Hospital executives speak frankly about managed care changes

Issues surprisingly similar despite market differences

If you’ve been envying your medical school classmates who practice in less mature managed care markets, we may have a surprise for you. The grass isn’t always greener on the other side, as evidenced by the cost-cutting pressures we found equally evident among hospitals operating in less mature managed care markets.

Our query — prompted by a study from The Center for Healthcare Industry Performance Studies (CHIPS) in Columbus, OH, that compared hospital lengths of stay (LOS) in low managed care areas vs. high managed care areas — found that hospitals across the country are employing a variety of ways to not just lower length of stays but overall costs.

"The whole industry is moving toward shorter stays and has been for the past few years," says Susan White, PhD, vice president of CHIPS and author of the study, which is included in The 1998 Procedures Resource Book — A Guide to Inpatient Surgical Procedures. CHIPS is a consulting firm that provides customized benchmarking reports for hospitals.

There are two explanations why the low managed care areas are cutting LOS at a faster rate now, White says.

1. The high managed care areas, which have greater than 75% HMO saturation, have already shortened their LOS to very low levels, leaving less room for improvement. The study also showed that their LOS rates still are, on average, lower than the average LOS in low managed care areas. In 1996, the high managed care areas averaged a 6.4 day LOS, and the low managed care areas averaged a 7.51 day LOS.

2. The areas that are now considered low managed care areas might have been considered high managed care areas in the past. The cut-off percentages for HMO penetration have risen in recent years, so that now an area can have a little more than half of its market dominated by HMOs and PPOs, and it’s still considered a low managed care area.

Managed Care Strategies asked seven hospital representatives from the East Coast to California to discuss how managed care pressures have affected their hospitals’ LOS, their use of clinical pathways, cost-cutting measures, and other changes. (See related story, p. 26, for a summary of their remarks.) They are as follows:

Low managed care.

— Henry Anderson, MD, FAAFP, vice president of professional affairs and chief quality officer of Swedish American Health System in Rockford, IL. The nonprofit health system has a 400-bed community hospital, an insurance company, and a medical services organization with 44 primary care physicians, who are under contract to the system. The area’s HMO penetration is less than 20%.

— Faye L. Deich, RN, MS, assistant administrator of Sacred Heart Hospital of Eau Claire, WI. The 334-bed hospital is part of Hospital Sisters Health System in Springfield, IL. The area’s HMO penetration is about 30% to 35%.

— Craig Goscha, MBA, corporate vice president of Nebraska Methodist Health System in Omaha. The health system has 700 beds and three hospitals and is located in an area with about 21% HMO penetration.

Medium managed care.

— Chris Fallon, CPA, vice president of finance and chief financial officer for Atlantic Health Systems in Florham Park, NJ. The health system has 1,700 beds. The area has a managed care penetration of 65% to 70%.

— Ira Meiselman, MBA, vice president of managed care, also with Atlantic Health Systems.

High managed care.

— Robert A. Minkin, chief executive officer of Desert Hospital in Palm Springs, CA. The 388-bed hospital is owned by the Tenet Health System, which has more than 130 hospitals and is the second-largest hospital company in the United States. The Palm Springs area has a managed care penetration of about 85%.

— Wayne Selden, associate administrator of managed care services for Alvarado Hospital Medical Center in San Diego. The hospital has 231 beds. The San Diego area has about 50% managed care penetration.