Paying more and getting less: As hospital chains grow, local services shrink

When most hospitals close, it’s plain to see. Equipment and fixtures are hauled out and carted away. Doctors and nurses leave and buildings are shuttered, maybe demolished.

But another fate befalling U.S. hospitals is almost invisible. Across the country, conglomerates that control an increasing share of the market are changing their business models, consolidating services in one regional “hub” hospital and cutting them from others.

In recent years, hospitals across the country have seen their entire inpatient departments closed — no patients staying the night, no nursery, no place for the sickest of the sick to recover. These facilities become, in essence, outpatient clinics.

Hospital executives see these cuts as sound business decisions, and say they are the inevitable consequence of changes in how people are using medical services. But to patients and local leaders who joined forces with these larger health networks just years ago, they feel more like broken promises: Not only are they losing convenient access to care, their local hospitals are also getting drained of revenue and jobs that sustain their communities.

“It’s not even just betrayal. It’s disgust, frankly,” said Mariah Lynne, a resident of Albert Lea, Minn., where Mayo Clinic is removing most inpatient care and the birthing unit from one of its hospitals. “Never would I have expected a brand of this caliber to be so callous.”

In 2015, the most recent year of data, these service reductions accounted for nearly half of the hospital closures recorded around the country, according to the Medicare Payment Advisory Commission. (By MedPac’s definition, the loss of inpatient wards is equivalent to closure.) These data do not capture more discreet closures of surgical and maternity units that are also happening at local hospitals.

And the trend doesn’t just affect nearby residents. It represents a slow-moving but seismic shift in the idea of the community hospital — the place down the street where you could go at any hour, and for any need. Does the need for that hospital still exist, or is it a nostalgic holdover? And if it is still needed, is it economically viable?

The eye of the storm

The effort to scale back inpatient care is occurring within some of the nation’s most prestigious nonprofit hospitals.

Mayo Clinic announced last summer that it would cease almost all inpatient care at its hospital in Albert Lea. The health network said it would keep the emergency department open, but send most other patients to Austin, 23 miles east.

In Massachusetts, sprawling Partners HealthCare said it will shut the only hospitalin Lynn, a city of 92,000 people near Boston, and instead direct patients to its hospital in neighboring Salem. Only urgent care and outpatient services will remain in Lynn.

And in Ohio, Cleveland Clinic has made similar moves. In 2016, it closed its hospital in Lakewood, a densely packed Cleveland suburb. It is replacing the hospital with a family health center and emergency department.

The cuts follow a period of rapid consolidation in the health care industry. Of the 1,412 hospital mergers in the U.S. between 1998 and 2015, nearly 40 percent occurred after 2009, according to data published recently in the journal Health Affairs.

As large providers have expanded their networks, they have also gained inpatient beds that are no longer in demand — thanks to improved surgical techniques and other improvements that are shortening hospital stays. Hence the closures.

But the hollowing-out of historic community hospitals has surfaced fundamental tensions between providers and the cities and towns they serve. Residents are voicing frustration with large health networks that build expensive downtown campuses, charge the highest prices, and then cut services in outlying communities they deem unprofitable.

Health scholars also note a growing dissonance between the nonprofit status of these hospitals and their increasing market power. While the nonprofits continue to claim tens of millions of dollars a year in tax breaks to serve the sick and vulnerable, some are functioning more like monopolies with the clout to shift prices and services however they wish.

“These providers say they are worth the high price and that in the American system, if you have a reputation for excellence, you deserve higher fees,” said Dr. Robert Berenson, a senior fellow at the Urban Institute. “My response to that would be, if we had a well-functioning market, that might make some sense. But we don’t.”

Changing demand among patients

The financial upheaval in community hospitals is driven by sweeping changes in the delivery of care. Procedures and conditions that once required lengthy hospitalizations now require only outpatient visits.

At Mayo Clinic, Dr. Annie Sadosty knows this evolution well because it roughly traces her career. She uses appendectomies as an example. Twenty-five years ago, when she was in medical school, the procedure was performed through a 5-inch incision and resulted in a weeklong hospitalization.

Today, the same procedure is done laparoscopically, through a much smaller incision, resulting in a recovery time of about 24 hours. “Some people don’t even stay in the hospital,” Sadosty said.

Something similar could be said for a wide range of medical procedures and services — from knee replacements to the removal of prostate glands in cancer patients. Hospital stays are either being eliminated or reduced to one or two days. And patients who were once routinely admitted for conditions like pneumonia are now sent home and managed remotely.

