[Congressional Record Volume 145, Number 129 (Wednesday, September 29, 1999)]
[House]
[Pages H9010-H9018]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TEACHING HOSPITALS IMPACTED AS RESULT OF PASSAGE OF THE BALANCED BUDGET
ACT
The SPEAKER pro tempore (Mr. Cooksey). Under the Speaker's announced
policy of January 6, 1999, the gentleman from Illinois (Mr. Davis) is
recognized for 60 minutes.
Mr. DAVIS of Illinois. Mr. Speaker, during the last several months we
have had a tremendous amount of discussion about managed care,
patients' bill of rights, different kinds of indicators of disease and
problems with our health care delivery system, trying to find a way and
trying to find solutions, answers, to many of these problems. Group of
us come this afternoon because we want to talk about another problem,
and that is a problem facing the hospitals in the State of Illinois and
especially facing tertiary care teaching hospitals as a result of our
passage of the Balanced Budget Act.
Health care, as all of us would agree, is one of the essential
elements of a great society, and unless people have access, have the
ability, unless people have the assurances of knowing that they can
find the care that they need in times of stress and difficulty and in
times of physical pain and disability, then that society is missing
something.
As a member of the Illinois delegation, I am going to share some
concerns about the fate of Illinois' teaching hospitals and academic
medical centers unless we get some form of relief from reimbursement
cuts authorized in the 1997 Balanced Budget Act.
While we all recognize that cost containment, trying to manage the
cost of health care, is important, all of us recognize the concerns
that have been expressed over the years about unregulated, unbridled,
unchecked cost overrunning our ability to pay; and so while we
recognize that certain sacrifices must be made in order to achieve
Balanced Budget Act objectives, we strongly believe that the unintended
consequences of the Balanced
[[Page H9011]]
Budget Act threaten the viability of these valuable health care
resources.
As envisioned, the Balanced Budget Act was intended to cut $104
billion from Medicare reimbursement to hospitals.
{time} 1500
However, the Balanced Budget Act, if implemented as enacted, will
result in nearly $200 billion in reductions.
Now, the people of Illinois have come to expect, and they have every
right to do so, the high quality medical care delivered by our teaching
hospitals and academic medical centers. The benefits derived by
residents of every region of our State are incalculable. These teaching
hospitals and academic medical centers are the primary providers of
complex medical care and high risk specialty services, such as trauma
care, burn care, organ transplants and prenatal care to all patients,
regardless of their ability to pay. In fact, the 65 tertiary care
teaching hospitals in Illinois provide approximately 63 percent of all
hospital charity care in the state.
Aggressive Balanced Budget Act cuts are jeopardizing their ability to
fulfill their vital mission of maintaining state-of-the-art medical
care and technology, providing quality learning and research
environments, and serving as a safety net for those unable to pay.
Not only do these institutions enhance our health and physical well-
being, they are also some of our largest employers and consumers. As a
matter of fact, they are an integral part of our overall economy. In
total, our Illinois teaching hospitals and academic medical centers
employ more than 56,000 of our constituents and add almost $3 billion
to the State's economy in salaries and benefits alone. Yet, despite the
great benefits that Illinois residents derive from our teaching
hospitals and academic medical centers, these institutions suffer
disproportionately under the Balanced Budget Act.
In total, Illinois teaching hospitals face 5-year reductions of more
than $2.5 billion. I will say that again. In total, Illinois teaching
hospitals face 5-year reductions of more than $2.5 billion.
Consequently, while teaching facilities comprise 27 percent of Illinois
hospitals, they will bear the brunt of 59 percent of the Balanced
Budget Act reductions. These cuts are compounded by increasing fiscal
pressures from managed care companies and inadequate Medicaid
reimbursements on the State level. We believe that we must act now,
that we really cannot wait.
I represent a district that has 22 hospitals in it. I have four
academic medical centers, four of the best in the Nation, in my
district. Not only do they provide greatly needed care, but they are
also the primary trainers of medical personnel, not only for Illinois,
but all over America. I have three Veterans Administration hospitals in
my district that are linked to these medical schools.
So not only are we looking at the provision of greatly needed care,
but we are also looking at the overall economic impact on a community
if the individuals cannot work, if they have no place to go. Then,
obviously, the status of health for the community worsens, worsens, and
worsens.
Also with me this afternoon, one that I know is greatly interested in
this problem and this issue and has concerns not only about the ability
of hospitals to serve but the ability of our society to function as it
is intended to do, it pleases me to yield to the gentlewoman from the
9th District in the State of Illinois (Ms. Schakowsky).
