DON Reform - Half A Loaf?
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I usually spend some time throughout the year visiting with accounts, physicians, hospitals, and brokers (among others), just to hear what’s up and what’s going on. Earlier this week, I was out visiting the leadership at a community hospital in Massachusetts, and asked them if they appreciated the Department of Public Health’s (DPH) decision to require Academic Medical Centers to prove they weren’t duplicating existing clinical services in the community when they opened new operations in the suburbs around Boston.
For the uninitiated, this issue’s been percolating in Massachusetts for the past couple of years, as a number of well known teaching hospitals have broken ground on some pretty big outpatient facilities in the suburbs around Boston. The service suite in these places varies, but it’s basically day surgery, cancer treatment, cardiac care, high end radiology, and assorted other high margin outpatient services that many community hospitals in Massachusetts argue they were already doing, and may now lose to these new facilities. The community hospitals also argue - and there’s plenty of data to back them up on this - that they already deliver most of these services, do it for a lot less than the teaching hospitals - and will lose business to these new sites once they open. This will, in turn, jeopardize their ability to deliver the whole suite of inpatient and outpatient services they’ve been delivering successfully in these communities for years - which will raise the overall cost of health care.
In response to these concerns, the state’s DPH recommended, and the Public Health Council voted affirmatively for, changes in the state’s Determination of Need (DON) rules that would require a provider to demonstrate they weren’t duplicating existing services if they expanded their footprint into someone else’s territory.
Or so I thought.
When I asked these community hospital leaders about this reform, they scoffed at me. “It only applies to the conversion of existing outpatient services to inpatient services,” they said. They added that the new rule won’t require any kind of approval if a teaching hospital wants to open a new outpatient facility that duplicates existing community-based services anywhere in Massachusetts. My initial reaction to this was, “that can’t be right - the whole ballgame is in expanding outpatient and day services.” So imagine my surprise when I called a few health care lawyers I know and asked them about whether or not the new rules around service duplication applied to outpatient services. The answer - while delivered with three layers of lawyerspeak - was, for the most part, ”no.”
Ouch. If this is, in fact, the case, then this reform does very little to stop the ongoing expansion of clinical services out of downtown Boston and into the suburbs. That’s too bad. There’s a lot of really good - and relatively inexpensive - care being delivered outside the city of Boston by respected caregivers in community hospital settings. Before provider organizations from other parts of the state can open up new - and potentially unnecessary - outpatient services in these service areas, the state has an obligation to determine if, in fact, the new services are necessary and/or cost effective.
Ouch indeed! And I figured Partners’ support was due to the fact that the “horse was already out of the barn” as for their own costly, unquestioned and unjustified expansion plans. Seems like the whole herd will continue to be get loose from Boston and spread across the state. What a shame for the community hospitals. And guess who gets the tab to pay for the unnecessary expansion?!? Same old story–the consumers, employers and taxpayers.
I wonder if Academic Medical Centers could not become low cost providers of healthcare if we made a couple of important changes in the payment mechanism. Specifically, why can’t we pay AMC’s for their education mission separately with a combination of medical school tuition and tax dollars instead of imbedding much of this cost into patients’ bills? Why can’t the research mission be paid solely with research grants and philanthropy, and, if needed, tax dollars? While this would obviously require CMS and Congressional leadership to effect, it could allow AMC’s to bill patients and their insurers for the cost of healthcare services only.
In theory, the AMC’s have more scale, state of the art knowledge and better access to capital than community hospitals. They should be able to more easily afford electronic medical records, develop bundled payments for expensive surgical procedures, and maybe even learn to live with a capitation payment system which, in turn, would give them the incentive to provide cost-effective care and not just aggressive (and expensive) care which, as often as not, is unnecessary and sometimes even harmful.
If I needed cancer care, either inpatient or outpatient, I would feel more confident receiving it from a brand name institution like Memorial Sloan Kettering or Dana Farber with a well established reputation for excellence in that field. They have the state of the art knowledge and cutting edge research in house and their doctors probably see more patients, especially the more complex cases. With volume and scale, these institutions should be low cost producers. Why aren’t they? I think the payment system is at least part of the answer.
I agree that the recent update of DoN regulations probably should have taken a closer look at ambulatory services. When the state deregulated ambulatory services from the DoN process decades ago, the environment was totally different. The intent was to level the playing field for hospitals with the large staff model HMO’s like Harvard Community and Fallon Health Plans which were exempt from DoN review under federal law. Equally, the deregulation of ambulatory care sought to offer an incentive to hospitals to invest in ambulatory services at a time when cost reimbursement greatly favored inpatient services.