Healthcare Roundtable: Westchester County Experts Discuss the Financial State of the Healthcare Industry
With nearly a fifth of Westchester's labor force working in healthcare, local experts discuss the industry's financial prognosis.
Photography by John O'Donnell
Robert W. Amler, MD
President and CEO, Hudson Health Plan
Simeon Schwartz, MD
President and CEO, Sound Shore Medical Center
Daren Wu, MD
With all the political rhetoric on healthcare saturating the cable news airwaves, it’s easy to tune out the debate and dismiss it as little more than an academic abstraction. But in Westchester, the healthcare sector is a palpable part of our economy, employing 15 percent of the county’s labor force—and much of that hard-earned payroll is spent in-county. With so much of the county’s economic livelihood at stake, we invited several of Westchester’s healthcare leaders to join us for a spirited roundtable discussion. While we didn’t solve anything in two hours (surprise), we did, we hope, shed some light on a complex and confusing situation.
914INC.: What is the biggest challenge facing healthcare providers in Westchester?
Jon Schandler: First of all, getting ready for the changes that will be a part of the Affordable Care Act. It’s a massive reengineering of the healthcare system, and we are all trying to make sense of how it will affect us. But it is clear that being high-quality, low-cost, and efficient providers is going to be key. On top of that, unfunded mandates—the constant layering of government requirements where costs are not known. Almost everything the government requires is an unfunded mandate. Medicare and Medicaid pay me thirty percent below my costs, and I’ve got another ten to twelve million dollars a year taking care of people who can’t pay their bills. Then we have reporting requirements for almost everything we do—probably four hundred agencies survey our hospitals. Some surveys are appropriate and public-health oriented, but some have just existed for years that have no necessary purpose. It is a huge cost.
Simeon Schwartz: With no added value to the consumer. We report because we are told.
Daren Wu: There is a lot of busy work, but I think there is a lot of very excellent work that we are all asked to do. The surveys are generally about patient experience, which is sorely needed. But we at Open Door shouldn't be administering them ourselves; we should contract externally for the most unbiased results, but we are a very small entity compared to the folks around this table. Contracting externally means tens of thousands of dollars of work, with no reimbursement.
914INC.: What do you find out, that patients are miserable?
Daren Wu: Well, besides the fact that most are miserable, we find out about our care as physicians, frontline staff, communication with the office, accessibility. Are we affordable? Are we providing the right hours?
Georganne Chapin: Hudson Health Plan is a Medicaid and public-program managed care organization, and our biggest challenge is true care integration, the goal of which is to make sure that people get what they need and get only what they need—not five times what they need; that there is communication among all the different individuals and institutions involved in people’s care.
914INC.: Are people getting more than they need because of the commercialization of medicine, where providers are going to up-sell services to patients?
Georganne Chapin: I don’t think hospitals are into up-selling. I think pharmaceutical companies are into up-selling, and I think specialists are. Some of it is defensive, and some of it is simply our culture. Are we all ‘patients’ just because we go to a doctor? When you identify everybody as a ‘patient,’ and you are in a money-driven system, that means everybody is really a consumer. And nothing in healthcare reform is really changing that.
Simeon Schwartz: I would actually disagree with that. I think the biggest issue in healthcare today is the fact that we are changing into accountable-care organizations. These are organizations where providers are responsible for the cost of care. Hudson Health Plan has, for years, been responsible for the cost of care. But now, a significant percentage of WestMed’s patient base, including our twenty-plus thousand Medicare members, will have contractual relationships with us that provide a financial incentive for us to control the cost of care. And that is going to have a dramatic impact. It is an enormous challenge, and we have invested now in excess of one million dollars in systems to control costs while improving quality. Whether or not the Affordable Care Act is going to go through or not, all private carriers are being held accountable.
Georganne Chapin: I don’t think we are very far apart on this. I think that the challenge of costs and the pressures on your doctors to deliver too much are not from within. These are conflicts we have in our system.
914INC.: I’m going to ask a really silly question here: How do you guys make money?
Daren Wu: It is changing right now. But it is still predominantly volume driven, so quantity, in a very general sense, over quality. So the more ‘widgets’ we produce on the healthcare plan, the more we get paid.
914INC.: So the more patients you admit into your hospital, the more money you make?
Daren Wu: Or the more procedures done, the more MRIs done…sure.
Georganne Chapin: Specialty visits generate more money than primary care.
Jon Schandler: With several caveats—there are more performance systems, so now a portion of your payments are based on efficiency and satisfaction.
