Battle for beds: Maine's escalating fight for health care dollars

In one corner there's the hospital tag-team of Lewiston-based Central Maine Healthcare and the Parkview Adventist Medical Center in Brunswick. Together they are seeking approval of a "change-of-control" request they say will solidify a 10-year partnership that preserves choice and competition for their patients.

In the other corner there's Mid Coast Hospital, with a competing proposal that would close Parkview's 55-bed acute care hospital and create a coordinated preventive health care system for the Brunswick region — saving $24.3 million a year by eliminating duplicated costs and services.

Refereeing the match is Mary Mayhew, a former lobbyist for the Maine Hospital Association who now serves as commissioner of the Maine Department of Health and Human Services. She'll be guided by the state's 34-year-old Certificate of Need process — updated several times since its creation — which is intended to curb unnecessary health care costs as well as coordinate the planning of new services and construction.

Among the questions she faces is whether the smallest market in New England still served by two acute-care hospitals can be sustained, particularly since Parkview and Mid Coast have an average 44% occupancy rate for their combined 147 beds.

The underlying issues in this high-stakes battle over Parkview extend well beyond Brunswick. Topping the list is the high cost of health care in Maine and its effect on businesses and consumers: At $8,521 per capita, it's 27% higher than the national average and more than double the cost in other developed countries, according to the Kaiser Family Foundation. At the heart of the debate is whether "coordination of care," the essence of Mid Coast's proposal, or "increased competition," the essence of CMHC/Parkview's proposal, is more likely to keep costs from spiraling out of control — especially in a fragmented health care market like Brunswick's.

It also serves to illuminate the various strategies Maine hospitals are pursuing in their struggles to survive. Some examples:

• St. Andrews Hospital in Boothbay Harbor plans to close its emergency room and remove 'hospital' from its name in April 2013. It would continue serving the Boothbay region as an urgent care center.

• Sanford's 58-bed Goodall Hospital is joining Portland's Maine Medical Center as a part of the MaineHealth network.

• Mercy Health System of Maine has signed a letter of intent to sell its Portland hospital to Steward Health Care System, a Massachusetts-based chain of hospitals owned by private equity firm Cerberus Capital Management.

Clearly, Maine hospitals large and small are scrambling for survival in a changing landscape of government reimbursement, skyrocketing costs for new medical technology, increasing regulation and a drive to improve quality. Adding to those challenges is the $450 million the state still owes Maine hospitals for care provided to Medicaid patients during the last four fiscal years.

Competition or coordination?

In a small, fragmented health care market like the Brunswick region — whose 86,000 residents have at least five other hospitals within a 40-minute drive — the competing proposals over Parkview's 55-bed hospital reflect fundamentally different visions of health care's future.

Chuck Gill, vice president of public affairs for CMHC, says what's at stake is whether Brunswick area residents will continue to have a choice in hospital care.

"Mid Coast's argument is 'We can do everything for everybody and we want to be a monopoly,'" he says. "Monopolies lower competition and that leads to higher costs. Smart competition lowers costs, improves quality and helps with innovation and access."

Mid Coast CEO and President Lois Skillings disagrees, saying competition in a market that already is too small to keep two hospitals at full occupancy is more likely to trigger a "medical arms race" among the providers who are seeking greater shares of that limited population base. Specialties such as cardiology, gastroenterology, urology and neurology — which typically require four doctors per field for a hospital to provide 24/7 coverage — are the battlefield where Mid Coast and CMHC, which supplies most of those specialties to Parkview, compete for market share.

CMHC's geographic expansion of its specialist medical services into the Brunswick region via its relationship with Parkview inevitably shifts some patient care from Brunswick to Lewiston — a duplication of acute-care services leading to unused capacity and added expense in Brunswick, Skillings says.

"Competition in health care is only effective in reducing costs if there is enough population to sustain it," she concludes. "This is an issue of making sure that we have appropriate hospital capacity to serve the region's population."

Robert McCue, Mid Coast's chief financial officer, says accounting consultants from Ernst & Young, Baker Newman & Noyes and Stroudwater Associates, calculated the annual cost of redundant acute care between the two Brunswick hospitals at $24.3 million.

"Today our communities are trying to support two intensive care units, two emergency departments, two medical surgical units, two operating suites, two CAT scans, two MRIs … basically, two of everything," McCue says. "It is not necessary, and more than ever we need to capture this savings and return it to the community."

An April report in Health Affairs journal about hospitals' geographic expansion gives context to those opposing views. The report, funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform, identifies an increase in "targeted geographic expansion to 'capture' well-insured patients" as "health care's most recent competitive trend."

Brunswick region's three large employers — Bath Iron Works, Bowdoin College and L.L.Bean — provide health insurance to their employees, making the market attractive for health care providers. It also hosts a growing, well-heeled retirement community that will need care.

"Such moves enable hospital systems to increase market share by drawing referrals to support current or planned in-patient facilities … increasing referrals of complex cases to their flagship tertiary care hospitals, and strengthening service lines," the report states. "Increasing their geographic reach may bring more patients into these hospital systems, further increasing their leverage over health plans to command higher rates."

While the report says health care costs can go either up or down, depending on a market's characteristics, it ends on this note: "Health care providers' market imperative to grow may conflict with other mission and policy goals. As our study shows, this tension persists and remains unresolved."

New trends

As the CEO of the Maine Health Management Coalition in Portland, Elizabeth Mitchell has been bringing together employers, hospital and doctors' groups, and health insurance providers for tough conversations about the price and quality of health care in Maine. Since stakeholders in the Brunswick hospital debate are members of her organization, she's unwilling to take a side.