Ms. SCHAKOWSKY. Mr. Speaker, I want to thank the gentleman from
Illinois for organizing this special order tonight and for yielding
time. His commitment to providing quality health care in Illinois and
across the Nation is unparalleled.
There is probably not a Member in this House that is not committed to
and has not talked about protecting Medicare, but that means more than
just the benefits under the Medicare program. That means that we have a
strong and vibrant delivery system in place. That is what we need, one
that is available to meet the needs of Medicare beneficiaries.
Unfortunately, the payment cuts required under the Balanced Budget
Act threaten that delivery system. Inadequate payment levels are
jeopardizing quality care at nursing homes, in hospices, for home care
services, and the subject of tonight's special order, hospitals.
Now, my mother-in-law in Shreveport, Louisiana, Adelaide Creamer, was
director of volunteer services at the large university hospital there;
and she knows, as good as volunteers are, this is one issue where we
are going to need far more than that in order to meet the needs of our
Medicare patients.
We need to understand as policymakers and as consumers that payment
cuts and inadequate reimbursement levels are patient issues. Patients
will suffer if we do not act now to correct the problems created by the
Balanced Budget Act.
The Balanced Budget Act, when it was passed, was supposed to cut
hospital rates by $53 billion, but the actual cuts are now estimated to
be $71 billion. As the gentleman from Illinois has said, cuts in
Illinois would be close to $3 billion, and, in my Congressional
District alone, the cuts could approach $270 million over 5 years.
Because the size of the cuts grows every year, the longer we wait to
correct this problem, the greater the impact on patients and healthcare
quality.
I want to emphasize that we are not talking here about slowing the
growth rate in hospital payments in the coming years. Without a
correction in the Balanced Budget Act provision, Illinois hospitals
will face actual reductions below existing payment levels. That is why
the Honorable John Stroger, President of the Cook County Board, and
Robert Maldonado, County Commissioner, and many of the members of the
Cook County board, introduced and passed a resolution that calls on the
President and the Members of the 106th Congress to refrain from
enacting additional Medicare reductions in addition to those contained
in the Balanced Budget Act of 1997, and to use at least a portion of
the Federal budget surplus to address the negative impact caused by
these reductions.
Obviously, as the cost of healthcare rises, cuts of these magnitudes
will mean that hospitals will face horrible decisions, whether to cut
back on staffing, turn away patients, shut down services such as trauma
care, delay elective surgery, impose cutbacks on clinics and outpatient
services.
In February, I wrote to President Clinton endorsing his proposal to
use 15 percent of the budget surplus for Medicare and encouraging him
to place a moratorium on any further BBA, Balanced Budget Act, payment
reductions. Recognizing the problems being created already by the
Balanced Budget Act, we simply cannot allow it to continue in place.
We need to take additional steps as well. I particularly am concerned
about the impact of cuts on disproportionate share hospitals, hospitals
that serve a large number of uninsured and underinsured patients.
We have heard a lot this week from the Republican leadership
expressing their concern about the 44 million uninsured Americans.
Disproportionate share hospitals care for those uninsured persons. They
are the only source of care for many children and adults.
According to the Illinois Hospital Association, 30 percent of these
disproportionate share hospitals had negative margins before the
Balanced Budget Act was enacted. By 2002, if we do not act to stop
further reductions, two out of every three of these hospitals serving
low-income people will have negative margins.
In Illinois, these DSH hospitals, is what we call them, will lose
$1.7 billion. $1.7 billion. These cuts are simply not sustainable. As
the number of uninsured rises, DSH providers should be getting more
resources, not suffer the cutbacks required under the balanced budget
amendment.
Patients who rely on teaching hospitals would also suffer. The $1.1
billion in projected cuts to Illinois teaching hospitals threaten their
ability to train medical professionals and serve patients.
Tertiary teaching hospitals in Illinois provide over half of all
charity care in the State, even though they represent only 13 percent
of hospitals. That care too would be threatened. Finally, teaching
hospitals provide critical specialty services, trauma centers, organ
transplants, specialized AIDS care, and other critical services.
Teaching hospitals are pioneers in training medical professionals and
providing complex and innovative medical
[[Page H9012]]
technologies to patients. We should make it a priority to ensure that
they have adequate resources to continue to do so. As less and less
services are performed on an inpatient basis and more and more in
hospital outpatient departments, we need to take action to stop drastic
cuts for outpatient services.
Finally, I hope that we will act to repeal the annual $1,500 per
patient cap on rehabilitation therapy payments. This arbitrary cap is
preventing patients from getting adequate care to maintain, restore,
and improve their functioning. We need to protect and increase payments
to disproportionate share hospitals and payments for teaching
hospitals. We need to protect against drastic cuts in outpatient
hospital care. If we fail to do so, the real victims will not be the
providers, they will be the patients who rely on their hospitals for
quality, compassionate, and timely care.