Simeon Schwartz: If you asked me six months ago, I would’ve told you that the transition to accountability, where providers are responsible for costs, would take place over three to five years. It is now clear to me that the market is going to transition in six to twelve months. As of July 1, thirty-plus percent of our patients will be covered by a system with some financial incentive to control costs. We had one percent of our patients covered January 1, so that is a very exciting development.
914INC.: When you say you have to account for costs, who are you accounting to?
Simeon Schwartz: Either to the insurance companies, or—in the case of Medicare and Medicaid—to the government.
John Spicer: What healthcare reform is doing also is changing the relationships between the hospitals and the doctors, because we’re now incentivized in a very similar fashion. Frankly, in many instances, we were the ‘hotel’ in which the doctors practiced. But we are now under pressure to ensure that we can deliver low-cost, high-quality care, which makes us more or less attractive to the physicians. Many of the hospitals are joint-venturing with their medical staff in ways that, six months ago, we wouldn’t have.
Robert Amler: Thirty-five years ago, when I first came to Westchester as a young attending physician at a community hospital, I ordered whatever tests or treatments I wanted and whatever happened, happened—but it was completely my orders, my direction about who came into the hospital, who went home, when they went home, etcetera. That is no longer the case. At New York Medical College, we produce some four hundred new health providers every year—half of them physicians. We have to adjust our training for this shift in accountability. More and more physicians are captive in practices that are now owned or operated by the hospital in which they work. Let’s face it: Their professional responsibility may be to the patient, but their responsibility as employees is to their employer. Small group practices of three to six doctors are running to get into a larger organization so that they can get some kind of protection from the extra maladies that are raining down on them.
Daren Wu: Up until about three years ago, more than fifty percent of all graduating physicians coming out of residencies established solo private practices, or joined a practice with two or three others. Now, fewer than a quarter are joining small practices—the great majority are joining hospital practices and large practices. That’s a good thing overall. When you join a group that has economies of scale, only then do you have levels of oversight for quality control. Right now, healthcare providers don’t know exactly how they are doing. When you join a community health center, a hospital, a group like WestMed, you are joining a part of a system that has in place data collection and tracking capabilities. And once you have data, you can see what you are doing well—and often what you are doing not so well.
Robert Amler: There is a trend that we hope to see modified somewhat. Over the last fifteen years, there has been a tremendous gravitation of graduating doctors into sub-specialties, who do more elaborate and more complicated procedures and thus get paid more per visit. Primary-care doctors get the lowest rate of return. There have been government programs to try to reverse that trend, and, in our medical school, we have all sorts of incentive programs for students, but we are fighting an economic tide.
Daren Wu: The trend is starting to shift. We’re recognizing we need more primary-care physicians, who are trained in a more holistic manner and work more on the primary-care/prevention side, to get to know the communities and reduce cost to the overall system.
Georganne Chapin: It’s going to take some time to get enough primary-care physicians. Being a primary-care doctor doesn’t pay, and it doesn’t have good prestige, traditionally.
Daren Wu: It is not true capitalism that has driven this system. This system has been an oligopoly at best. Money is not paid from the patients/consumers to the healthcare provider: There is a third party in between things, an insurance company. So, as an insured patient, if I want to get a physical exam with a primary-care doctor, it is going to cost my insurance company two hundred fifty dollars. I would never pay that amount if it came out of my own pocket. My insurance company will then also pay, if my primary-care doctor refers me to see an ear, nose, and throat doctor because I just sneezed last night, a gastroenterologist because I have a little bit of bloating after a big meal, etcetera—that’s currently what is happening. In a true free market, I would have to go around and pay for all these specialists and pay for all these medications. It is an insurance company that is paying, and then jacking up its rates.
Simeon Schwartz: The capitated model, which has been dominant in Northern California for more than a decade and a half, is starting to come to New York. In a capitated model, providers are given a lump sum when they handle the patient and, if they are able to deliver high-quality care for less than that sum, they’re rewarded financially. And in some contracts, if they deliver for more than the sum, they are penalized. In those markets in California where this is dominant, patients utilize thirty percent fewer hospital day services than what is typical in Westchester, and their total costs are twenty-five to thirty percent less also.
Georganne Chapin: With no appreciable difference in quality.
Simeon Schwartz: It’s actually even a little more impressive than that, because there is a special-needs population. These are patients who have both Medicare and Medicaid. They tend to be poor, they’re always elderly, they always have multiple chronic illnesses, and they are actually the highest cost group in the country. In California, they are now down to half the number of hospital days compared to a similar population in Westchester.
Georganne Chapin: We at Hudson Health Plan just started to review our hospital admissions more critically, because our payment from the government has been squeezed so much, and we found that between twenty and fifty percent of our short-stay admissions were deemed to be ‘not medically necessary.’ That doesn’t mean that the physicians who admitted these patients didn’t have a rationale for doing so.