Instead, Mitchell identifies questions she believes should be considered in the state's review of the CON proposal, such as "how will this improve health care in our community?" and "how do the hospitals compare with respect to patient outcomes, expense and 24/7 coverage?"

Health care trends also should be considered, she says, particularly their likely impact on hospital admissions. For example, she says, greater emphasis placed on preventive and primary care tends to reduce hospital admissions. Concerns about cost and the risk of hospital-borne infections, likewise, have led to shorter hospital stays, as will paying closer attention to people with chronic illnesses, who are 3.2 times more likely to require hospitalization than the regular population when their primary care is not coordinated.

If payment incentives increasingly focus on keeping people healthy — as she believes they should — hospital overhead costs will be compromised by declining revenue from in-patient services. In Mitchell's view, that's already forcing hospital administrators to rethink their whole approach to health care.

Business perspective

For William Haggett, CEO of Pineland Farms Natural Meats Inc. in New Gloucester and former CEO of Bath Iron Works, CMHC's plan to assume control of Parkview is akin to the Yogi Berra feeling of "it's déjà vu all over again."

In 2004 he served as chairman of the Commission to Study Maine's Hospitals, which was charged with identifying ways of improving quality, increasing access and lowering hospital costs. Its 2005 report made numerous recommendations, many of which have been followed, including implementing best medical practices, increasing the number of critical access hospitals in Maine and pursuing "more hospital cooperation, collaboration, consolidations and/or affiliations." CMHC's CON request and its emphasis on hospital competition is a departure from those recommendations, he says.

Haggett says the commission at one point discussed closing two hospitals through mergers with larger neighboring competitors — Parkview and Inland in Waterville — to eliminate an unnecessary duplication of services. But the recommendation was removed from the commission's final report due to then-Gov. John Baldacci's strong objections over potential job losses.

In a July 13 letter to DHHS's Division of Licensing and Regulatory Services, Haggett reiterated the report's arguments about "excessive duplication of services leading to higher costs and poorer quality care in the long run." Expressing his opposition to CMHC's Parkview proposal in that letter, Haggett concludes: "2012 is hardly the time to establish a new hospital combination in the region … Now is the time to consolidate local assets, cooperate and strive for the highest possible level of affordable excellence in health care."

In support of that point, Haggett cites a new variable that wasn't present when his commission filed its report: the 2010 closure of Brunswick Naval Air Station and the loss of more than 3,000 active-duty and civilian employees from the region.

Two weeks after an Oct. 24 hearing on the CON, upwards of 180 letters had been received at DHHS's Division of Licensing and Regulatory Services, the vast majority from patients, employees and board members of the three hospitals. Only a few were submitted by businesses, but they reflected a common concern: Businesses say they can't afford continuing increases in health care costs and the related expense of providing health insurance to employees.

"Over the years, the challenge of offering health insurance has become significantly more difficult," writes Cheryl Rust, owner of Le Garage restaurant in Wiscasset. "Higher deductibles and escalating premiums have diminished its accessibility to some employees … The added costs of sustaining two hospitals in Brunswick have a tremendous impact on the cost of coverage …. If this [CMHC/Parkview] application is approved, both the economic and opportunity costs to our communities will be great and enduring. "

Bath Iron Works, which has 5,200 employees and pays $100 million a year on health care, is drafting its letter of opposition to the CMHC/Parkview CON proposal. But in a statement, spokesman Jim DeMartini told Mainebiz that "excess capacity" and "duplication of health care facilities" are not in the shipyard's or Maine's best interests.

"By 2016 Maine is projected to have the highest cost in the nation for employer-sponsored family coverage. Our primary competitor operates in Mississippi. Mississippi is projected to have the seventh least expensive family coverage costs. Our challenge to remain competitive in light of these circumstances is significant and other businesses are facing similar challenges … Continuing to spend millions of dollars a year on inefficient health care delivery is a luxury that BIW, the business community and our families cannot afford."

What next?

Both Skillings and McCue see Mid Coast's plan as a viable alternative that's more in tune with the emerging "Triple Aim" health care trend, which emphasizes preventive care over hospitalization, reducing the per-capita cost of care, and having hospitals working closely with patients, doctors and communities to improve quality of care and access to services that keep people healthy.

Although only the CMHC/Parkview proposal is subject to CON review, Skillings and McCue say their competing plan remains in play because the CON law requires the state to consider lower cost alternatives that meet the community's health care needs — as well as determine if there's a public need for CMHC's to assume control of Parkview. On both counts, they say, CMHC and Parkview fall far short.

Gill disagrees, saying CMHC has a proven record of reducing costs and improving quality at its hospitals in Lewiston, Rumford and Bridgton, and will do the same at Parkview.

DHHS staff will begin an analysis of the CMHC/Parkview CON application that is expected to last until late December. No date has been set for Mayhew's decision.

If she rejects the application, Gill says CMHC will continue its 10-year-old working relationship with Parkview. But he doesn't expect that to happen.

"This is a pretty simple decision," he says. "We believe the department will approve our application."

Skillings and McCue say if the state approves the CMHC proposal, the CON process gives Mid Coast the opportunity to request a reconsideration hearing. If CMHC is turned down, both say Mid Coast's board is committed to working with Parkview's administrative team to reduce costs and improve the delivery of health care services.

"Our goal is to heal the health care system in our community," says Skillings.

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