“Hospitals that used to be full of patients with common problems are no longer as full,” said Sadosty, an emergency medicine physician at Mayo and regional vice president of operations. “It’s been a breakneck pace of innovation and change that has led to a necessary evolution in the way that we care for people.”

That evolution has cratered demand for inpatient beds. In 2017, the Medicare Payment Advisory Commission noted that hospital occupancy is hovering around 62 percent, though the number of empty beds varies from region to region.

In Albert Lea, Mayo administrators said the changes at the hospital will only impact about seven inpatients a day. Currently, caring for those patients requires nursing staff, hospitalists, and other caregivers, not to mention overhead associated with operating a hospital around the clock. The financial result is predictable: Hospital executives reported that jointly Albert Lea and Austin hospitals have racked up $13 million in losses over the last two years.

With inpatient demand declining, hospital administrators decided to consolidate operations in Austin. The decision meant the removal of Albert Lea’s intensive care unit, inpatient surgeries, and the labor and delivery unit. Behavioral health services will be consolidated in Albert Lea.

Cleveland Clinic described similar pressures. Dr. J. Stephen Jones, president of the clinic’s regional hospital and family health centers, said use of inpatient beds has declined rapidly in Lakewood, dropping between 5 and 8 percent a year over the last decade. By 2015, 94 percent of visits were for outpatient services — a change that was undermining financial performance. The hospital lost about $46.5 million on operations that year, according to the clinic’s financial statements, and its aging infrastructure was in need of repair.

“Hospitals are very expensive places to run,” Jones said. “Lakewood was losing money on an operating basis for at least five years” before this decision was made.

Closures spark fierce protests

But the service cuts in Albert Lea, Lynn, and Lakewood — backed by nearly identical narratives from hospital executives — provoked the same reaction from the communities surrounding them.

Outrage.

Residents accused the hospital chains of putting their bottom lines above the needs of patients. Even if these individual hospitals were losing money, they said, nonprofits have an overriding mission to serve their communities.

“Why is profit such a priority, and more of a priority than the Hippocratic oath?” said Kevin Young, a spokesman for Save Lakewood Hospital, a group formed to oppose Cleveland Clinic’s removal of inpatient services. “Why are we allowing this to happen?”

The fight over Lakewood Hospital has persisted for more than three years, spawning lawsuits, an unsuccessful ballot referendum to keep the hospital open, and even a complaint filed by a former congressman to the Federal Trade Commission. None has caused Cleveland Clinic to reverse course.

Meanwhile, in Albert Lea, opponents to the service cuts have taken matters into their own hands: With Mayo refusing to back down, they are hunting to bring in a competitor.

A market analysis commissioned by Albert Lea’s Save Our Hospital group concluded that a full-service hospital could thrive in the community. The report included several caveats: A new provider would need to attract new physicians and capture market share from Mayo, a tall order in a region where Mayo is the dominant provider.

But members of the group said the findings directly contradict Mayo’s explanations to the community. They argue that, far from financially strained, the health system is simply trying to increase margins by shifting more money and services away from poorer rural communities.

“They don’t care what happens in Albert Lea,” said Jerry Collins, a member of the group. “Mayo cares what happens with its destination medical center.” He was referring to Mayo’s $6 billion project — funded with $585 million in taxpayer dollars — to expand its downtown Rochester campus and redevelop much of the property around it.

Sensitivity to Mayo’s service reductions is heightened by its control of the market in Southeastern Minnesota. It is by far the largest provider in the region and charges higher prices than facilities in other parts of the state. A colonoscopy at Mayo’s hospital in Albert Lea costs $1,595, compared to $409 at Hennepin County Medical Center in Minneapolis, according to Minnesota HealthScores, a nonprofit that tracks prices. The gap is even bigger for a back MRI: $3,000 in Albert Lea versus $589 at Allina Health Clinics in Minneapolis.

“All of Southeast Minnesota is feeling the domination of one large corporation,” said Al Arends, who chairs fundraising for Save Our Hospital. “They are ignoring the economic impact on the community and on the health care for patients.”

The community’s loud resistance has drawn the attention of the state’s attorney general and governor, as well as U.S. Rep. Tim Walz, who has begun a series of “facilitated dialogues” between Mayo and its opponents in Albert Lea.

So far, the dialogue has failed to forge a compromise. Mayo is proceeding with its plans. It has relocated the hospital’s intensive care unit to Austin, and inpatient surgeries and labor and delivery services are planned to follow.