Jon Schandler: John Spicer and I can talk about the fact that every day there are at least thirty patients in our hospitals that we just don’t have a place to send. And so we warehouse patients—we are sort of like the social-service agency for those people.
Simeon Schwartz: The issue is that they are not picked up until a crisis has occurred. The problem is that we do not identify people who are at higher risk based on a variety of social, economic, and medical conditions, who are likely to require interventions early enough to bring them into the system.
Jon Schandler: We are doing the opposite: We look at our admitted population and identify which of those patients are up for readmission because we have begun to be penalized for readmissions. So now, we are predicting which patients we think will come back and are putting a system of care in place with visiting nurses and our own practitioners. We call patients to see that they’ve seen their doctors. We are fundamentally changing our responsibilities. My responsibility used to be for patients in the hospital. Now, my responsibility is going much further; I have to worry whether the patient with congestive heart failure went out and ate high-sodium food every day or went to the doctor and took his medication. It’s now my problem because, the next time he comes in, I am only going to get a fifty-percent payment. Don’t get me wrong, this is better for the patient.
Simeon Schwartz: And better for the system. The cheapest heart attack is the one that doesn’t occur, and we know, as a society, how to prevent a vast majority of acute heart attacks. The data is compelling: diet, exercise, smoking cessation, etcetera. We are seriously considering building a kitchen in one of our facilities because we want to bring the community in and give them healthy-cooking classes.
914INC.: Hospitals becoming the primary social-services agencies for patients is obviously putting an increased financial burden on the hospitals.
Daren Wu: It stretches our resources, but I am quite convinced it will save the system money, if we work on the public health message.
Simeon Schwartz: The studies don’t show that.
Daren Wu: Not just if we work on reducing unnecessary readmissions—that alone would not do it. It’s about really building the foundation of primary care. I am biased; I am a family physician. But you need to have a much stronger base of primary care to catch things far earlier, before they become a train wreck in one of our hospitals, using up a lot of those resources. I also want to make a pitch for public health. I see a lot of pediatric patients, and I’m shocked by how many kids do not have recess every day or phys ed every day. What they eat and how much they exercise is a public-health issue. So is the plight of the uninsured. Fifteen percent of people are uninsured in this county, and we see quite a few of them at Open Door.
914INC.: To care for uninsured patients, you have to raise funds, right?
Daren Wu: Correct. We have a pretty robust fundraising mechanism for them, and we are also government-funded. And an ounce of prevention really is worth a pound of cure. When you don’t take care of uninsured people, eventually many of them get sick, which means lost days of work, days out of school. And when these folks land in a hospital, they’re usually a little sicker. So besides humanitarian reasons to take care of everybody, it’s a huge cost to society.
Robert Amler: I agree with everything that Daren said, but there is an economic asymmetry here. When Daren’s primary-care facility saves lost days from work or prevents a heart attack, Daren does not reap the economic benefit of that savings. It lands someplace else, and because of that asymmetry, the real economic value of prevention is not recognized or realized at the place where it is provided.
Georganne Chapin: It has to do with our philosophy of healthcare in this country. This is an industry; this is a market. We want to be incentivized, and we want to have rewards. But countries that have far better health indicators than the US spend half as much.
Robert Amler: I would challenge that. The statistics are easily misinterpreted; there are many that show that they do not have a better health status than the US.
Simeon Schwartz: Everyone at this table would agree that the current system is broken, yet no one came to me, nor to Jon, nor to John, nor to Daren. The system has been changed by an act of Congress, and none of us are excited about this. To lead organizations of our size through fundamental change is very, very challenging and for some of us, it will be a career-denting experience. We will have to change the way we pay every physician in our organization over the next few years. We are making fundamental changes to our compensation model to award quality, efficiency, cooperation.
914INC.: That sounds positive.
John Spicer: It is.
Jon Schandler: Our problem is New York State has been starved for capital in the hospital business. We have to figure out creative ways to invest in electronic records, and it is a huge investment. Every day, ten percent of the two thousand devices in my hospital are broken because they are used so much.
Georganne Chapin: We have an unsustainable healthcare system from a cost perspective. Costs are going up, and people now are ramping up for healthcare reform essentially by creating larger and larger corporate entities and bludgeoning insurers. There is nothing under health reform that is going to change the direction of spending. People want a lot of stuff. They want a lot of drugs, a lot of testing, a lot of nice buildings. They want things that in other nations are decided in a more central way. We are going to have to address that, and if we don’t, we are basically not going to be able to invest in roads, schools, everything else because healthcare is eating up all of these dollars.
