Banner-Northern Colorado CEO: Health care reform debate driving uncertainty, layoffs in health care

March 26--Political uncertainty goes a long way to explaining the layoffs and staff reductions roiling Phoenix-based Banner Health, North Colorado Medical Center and heath-care systems across the country.

That's the conclusion of Banner Health-Northern Colorado CEO Margo Karsten. She offered that assessment during a wide-ranging hour-long interview from her office at NCMC, 1801 16th St., which Banner Health manages. Karsten oversees the Greeley hospital, along with McKee Medical Center in Loveland and Banner Fort Collins Medical Center, which opened in 2015. That hospital was built in part to help Banner serve the growing number of patients that are covered by its partner, Kaiser Health, officials said.

The Banner layoffs, which come at a time when NCMC has been named among the Top 50 hospitals in the country for three straight years by an independent evaluator, have remained stubbornly opaque. Karsten herself offered few details. She did point to other health systems that faced similar challenges. For example, she said, Houston-based MD Anderson Cancer Center cut its staff earlier this year by 1,000 positions, roughly a 20 percent reduction.

"I don't see that magnitude hitting us here, but even one person is painful," she said. "We're in the midst of it. We should know something in, I'd say, the next few weeks to understand the direct impact."

Other Banner officials -- including NCMC spokesman Gene Haffner and Banner spokesman Paul Matthews -- have declined to answer numerous questions form The Tribune seeking details about the cuts. Matthews would say only that the cuts affected a small number of positions and would not affect patient care.

Still, when Karsten spoke with The Tribune -- before House Speaker Paul Ryan, R-Wis., pulled his health care reform bill from the House floor on Friday -- she pointed to three main factors as driving uncertainty for the Banner hospitals in northern Colorado and forcing officials to keep a watchful eye on expenses.

-- Uncertainty about the future of the Affordable Care Act, known as the ACA: Regardless of the politics associated with President Barack Obama's controversial health care reform effort, it expanded the number of people who had health insurance. For hospitals, that meant more patients paying for more care. Current nonpartisan projections are that the American Health Care Act -- the proposed successor to the ACA -- would result in a reduction to the number of people who have insurance. For hospitals, especially those such as NCMC that treat patients regardless of their ability to pay, that means a near-certain spike in charity care and bad debt, Karsten said.

-- Cuts to the state's hospital provider fee: Even though Colorado's economy is good and tax revenues are up, legislators in Denver face the prospects of making budget cuts. This is true because if they don't, the state's revenue will exceed the constitutional cap that's part of the Taxpayers Bill of Rights, TABOR. As part of those budget reductions, the state will take in less money from the hospital provider fee. The fee is collected from hospitals and goes to the federal government to help pay for, among other things, Medicaid expansion, which comes back in the form of matching federal dollars. The state will reduce the amount of money that comes in as part of the hospital provider fee. That will mean less money for the federal government to match and therefore a cut to the amount of money that will ultimately go to health care providers. Legislators have discussed making the hospital provider fee an enterprise. That's a legal maneuver under TABOR, which would allow the state to collect the money without it counting against the TABOR revenue cap. Karsten said even if that happens, it won't offer relief for NCMC this year, which faces a massive hole in its budget as a result of the state cuts.

-- New business models in a changing competitive environment: Traditional hospitals like NCMC face new competition, driven largely by growing demands from consumers for all types of health care options as close to home as possible. In Greeley, Neighbors Emergency Center, 2015 35th Ave. -- which offers reduced wait times for care at premium prices traditionally associated with an emergency room visit ­-- and a new west Greeley hospital being built by Banner competitor UCHealth illustrate two types of emerging competition, Karsten said. They also raise questions about whether the region will wind up with more hospital beds than it needs.

"I really believe we don't need any more beds," Karsten said. "We need to do a better job of keeping you healthy."

Karsten, who began her career in health care two decades ago as a nurse, sat down with the Tribune for an interview March 16. The following Q&A has been condensed from that interview.

Question -- What did the ACA mean for this area?

Answer -- What the Affordable Care Act allowed is for some vulnerable patients -- and people -- who didn't have access to care to get access to care. I've always said I don't believe this is a political issue. This is an issue around do people have a right to health care? Right or wrong the Affordable Care Act allowed a vulnerable group of people to get access to health care.

Q -- Projections from the nonpartisan Congressional Budget Office indicate that the Republican plan to replace the ACA would lead to about 20 million people across the country losing health coverage. How would that affect charity care and bad debt at NCMC?