Again, I thank the gentleman for the time.
Mr. DAVIS of Illinois. Let me thank the gentlewoman from Illinois for
her comments. As I was listening, I was just sure that not only are the
people of the 9th District in Illinois pleased that you are here
working on their behalf, but citizens from all over the State of
Illinois are pleased to know that they have you as a Member of Congress
fighting for their rights and for their communities. So I thank you so
very much.
The gentlewoman that I would like to next yield time to is not from
the State of Illinois, but any time that she would want to come she is
always welcome, and especially would she be welcome in the 7th
District. But I would like to yield to the gentlewoman from the State
of North Carolina (Mrs. Clayton).
Mrs. CLAYTON. Mr. Speaker, I thank the gentleman for his time and
gracious comments, and I appreciate him allowing me to say a few words
during his designated special order on the impact of the 1997 budget on
hospitals as it relates to hospitals, particularly in urban areas.
I come from rural North Carolina. I am here to talk about another
issue, which I will do later, but I could not pass up the opportunity
of reaffirming how important the subject you are talking about is, how
the 1997 Balanced Budget Act affects hospitals, and to also share with
you that the implication is even more severe for those of us who live
in rural America.
Just think that if indeed you think about the delivery system or the
infrastructure for health care being at peril in urban areas, think of
rural areas of having already a severe shortage of providers and
institutions and heavily dependent on Medicare reimbursement and
Medicaid reimbursement, and, therefore, having private insurance to pay
for most of their care is not a part of the equation in supporting
rural hospitals or nursing homes or home health services or hospice
services. They are heavily dependent on the participation of the
Federal budget.
So your raising this issue for us helps us to join with you from
rural America to say that this is a nationwide project, it is a
nationwide problem. It is a challenge for those of us who live in rural
America, because we serve a disproportionate number of senior citizens
who are very much dependent on Medicare.
The teaching hospital that is in my district, for their interns and
their fellows, it is supported in the main by the Medicare payments
that are made to the individual institution.
{time} 1515
We talk about DSH. Most of our hospitals are actually
disproportionately hospitals in rural areas so we are on the verge of
losing hospitals in our area if, indeed, we pursue with this gradual
sliding below to the lowest common denominator, Balanced Budget Act
projection, given just what the last speaker spoke of. Actually we have
exceeded those projections where the intent was to have 53 percent.
Now we have exceeded those. So just think, that means we are going to
have to make decisions about cutting outpatient, making decisions about
cutting AIDS programs, of all of those extra programs that hospitals
were beginning to equip themselves for, so they would not have to keep
patients in their hospitals in beds. They had outpatient, they had
therapy, they had rehabilitation programs. All of those are threatened
under the 1997 Balanced Budget Act.
It is not the act itself. It is the implementation. So we really do
need to do two things. There needs to be two tracks. We need to make a
case to the administration in the finance mechanism that they need to
adjust where they have authority to adjust so they can make that relief
that hospitals need right now.
Secondly, we need to make some amendments in our budgetary process to
allow for us to not have the year 2000 as structured as we had proposed
in 1997.
I thank the gentleman for allowing me to participate and just would
say finally that rural hospitals also are appreciative of the efforts
of the gentleman to raise this issue for Members of Congress so that we
can take the appropriate action.
Mr. DAVIS of Illinois. Mr. Speaker, let me just thank the gentlewoman
and commend the gentlewoman again for the tremendous advocacy that she
displays consistently on the part of rural America, and especially as
she crusades right now to try and find relief for that part of North
Carolina and for all of those thousands and thousands of people who
have been uprooted by recent Hurricane Floyd.
Certainly, our hopes, our prayers, and our thoughts are with the
gentlewoman and all of the people in North Carolina as they try to work
their way out of this disaster.
Mr. RUSH. Mr. Speaker, will the gentleman yield?
Mr. DAVIS of Illinois. I yield to the gentleman from Illinois, who
represents a district that certainly has one of the most outstanding
hospitals and academic medical centers in the Nation in it, the
University of Chicago.
Mr. RUSH. Mr. Speaker, I want to thank the gentleman from Illinois
(Mr. Davis), Congressman from the 7th Congressional District, for
holding this special order. This special order is important to the
hospitals in my district, the hospitals in urban America and, as the
previous speaker indicated, the hospitals in rural America.
