxes. There’s an appeal to that. It’s more equitable and would eliminate situations where health crises result in bankruptcy, or costs dissuades people from seeking care. Whether this shift will result in savings for individuals will depend on tax details as well as income and health status. If such a plan can lower costs by cutting prices and eliminating insurer profits, there’s a real possibility that many Americans come out ahead. Right now, polls suggest that broad support for Medicare for All drops when people hear about tax increases. Getting voters to understand what they get in return will be critical.
RAISE YOUR HAND: On both nights, the debate moderators chose to boil the health-care debate down to one yes-or-no question. Candidates who support eliminating private health insurance in favor of a single-payer system were asked to raise their hands. This is a defining divide in the field, so it was notable that Elizabeth Warren raised hers on Wednesday. She places third in most polls behind Joe Biden and Sanders, and has been vague on health care in the past. If she’s a dogmatic supporter of Sanders’s specific plan, that tilts the race in the direction of Medicare for All. I’m not sure that’s the case, though. She could end up diverging on specifics of how the U.S. should transition to a single-payer system and structure it. As the field shrinks, it will probably benefit her to stake out a place between Sanders and Biden, who supports a milder public option. A lot of candidates want to be in that space, though none have defined it well or made it their own yet. Given ambivalent polling about the details of Medicare for All and the idea of killing private insurance, this feels like an opportunity for the person who seizes it.
WHAT PRICE IS RIGHT? America spends far more than other countries on services without getting better results. That might not change without price controls for providers. Former Maryland representative John Delaney claimed on Wednesday that these types of controls would have consequences, saying that many hospitals would be forced to close if they had to accept the rates currently paid by Medicare for all services. While the truth of that statement is a matter of some debate, what isn’t in doubt is that lower reimbursement would be necessary even for milder plans, and that this could put pressure on hospital systems.
Reform-minded candidates don’t like to talk about that, which is why Delaney’s point stood out. Instead, they preferred to focus their ire on insurers and drugmakers. Drug prices and insurer overhead are important issues too, but services eat up a far more significant portion of spending. The field won’t be able to ignore that issue and the potentially disruptive consequences of dealing with it.
These first debates got the discussion going. The devil will be in the details.
KINGSPORT, Tenn. – Molly Worley is an angry grandma.
For weeks she has stubbornly occupied a folding lawn chair on a grassy median outside Holston Valley Medical Center, sheltered from sweltering Appalachian summer sun by a thin tarp and flanked by a rotating crew staging a round-the-clock protest since May 1.
Behind them is the state-of-the-art neonatal intensive care unit where Worley’s newborn grandson spent his first weeks of life treated for opioid exposure.
In the same building is a Level I trauma center to respond to the most critical emergencies.
Both facilities will downgraded in the coming months, diverting the sickest babies and adults elsewhere.
The cuts are the latest fallout from an unusual and controversial merger between two former rival hospital systems headquartered in northeast Tennessee.
The newly formed company, Ballad Health, is now the sole hospital provider for a region the size of New Jersey. For nearly 1.2 million people people living in a largely rural stretch of 29 counties in northeast Tennessee and nearby parts of Virginia, North Carolina and Kentucky, Ballad hospitals are the only inpatient option.
Mergers involving hospitals that compete for same patients face opposition from the Federal Trade Commission, which can block mergers on the grounds the combined company can limit patient choices, cut services, raise prices and diminish quality.
Ballad officials found a way to bypass FTC rules. They turned to Tennessee state Sen. Rusty Crowe, R-Johnson City, who successfully carried legislation making the merger possible. Crowe is a longtime paid consultant with Ballad hospitals.
Only a handful of other states have exempted similar hospital mergers from FTC anti-monopoly rules. Ballad’s is the largest.
CEO Alan Levine said the merger lets the hospital system save money and keep rural hospitals afloat in a state that is already No. 2 in the nation for closures.
Eliminating overlapping staff and services, including the trauma center and NICU, will free funds to invest in other public health initiatives. Ballad pledged to keep open all of its rural hospitals for five years and to invest $308 million in public health, medical education and other initiatives.
“Every decision we make starts and ends with how can we best serve the community and what does the evidence show will lead to the best possible outcome,” Levine said.
“You don’t want a trauma center on every corner and you don’t want a NICU on every corner because it dilutes volume and hurts quality,” he said.
No rural hospitals owned by Ballad have been closed.
Some residents, doctors, nurses, EMS workers and public officials say the changes by Ballad expose the dangers of a single system imposing decisions on health care services on a captive audience that has no other options. More than 23,000 people have signed a petition opposing Ballad’s proposed changes.
“Never ever have I been this outspoken about anything,” said Worley, 60. “This NICU saved my grandson’s life. With Ballad we have no other choice. They have a monopoly at every level of health care.”
As hospital systems across the country struggle to stay afloat, particularly in rural areas, Ballad’s plan is being closely watched by other states weighing whether to allow other hospitals to take a similar approach.