Health care changes on horizon

Oct. 23--TRAVERSE CITY -- The future of health care figures heavily in the current national political debate, but the wrangling likely will continue long after the 2020 election is over.

"The underlying themes don't go away when we have a Republican or Democratic government," Munson Healthcare President and CEO Ed Ness told members of the Economic Club of Traverse City at the group's October meeting.

One continuing theme in healthcare, he said, is that people who have money -- in one way or another -- pay more for health care than people who have less money. That reality holds true in the past, present and future.

"The math isn't that complicated," said Ness.

About 68 percent of payments collected by Munson come through government programs: 54 percent via Medicare and 14 percent via Medicaid. Those payments are set by the government and are non-negotiable, Ness said. That means that some services the hospital provides are not fully paid for.

"Each year, we write off $82 million," said Ness.

People who buy insurance through their employer, he said, effectively subsidize the underpayment provided by government insurance.

About 16 percent of Munson's income flows through Blue Cross, about 15 percent through commercial insurance and Priority Health. Only 1 percent of Munson's income derives from patients who pay privately.

Munson's expenses are rising at rate of 4 to 6 percent a year, Ness said, and incoming payments are rising at about 2 percent a year. The difference between those two rates of change at some point will force a reckoning. Payments are not likely to rise, no matter how the U.S. health insurance system is structured in the future. That means Munson will need to control costs.

"You can see you have to redesign care to fix the system," said Ness.

Munson plans to double its emphasis on preventive and managed care. Preventing a problem generally costs less than curing it after it occurs. Ness also mentioned cost savings possible through technology like minor doctor consultations conducted electronically.

It takes $3.3 million a day to keep all nine Munson hospitals in the Munson system open, Ness said.

Munson Healthcare's largest expense is personnel. It pays $641 million a year in wages and benefits, about 56 percent of its total budget.

Increasing demand for services forces expansion. Munson spent $37.7 million to upgrade facilities in 2018. It spent $11.7 million on medical technology and equipment. It spent $12.1 million on integrated technology including electronic patient records systems.

Munson's main campus is nearing the limits of available land. So it is moving a few services off site, some to the Copper Ridge Surgery Center and others to the Foster Family Community Health Center.

But two major projects are taking shape on Munson's main campus.

The hospital's surgery center will be expanded. The current 17 operating rooms host 17,000 surgical procedures a year, Ness said. Most of the operating rooms are fully booked with time blocked out for individual surgeons. Munson must add operating rooms if it is to attract new surgeons, said Ness.

Patients are beginning to demand use of robotic surgery -- in which the surgeon electronically operates mechanical tools to perform the surgery -- and those devices require larger rooms.

"Per robot, we have the busiest surgical robots in the country," said Ness.

Munson plans to add one or two additional robotic surgery units, he said.

The hospital's birthing and children's unit will be expanded. The current maternity unit, when built two decades ago, hosted about 1,200 births per year. It now is hosting about 2,000 births per year.

Munson is seeking an additional $2 million to complete fundraising for the planned family birthing and children's unit. The project will add a dozen beds to the current 21 and will expand the hospital's neonatal intensive care unit.

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