I want to say to my colleague from the 7th Congressional District
that, again, he is on point. We served in the Chicago city council
together. He was a leader on health care issues in the city council. He
was a leader on health care issues when he was a member of the Cook
County Board of Commissioners and now in the Congress he is a leader on
health care issues, and I want to applaud him for his leadership and
again thank him for holding this important special order.
To the gentlewoman from North Carolina (Mrs. Clayton), I want to join
with my colleague from the 7th Congressional District in indicating my
support for her, my support for those distressed constituents in her
district, those individuals who are experiencing hardship now because
of Hurricane Floyd. I want her to know that any time she wants to visit
her son, who is a constituent of mine in the 1st Congressional
District, she certainly can come in; and we will roll out the red
carpet for her, as we have done in the past.
The Balanced Budget Act, Mr. Speaker, is causing real pain for
hospitals, for patients, and the communities that they serve. The BBA
has produced an unintended financial burden on Chicago teaching
hospitals, on rural hospitals, on skilled nursing facilities, and on
home health providers. The issue is important, to me and to others,
because Illinois ranks fifth in the Nation in the number of teaching
hospitals.
Teaching hospitals not only provide training to our Nation's future
doctors but they also provide uncompensated care to underserved
communities. In my State, the State of Illinois, these teaching
hospitals provide 59 percent of the State's charity care. Additionally,
in teaching hospitals in Illinois and in academic medical centers in
Illinois, there are at least 80,000 Illinoisans statewide who are
employed by these hospitals.
As a matter of fact, Illinois teaching hospitals and academic medical
centers are one of Illinois' largest employers. They add more than $3
billion in salaries and benefits to the Illinois economy.
Because of these BBA cuts, these hospitals will lose $1.678 billion
between
[[Page H9013]]
fiscal year 1998 and fiscal year 2002. $1.678 billion the hospitals in
Illinois will lose between fiscal year 1998 and fiscal year 2002. These
cuts would be atrocious, these cuts will undeniably deny many low-
income patients adequate and much-needed health care.
This year this Congress passed a budget resolution that would have
allowed for $792 billion in tax breaks, mostly to millionaires and
billionaires, those who are living the good life, but not one red cent
to fix the damage to Medicare from the BBA.
Ironically, today in this Congress we are seeing that Members who
voted for the BBA 2 years ago, they are now switching. They are now
reversing their positions. They are now supportive of fixes to
Medicare.
Mr. Speaker, the Members on both sides of the aisle, this Congress,
the Republicans particularly, this Congress must fess up and admit that
it made a mistake; and it must do the right thing by funding for
substantial increases in Medicare reimbursements.
Mr. DAVIS of Illinois. Mr. Speaker, let me just thank the gentleman
from Illinois (Mr. Rush) for the comments that he has made because what
he has said actually is the same thing that I am hearing from
constituents of mine each and every day.
In my hand and in my office are actually thousands of cards that I
have received from constituents of my district asking that we provide
for them some relief. They are very active people who understand what
is going on, who recognize when they hurt that they need to cry, and
who recognize that if they do not cry chances are nobody will even know
that they are hurting.
I can say that the people of the 7th District are crying. They are
crying out for relief from the Balanced Budget Act. They are crying out
to make sure that their hospitals, that their health centers, that
their skilled nursing homes, can continue to exist and provide for them
the greatly needed services that they so richly and rightly deserve.
So I thank the gentleman for being where the people are, and I
appreciate his comments.
Not only, though, are we saying it, I mean the Members of Congress
are saying it, but also I am looking at editorials, and I would put
these entered into the Record at this point, Mr. Speaker.
[From the Peoria Star Journal, Aug. 31, 1999]
Medicare Reductions Threatening Hospitals
If these are the good years, then why are hospitals
administrators so blue? The answer is that they're seeing
red.
Medicare cuts being implemented now are ``the most serious
reductions in the history of the program,'' says Ken Robbins,
president of the Illinois Hospitals and Health Systems
Association.
Hospitals operating on a slim margin, or dependent on
Medicare for almost all of their revenues, will close, he
says. Those which stay in business will cut staff, eliminate
unprofitable programs and increase prices charged paying
patients, forcing insurance rates up.
Teaching hospitals, which will lose more assistance than
most, will cut residency slots. That will threaten medical
specialities and charitable care, which depends heavily on
resident physicians. Already OSF St. Francis has trimmed
seven positions and is considering eliminating an entire
residency program. In the 26 years he's been looking Robbins
says he's never seen a more critical threat.
It seems peculiar that hospitals are ringing this alarm as
congressman fan out across the land to tell of a federal
treasury overstuffed with surplus dollar bills. The timing is
not accidental.
