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In search of a sustainable business model

The proposed merger between Lifespan and Care New England [and Brown] will require regulators, legislators and policymakers to ask and answer difficult questions about the future of health care in RI

Photo by Richard Asinof

On Feb. 6, 2019, Gov. Gina Raimondo signed an executive order that placed a voluntary cap of 3.2 percent annual growth for the health care spend in the state, accompanied by Dr. Tim Babineau, president and CEO of Lifespan, Dr. James Fanale, president and CEO of Care New England, Kim Keck, president and CEO of Blue Cross & Blue Shield of RI, Marie Ganim, the R.I. Health Insurance Commissioner, and Neil Steinberg, president and CEO of the Rhode Island Foundation, among others. With the proposed merger of Care New England and Lifespan, the question is: what regulatory mechanism or body will be able to enforce a spending cap on health care costs moving forward?

By Richard Asinof
Posted 9/14/20
The proposed consolidation of Care New England and Lifespan into one dominant health system in Rhode Island requires regulators and legislators to ask some hard questions about how such a merger will require a changed business model.
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If housing is the place where jobs go to sleep at night, what are the practical policy solutions being developed at the community and neighborhood level to address such needs, tied to job creation and job training?
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It may seem clichéd to quote lyrics from Bob Dylan more than five decades after they were first sung, but it seems apt to share them during this time of dramatic change: “Come gather ‘round people/wherever you roam/and admit that the waters/around you have grown/and accept that soon/you’ll be drenched to the bone/if your time to you is worth savin’/and you better start swimmin’/or you’ll sink like a stone/for the times they are a-changin.”

PROVIDENCE – The news that the boards of directors of Lifespan and Care New England have voted to move ahead with plans for a consolidated merger [with Brown University’s medical school and school of public health as a full participant and beneficiary] should surprise no one, in the latest chapter in the soap opera that is the health care industry in Rhode Island.

In the latest plot twist, former petulant suitors – Dr. Timothy Babineau, the president and CEO of Lifespan, and Dr. James Fanale, president and CEO of Care New England – have decided to give it the old college try to find a way to make an arranged corporate marriage work, agreeing to share a connubial hospital bed together.

Translated, money talks. It appears that the coronavirus pandemic and its resulting financial disruption has accomplished what years of nasty corporate warfare could not – bringing Babineau and Fanale together to the altar to say, “I do.”

Whether either of the two will retain their titular positions if a merger is accomplished remains an open question.

The bottom line: both health systems have been wedded for years to an unsustainable business model, where 90 percent of health outcomes are determined outside of the clinical office, yet health care costs continue to skyrocket – driven by five major factors: the spiraling costs of drugs; the rising costs of specialty care; the unmet needs of mental health and behavioral health care; the high cost of women’s health care; and the systemic racial inequities built into the business models for delivering care.

As illuminated by the coronavirus pandemic, a sixth factor will be the unrelenting public health threat of climate change, which health systems and public health agencies are unprepared to address. It is unclear how such a merger will make them better prepared to do so.

The health care industry in Rhode Island has already been colonized: Yale New Haven owns Westerly Hospital; CharterCare, a for-profit division of Prospect Health, owns Roger Williams Hospital; Prime Healthcare owns Landmark Medical Center in Woonsocket, while Southcoast Health keeps nibbling away at the edges of Rhode Island’s eastern borders with an urgent care center in a Seekonk, Mass., shopping plaza, for example.

Further, the move toward population health promoted by the Centers for Medicare and Medicaid Services at the federal level through accountable care organizations has reorganized risk at the physician’s level, insulating health systems from financial shortfalls.

And, big box stores such was Walmart and pharmacy chains such as CVS have created their own in-store clinics for consumers, serving patients who find it difficult to access primary care. Not to mention that hospitals, commercial health insurers, and pharmacy benefit managers have been engaged in a series of engulf-and-devour mergers in recent years.

The wealth gap
Whether or not the corporate merger of the two largest health systems in Rhode Island will improve access, reduce costs, and create better health outcomes remains to be seen. Or, as one observer put it bluntly: If everyone gets shitty care that costs too much and takes too long, what is the advantage of the merger?