Simeon Schwartz: I agree completely. It is clear to me that our system is broken. Provider accountability will slow the pace of rising costs, but it’s not going to decrease the cost.
Georganne Chapin: I think all of us have seen a change over the years: We have seen more and more people qualifying for government programs. We have got middle class people in our health plan. In the beginning we only had the very poor.
Simeon Schwartz: Isn’t it much better off for the person who is unemployed, instead of having no access to care and an almost-guaranteed place in John’s emergency room, to be on the Hudson Health Plan?
Georganne Chapin: Of course, but if we had a system that gave everybody a basic entitlement to services because you are born here, it would save all of you a lot of money. How many people do you have figuring out whom you have to bill?
John Spicer: All I could say is, all of a sudden I am paying attention to people who do not belong in my ER, to people who are going to get discharged, who my home-care agency is, what my C-section grade is, a whole series of things we didn’t pay attention to before. And I think that hospital utilization is definitely going to drop.
Jon Schandler: There is going to be a decreased utilization by thirty percent. There are going to be fewer hospitals, fewer hospital beds. Hospitals need to operate at a certain critical mass in order to be successful, and either they are going to merge or go out of business.
Simeon Schwartz: There is no way our hospitals are of an appropriate scale for the modern world. Essentially, the most efficient hospital size in the United States is in the range of three hundred fifty to five hundred beds. We don’t have any number close to that size, except for Westchester Medical Center.
Georganne Chapin: I was just at Orange Regional Medical Center, and one of the things that they wanted to show us was their new fifty-five-bay emergency room. What is a fifty-five-bay emergency room doing in Middletown, New York?
John Spicer: If his fifty-five-bay emergency room is deliberately overbuilt, then he's crazy.
Jon Schandler: We doubled the size of our ER, and we’re backed up every day.
Georganne Chapin: But you’re getting people in there instead of them going to the primary-care doctor.
Robert Amler: You can’t stand outside the ER at six o’clock on a Sunday evening and say, ‘You’re not really that sick; you can’t come inside.’
Georganne Chapin: They are being built to attract patients who are properly served elsewhere. I do not believe that Orange Regional Medical Center put in a fifty-five-bay emergency room without economic incentive for it.
Jon Schandler: They physically need to be able to handle the volume of patients. I lose money in my emergency room every day.
Simeon Schwartz: By the way, just for the record, the cost of a visit in his emergency room is more than four times the price of my urgent-care center.
Georganne Chapin: Exactly! Why aren’t we building urgent-care centers?
Simeon Schwartz: It turns out that a real urgent-care center, as opposed to just a regular doctor in a walk-in ‘doc-in-the-box,’ is a very complicated thing to build, because, in an emergency room, the infrastructure exists already.
914INC.: Isn’t there an inherent contradiction in the system, since providers are now being held accountable for the costs on one hand, but, on the other hand, they’re still all competitive with each other? If Hospital A opens a brand-new MRI center, then don’t Hospitals B and C have to open ones, too, or lose their business to Hospital A? Yet all three hospitals are now expected to contain costs.
Jon Schandler: There needs to be some sense of aligning incentives across the spectrum of healthcare. I have no problem with any of the construct of the Affordable Care Act. But I would have preferred that they figure out ways to test it, refine it, and then implement it to the broader population. If I wanted to re-engineer my hospital overnight and I said to my board, ‘I am going to completely change the construct of my business; you have to trust that it is going to work, and I am not going to test it or prove it’s right,’ I would be fired. I should be fired. But what worries me about New York and Westchester County is, since we have been so poorly funded for the last forty years, anything that disadvantages the system will be deadly to Westchester County. When you go around the country to hospitals like mine, they have four hundred million dollars in the bank. I’ve got twenty million in the bank.
Simeon Schwartz: Nobody mentioned the fact that thirty percent of Westchester healthcare is going into the city.
Georganne Chapin: People will not travel from Peekskill to White Plains, but they will travel from White Plains to Thirty-Fourth Street.
Simeon Schwartz: There are clear strategies that we can use in Westchester. One that worked was promoting our cardiac cath business. Most every cath is done by the same person—so he does the same procedure in White Plains that he does at Columbia. The only difference is that in White Plains, it is half the price of what it is at Columbia. Ninety percent of our cardiac caths were going into the City, and now we have just thirty percent of our cardiac caths going to the City.
John Spicer: Yes, my competition is not White Plains. My competition is Mount Sinai, Cornell, Columbia.
Simeon Schwartz: There are strategies that we can collectively adopt today that will result in improved access, better health to the community, and, hopefully, will stabilize the system in the process.