July 03--The coming knock-down battle in Monroeville for patients -- and insurance dollars, physicians and ambulance service -- between West Penn Allegheny Health System'sForbes Regional Hospital and the new UPMC East hospital might appear unseemly to some, but it's also reflective of the fierce suburban competition going on across the country.
That's true even in lean times, when government reimbursement dollars for programs like Medicaid get squeezed and hospitals compete more heavily for "well-insured" customers from well-heeled suburbs, patients who bring in more cash for hospitals and their affiliated practices, according to a new study.
The paper, written by the Center for Studying Health System Change and published this month in Health Affairs journal, says that the competition has the potential to lead to "duplicative services and higher costs" even though hospitals claim "expansion strategies will lead to greater efficiency and improved care."
The study did not examine the Pittsburgh region but in the 12 metropolitan areas studied, some of the rivalries described by the study's authors are reminiscent of the feud between UPMC, the region's dominant health network, and West Penn Allegheny, the No. 2 network, now in the process of being acquired by health insurer Highmark Inc.
For example, in the fast-growing South Carolina region of Greenville-Spartanburg, hospital systems are building "new, full-service hospitals outside of their traditional market boundaries and in communities with well-insured populations."
In an area of suburban Miami known as Kendall, the Baptist Health South Florida system opened a new hospital in April 2011, less than six miles from an existing medical center, the study says.
And in Indianapolis, competition for well-insured customers in the growing area north of downtown is so fierce, with top health systems building new hospitals and ambulatory care centers, that observers quoted by the study call it the "Exit 10 strategy," named for the Interstate 69 exit north of the city.
But the market that most resembles Pittsburgh might be right across the state line.
The two major Cleveland systems -- Cleveland Clinic and University Hospitals -- have been goading each other for years. In February 2011, University Hospitals opened Ahuja Medical Center, a new full-service hospital just a few minutes away from Cleveland Clinic's existing Beachwood Family Health and Surgery Center.
Cleveland Clinic, meanwhile, bought the Medina General Hospital in Medina, Ohio -- a hospital just a few blocks from University Hospitals' new outpatient and urgent care center -- and is now building a $76 million addition at its Fairview Hospital on Cleveland'sWest Side, to be completed in 2013.
In the same time period, Cleveland Clinic closed a "struggling safety-net" hospital, Huron Hospital, in the low-income neighborhood of East Cleveland -- reminiscent of UPMC's decision to close its Braddock hospital while doubling down on its new 174-bed Monroeville center set to open this summer.
Hospital officials "make several cases for these types of expansions," said Emily R. Carrier, lead author on the paper and a senior health researcher at the Center for Studying Health System Change in Washington, D.C., a health care think tank.
The Center for Studying Health System Change study was funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform.
"They may say the demographics are shifting, [that] we're just following where people are living," Dr. Carrier said. "Or that the care model they offer is superior to what their competitor is offering."
But insurers and industry observers in those regions often worry that the arms races between health systems adds to the cost of care without creating better outcomes.
Unlike the rest of the free market -- Dr. Carrier used the example of competing burger chains -- an increase in supply, capacity and competition in health care does not always lead to lower care prices.
A recent report commissioned by the Pittsburgh Business Group on Health points out that Pittsburgh's per capita health care costs are higher than they are in three other peer cities, as is the region's per capita number of hospital beds.
"That is our question, too. How do they justify increasing the number of beds per capita," without an increase in efficiency or outcomes, asked Diane McClune, director of operations at the Pittsburgh Business Group on Health, which represents employers.
What was most surprising about some of the large capital expenditures noted in the study is that the recession intensified them, rather than curbed them, partly because hospital executives believe capturing new audiences is the best avenue to new growth.
In other words, if a hospital system's slice of the pie is shrinking because of the recession -- and the decreased doctor visits, elective procedures and health insurance utilization rates that usually accompany economic slowdowns -- it's time to bake a bigger pie.
So while hospital systems' expenditures during the recession and recovery may have decreased in other ways -- wages, for example -- the hospitals "exempted expansions from cutbacks," Dr. Carrier said.
Health systems -- not unlike those hamburger chains, or any other type of business -- need to update themselves regularly in order to remain competitive. Sometimes updates take the form of a renovated building, new equipment or a new emergency room, and other times it means building a new hospital from scratch.
"Yeah, new stuff is going in, out in the more affluent neighborhoods," said Bill Ryan, president and CEO of the Center for Health Affairs, the trade association for Cleveland-area hospitals.
"But more than a billion dollars of capital investment went into the core city" over the last decade, he said. Cleveland Clinic's ever-expanding main campus, he added, is near Cleveland's poor Fairfax neighborhood -- in other words, a neighborhood that is neither suburban nor affluent.
Mr. Ryan also noted that capital and construction projects happened to overlay the recession by chance, not by design.
"That stuff gets programmed, five, six seven years in advance," he said. "There's always a little bit of angst from the insurers" when they see hospitals building at full bore, but "patients love it."
To read the full report, visit content.healthaffairs.org/content/31/4/827.full.html.
Bill Toland: email@example.com or 412-263-2625.
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