There will be a lot of thumbs on the scale to support the consolidation of the two dominant health systems in Rhode Island, given that the health care industry is the largest private employer in the state and one of the few industries with projected future job growth. Make no mistake: Gov. Gina Raimondo and Brown University President Christina Paxson will be deeply enmeshed in the negotiations, prepared to pull any and all strings to make this merger happen. Supporters will include the Partnership for Rhode Island, the group of top CEOs in the state, as well as the Rhode Island Foundation, which will see the merger as a way to move forward with its long-term, 10-year-plan to make Rhode Island the healthiest state in the nation.

Any merger will have to pass through the regulatory Scylla and Charybdis of the R.I. Department of Health and the R.I. Attorney General’s office. There is the further question of whether such a merger can pass the federal muster of restraint of trade issues for monopolies. A lot of law firms and a lot of consultants will make a lot of money navigating the regulatory passage to approval, which is likely to take a minimum of at least two years.

The intent of this story, then, is to put together a series of questions around the potential merger, as the beginning of a fact-finding expedition into what the consolidation will mean for patients and consumers. [Clearly, these are not questions that can be easily teased out at one of the Governor’s pressers, however diligent reporters such as Bill Bartholomew and WPRO’s Steve Klamkin are in pursing answers.]

There is also a clear political import: elected officials in Rhode Island who fail to respond to voters’ concerns over health care policies may find themselves on the losing side, as the pendulum swings toward greater accountability, as the most recent primary election demonstrated.

The questions that need to be asked
To push the conversation around the proposed merger of Care New England and Lifespan [and Brown] in a healthy direction, here are a series of questions to ask, suggested by ConvergenceRI.

1. How much new investment capital will be required to support the proposed merger, given the current financial liabilities of both health systems? During the previous proposed merger in June of 2019, the suggested figure of capital investment floated was $200 billion, according to several sources. [See link below to ConvergenceRI story, “Matchmaker, matchmaker, find me a find, catch me a catch.”]

Approximately $150 billion had been the amount of capital investment anticipated by the proposed takeover of Care New England by Mass General Brigham [then known as Partners Healthcare], a deal that had been squelched by Gov. Gina Raimondo.

Follow-up question: How much, if any, of that needed capital investment will come from Brown University and its endowment, given that its medical school and school of public health will benefit greatly from the merger?

Follow-up question: What is the total amount of money that has been pumped into the two hospital systems under the federal CARES Act in 2020, reported to be more than $100 million, and what are the details of how it has been spent?

2. Under the proposed merger, what will be the schedule of integration of data systems deployed by the two hospital systems, and what will be the cost of achieving interoperability? Is there a way to prevent patients from bearing the brunt of the costs of the needed upgrades to the data systems?

As much as data systems have been promoted as a tremendous innovation to achieve clinical integration, the true value of such systems has been the way it has maximized billing for the health systems, to squeeze every last dollar out of the medical enterprise.

Follow-up question: Is there a way that regulators can track how the costs of data interoperability are applied to health system operations? How much is in charges to insurance companies, how much is passed along to patients in “system” charges, and how much is passed through medical education funds from Medicare?

Follow-up question: What are the transactional costs of data systems on doctors and nurses who are responsible for inputting and tracking patient data?

There is a policy belief, as demonstrated by Gov. Gina Raimondo’s endorsement of Deloitte’s epic botched rollout of the Unified Health Infrastructure Project, that big data applications will create opportunities for greater efficiencies and cost savings.

That philosophy was promoted by Carl Dvorak, president of the privately held Epic Systems Corporation, in a lecture at the Warren Alpert Medical School on Jan. 29, 2018, in describing the federal investment in health IT by hospital systems.

“This was our [21st century] version of the Tennessee Valley Authority,” Dvorak said. “They [the government] didn’t care if it worked; it just had to have reasonable expectation that it would work,” in order to help keep the economy afloat in the aftermath of the Great Recession.

As ConvergenceRI reported, “In March of 2013, [seven] years ago, the amount being spent by the government on EHR implementation was $1.6 trillion, according to Stephen Soumerai, professor of population medicine at Harvard Medical School. At the time, Soumerai said that the investment was being made without any research evidence to support the claim that changes in delivery, outcomes, quality and cost savings could be achieved through EHR implementation.