A -- If they are going to limit access to care and not mandate coverage, which I know is controversial, it is going to have a negative impact on health care systems. You can just see the numbers.

Q -- How are you responding to the uncertainty around federal health care reform?

A -- To be good stewards of our financial well-being, everyone in health care, and specifically here within Banner, we're always looking at our cost structure and making sure that we're providing effective and efficient care. With an unknown of this magnitude -- I don't want to speak for all hospital CEOs in the country -- but I think all of us are doing our due diligence on cost structure. Can we be more efficient? What would that look like?

Q -- What's your guiding philosophy when it comes to finding places to cut?

A -- As a nurse in a CEO role, I always put patients and quality first, and then finances. That's the artful budgeting we're going to approach this with, especially given NCMC's track record of being in the Top 50 for the last three years.

Q -- What are your options when it comes to making cuts?

A -- I've been doing this about 20 years. I like to look at front-line staff and really be protective of their work. As you come into our ED, not only is that nurse important, the physician is, the tech is, so is the housekeeper and food service. They're our unit of care. In addition to that, what I always tend to evaluate is how many supervisor layers are there between me and the front line?

Q -- Are cuts to front-line medical providers at NCMC being considered?

A -- We have to look at everything. At the end of the day, I'd say our mantra is, we're going to protect the front line, and if we can make other changes, that's going to be our preference.

Q -- There have been a number of layoffs at health systems and hospitals around the country in recent months. Why is this happening now?

A -- I do think it's uncertainty around the ACA. I think all of us in health care are trying to be proactive with this uncertainty.

Q -- How will the state's cuts to the money collected under the hospital provider fee this year affect Banner-Northern Colorado and NCMC?

A -- In January, I was notified NCMC was going to take right around a $10 million hit. In NoCo total it was around $8 million. That's $8 million less that we needed for capital and other issues. We're left with -- we call it a bridge plan.

Q -- Is that part of what's driving the staff reductions at NCMC?

A -- It is the uncertainty of the ACA. It's always been part of our work to be good financial stewards, and then you layer on the provider fee and what they're going to do at the state level. The best work I can do right now is be proactive and look at our cost structure, with the priority being always protecting the quality that we've been giving to the community.

Q -- If legislators reached a political compromise to exempt the hospital provider fee from TABOR, would that solve the problem of the $8 million hole in your budget?

A -- It would in the long term. It wouldn't in the immediate. Right now their projection is we're going to get hit. The compromise would protect us in the future, which would be amazing. I'd be incredibly grateful.

Q -- What effect does competition have on the uncertainty you're facing?

A -- In the last four to five years, we're seeing different strategies systems take. One is called a micro-hospital. Google it. You'll see them happening down in Denver. The strategy would be, form a business model, a hub-spoke. If I'm a big hospital, I want to put a micro-hospital in Parker, which is a lovely suburb of Denver. I'll treat you, but if you need a heart procedure, I'm going to send you to my tertiary, bigger hospital. It is literally a hub-spoke that the airline industry used to use.

Q -- Are we seeing that hub-spoke model in northern Colorado?

A -- Absolutely we're seeing it. UCH coming into west Greeley. Centura Health bought Longmont's hospital, and UCH is going to build another hospital in Longmont.

Q -- ­There's also a stand-alone emergency department on 35th Avenue in Greeley. Is that another example?

A -- The other kind of side-by-side business model we're seeing are the free-standing EDs. Neighbors, they're not associated with a health system, but what that model is about is making it really easy. People know if you come into an ED attached to a hospital, at times -- not always ­-- the waits might be longer. However, at a free-standing ED you can get in and out. You're going to get the same bill, though. So there's been some confusion in the community. I'd put those business models together.

Q -- Isn't Banner Health using a hub-spoke model with its new hospital in Fort Collins?

A -- We've been very thoughtful in the location and the demographic growth. What is different from Banner-Fort Collins than a micro-hospital is we can quickly -- quickly being in the next three to five years -- expand based on growth. Where a micro-hospital is just that. They're going to stay that small. They're not going to grow. Our strategy in Banner-Fort Collins is let the demand push our bed capacity. When that city is projected to grow, then we will grow with it, versus always taking care out of the community, which that is not what we're about. I love where the location is. I love that it was in partnership with Kaiser, and we have expandability there, and we'll build out when the demand is there.

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