Mayo executives reject the notion that they are abandoning Albert Lea or compromising services. The hospital plans to renovate the Albert Lea cancer wing and beef up outpatient care, improvements executives say have gotten lost amid the criticism.

As for inpatient care, they say, Mayo must consider quality and safety issues. With the hospital in Albert Lea only admitting a handful of patients a day, caregivers’ skills are likely to diminish, potentially undermining quality. They also cited recruiting challenges.

“It’s difficult to outfit both [Albert Lea and Austin] hospitals with all the incumbent equipment, expertise, multidisciplinary teams, and nursing staff,” vice president Sadosty said. “This is one way we can preserve and elevate care, and do it in an affordable way so our patients have access to high-quality care as close to their homes as possible.”

A strained system

Efforts to regionalize medical services also pose a new challenge: Can hospitals transport patients fast enough — and coordinate their care well enough — to ensure that no one falls through the cracks?

It is a question that will face stroke victims and expectant mothers who now must drive greater distances, sometimes in treacherous conditions, to make it to the hospital on time.

In Massachusetts, Partners HealthCare will face that test as it moves inpatient and emergency care from Union Hospital in Lynn to North Shore Medical Center in Salem. The hospitals are less than 6 miles apart. However, the short distance belies the difficulty of coordinating service across it.

Ambulances will have fewer options in emergencies. And if residents drive themselves to the wrong place in a panic, precious time gets wasted.

Dr. David Roberts, president of North Shore Medical Center, said the health system is working to educate patients to ensure that they go to the correct facility. He added that Partners already conducts risk assessments of patients with severe medical problems, and transfers them to hospitals with higher-level care when necessary.

In cases of suspected stroke, Roberts said, Partners employs a telemedicine program in which patients who arrive in its emergency rooms are examined by physicians at Massachusetts General Hospital in Boston. “They instantly, based on imaging, can decide which patient might benefit from having a clot pulled out of an artery in their head,” Roberts said. “They can say, ‘Yeah, this patient needs to be in our radiology suite in the next 30 minutes, and they make that happen.”

Still, opponents of the closure say it raises a broader concern about whether Partners’s actions are driven by a financial strategy to shift care away from low-income communities with higher concentrations of uninsured patients and those on Medicaid, which pays less for hospital services than commercial insurers. Union Hospital serves a largely low-income population.

“Why don’t we see these cuts across the Partners system? Why are we only seeing it in Lynn?” said Dianne Hills, a member of the Lynn Health Task Force. “Are we moving into a world where you have two systems of care — one for the poor and the old, and another for the affluent?”

Roberts said the consolidation at North Shore Medical Center in Salem has nothing to do with the income level of population in Lynn. He said the hospitals serve “identical” mixes of patients with government and commercial insurances.

“Our payer mix at both hospitals is adverse,” he said. “And despite that, Partners invested $208 million” to support the expansion of North Shore Medical Center.

Roberts acknowledged that the closure of the hospital in Lynn will have a negative impact on the city’s economy. But he said construction of a $24 million outpatient complex will mitigate some of that damage. The facility is expected to open in 2019. “It doesn’t take away the sting of losing a hospital,” Roberts said. “I’m hoping the [new] building goes a long way. We’re going to grow it as a vibrant medical village.”

Meanwhile, Mayo is proceeding with its changes in Albert Lea. Executives have assured Albert Lea residents that they will receive the same level of care for emergency services and upgraded facilities for outpatient care.

But some community members said they are already noticing problems with Mayo’s regionalization. One local pharmacist, Curt Clarambeau, said he can’t get timely responses to reports of adverse drug reactions. A call to the hospital in Albert Lea results in several phone transfers and no immediate response.

“It’s just impossible. It takes days,” Clarambeau said. “They’re trying to create efficiencies by not having everyone calling the doctors, but there are certain things we need to talk to them about.”

Don Sorensen, 79, said he’s also had trouble getting access to doctors at the hospital in Albert Lea. He said began to suffer from severe knee pain in November, but couldn’t get an appointment. His wife was put on hold for 40 minutes before learning the earliest appointment was still several days away.

At the suggestion of his RV repairman, Sorensen called a clinic in Minneapolis and got an appointment the same day. His wife, Eleanor, drove him, and he ended up with a brace, a prescription, and another follow up appointment.

But the couple is worried about continuing to make the drive if the logjam persists in Albert Lea. “We used to feel secure because we had Mayo here,” Eleanor Sorensen said. “We could get the care we needed. But now everybody our age feels very very vulnerable.”