Translated, to paraphrase the lyrics of John Prine's song, “Sam Stone,” There’s a hole in the health system’s arm where all the money goes. [See link below to ConvergenceRI story, “Is health care all about the data, the data, the data?]

Health care that works best is a human enterprise, based upon the private, trusted relationship between the patient and the provider.

3. What will be the relationships between the new consolidated hospital system and nursing homes, moving forward? For years, in an effort to reduce in-patient costs, hospitals have deployed a kind of just-in-time “delivery” system of transferring patients to nursing homes and other rehabilitation facilities following procedures, a transactional program that is built into the DNA of the current health care delivery system.

Follow-up question: What part of state government will be responsible for regulating insurance payments to nursing homes under Medicaid in a new consolidated system?

Follow-up question: How will the merger address the costs of unnecessary hospitalizations and re-hospitalizations associated with the current relationships between hospitals and nursing homes and rehabilitation facilities?

4. How will emergency departments function in the new consolidated health system? Right now, the current practice is to divert ambulances on a regular basis, so on a typical slow Monday night in August of this year, ambulances were diverted from Landmark Medical Center in Woonsocket and Kent Hospital in Warwick to the emergency department at The Miriam Hospital in Providence, resulting in three-to-four hour delays in seeing patients.

Follow-up questions: Whose responsibility will it become internally to regulate the diversion practices of hospitals? And: Who will be responsible for tracking how “uncompensated care” costs are spent by the new entity?

5. Under the new proposed consolidation of Care New England and Lifespan and Brown, each of which “own” or are aligned with numerous physician group practices, who will be responsible for managing the practices?

Follow-up question: How will risk be shared, i.e., what are the rewards or penalties for good and bad health outcomes?

Follow-up question: Who will decide what the different group practices bill for, and how much they bill, for different procedures?

Follow-up question: What will be the extra costs that become the responsibility of patients who receive care from physicians who are “out-of-network” providers?

6. How will emerging physician group practices, such as Ortho RI, the largest independent, non-hospital-centric, orthopedic group practice in the state, fit into the future health care landscape in Rhode Island?

Follow-up question: Does the state need new regulatory laws to protect its citizens from potential monopolistic health care enterprises?

Follow-up question: What kind of regulations may be necessary to keep the proposed consolidated health system from exercising its market power in an anti-competitive framework?

Follow-up question: How do you strike a balance between eliminating unnecessary capacity as promised by consolidation, and the current reality that health systems have not proven to be adept at weeding out the delivery of unnecessary services that are lucrative?

7. What happens if the new entity falls apart financially, unable to pay its bills, or one partner seeks to file for divorce?

Follow-up question: How can the R.I. Department of Health, given its prominent role as a partner with Gov. Gina Raimondo in the political push to reopen schools amidst the coronavirus, be seen as an impartial regulator of such a merger?

The reality is that divorce under the marriage proposal of a consolidated system may prove to be very difficult. As with most corporate mergers, one health system may emerge as the eventual dominant partner.

8. Will the new consolidated health care entity endorse a policy of making health care prescriptions for affordable housing?

Follow-up question: If affordable housing is in such a crisis in Rhode Island, what is the responsibility of a new consolidated health industry entity to invest its capital in affordable housing development?

There are no incentives in the core business model to make investments in affordable housing; instead, health systems park their money in bonds and other financial vehicles to achieve a return on their “investments.”

The long-term benefits of making such investments in affordable housing as a long-term public health policy to improve health outcomes for the residents they serve are numerous. To do so, however, would require regulators to recommend a structural change to how health systems invest their “profits” as a way to achieve future health care savings.

9. How will the change to telehealth platforms redefine the way that office visits are coded and billed for under the proposed merger, given that the current infrastructure built around office visits, particularly around specialty practices, may need to be changed?

Follow-up question: Will health insurers be required to eliminate third-party verification for approval of services recommended by physicians?

10. Will it be possible for the R.I. Office of the Health Insurance Commissioner to control the enormous pricing power of a consolidated entity?

Follow-up question: How will investments in housing, childcare, transportation, and job training be able to compete with the likely increase in health care sector costs?

Follow-up question: Will there need to be a regulatory firewall created between home and community-based health services, and between primary care, acute care by hospitals and their specialist staff, in a new body that does not currently exist?

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