The federal surplus owes its existence not just to a
booming economy but to the domestic spending cuts mandated by
the Balanced Budget Act of 1997. About half of them will come
from Medicare and Medicaid. The American Hospital Association
anticipates that by 2002, hospitals will lose $71 billion, a
little more than one of every 10 Medicare dollars they take
in.
OSF St. Francis figures it will give up $27.6 million;
Methodist, $22.6 million; Proctor, $18.2 million. To
appreciate the size of the losses, and the steps necessary to
compensate, consider that Methodist and Proctor derive 50
percent of their income from Medicare, while St. Francis gets
40 percent. By the end of 2002, Robbins says Illinois
hospitals will be treating more Medicare-dependent patients
for fewer inflation-factored dollars than they get now. He
says everybody who needs hospital care will feel the effects.
The hospital association wants legislation that will
restore $25 billion, a little more than a third of what
hospitals lost. To get the money, it will have to fight off
those who would spend the surplus on tax cuts and those who
would pay down the federal debt.
Members of both camps say they want to make sure the
anticipated surplus isn't used to increase spending. That is
an understandable goal but an inaccurate description of the
alternative. The third choice in the surplus arguments is not
whether to expand federal programs with the extra money but
whether to maintain the present level of service.
Permitting spending to grow at the rate of inflation would
cost nearly $750 billion, or three-fourths of the predicted
10-year non-Social Security surplus. Assuming that defense
spending will not be reduced, the Balanced Budget Act will
require domestic spending cuts of about 20 percent over five
years. If Congress boosts military spending, as it has
indicated it would like to do, then bigger reductions in
domestic spending will be necessary.
The hospital lobbyists would seem to be at vanguard of
those who will feel the pinch. Earlier this month Peoria
officials said they anticipated a 10 percent cut in Community
Development Block Grant funds for neighborhood-based
programs. Housing and Urban Development Secretary Andrew
Cuomo warned last week of budget cuts that would leave
156,000 people without affordable housing. The nation's
parkland preservation program is due to be reduced to one-
tenth of its 1978 level. Congress has put out feelers about
taking back from the states $4.2 billion in welfare reform
money.
Cuts of this magnitude may have made sense when the nation
was battling to control deficit spending and the threats it
posed. The case for them is not as strong now that it's been
declared the post-deficit era on Capitol Hill.
Certainly maintaining Head Start participation and national
park dollars and environmental enforcement at present levels,
rather than slashing them, deserves an equal platform with
tax cuts and debt reduction as decisions are made. So do the
hospitals' concerns.
It is particularly irksome that the facts of the issue have
been so poorly laid out and that the budget cuts which lie
ahead have claimed so small a stage in the national debate.
Perhaps the hospital lobbyists will help.
____
[From the St. Louis Post-Dispatch, August 4, 1999]
When Hospitals Get Sick
The nation's teaching hospitals, the backbone of the
country's health care system, are getting sick. Squeezed on
one side by managed care's demand for lower costs and shorter
stays and on the other by federal cuts in Medicare
reimbursements, the average teaching hospital will have lost
$43 million between 1997 and 2002. That will leave nearly 40
percent of the facilities operating in the red.
Similar dire figures are projected for facilities here. By
the end of this year, St. Louis-area teaching hospitals will
have seen their revenues reduced by $70 million. The
reduction for all the state's teaching hospitals will be
about $126 million. By 2002, the figure will have climbed to
over $100 million in St. Louis and $214 million for Missouri.
Barnes-Jewish Hospital has gone from generating $30 million a
year to just $4 million this year.
Those figures are much more than just numbers on a balance
sheet. Teaching hospitals, particularly in St. Louis and
Missouri, are unique, vital cogs in the health care network.
Though they represent only 4 percent of all of the nation's
hospitals, they treat 44 percent of the uninsured patients.
Meanwhile, they provide expensive, highly specialized
programs, such as the organ transplant, bone marrow
transplant and trauma programs operating at St. Louis
University Hospital and Barnes-Jewish Hospital.
In St. Louis and Missouri, this continued financial
hemorrhaging could hurt the local economy. Barnes-Jewish
Hospital, with over 8,000 employees, is the largest private
employer in the city of St. Louis. Its network, BJC Health
System, is Missouri's single largest private employer.
Sen Daniel Patrick Moynihan, D-N.Y., and Rep. Charles
Rangel, D-New York, have an answer for the current mess. Mr.
Moynihan has introduced a bill to freeze the reductions in
Medicare reimbursements for the next two years. The New York
Democrats have proposed the establishment of a Medical
Education Trust Fund that would be financed by a 1.5 percent
assessment on private health insurance premiums and funding
from Medicare and Medicaid.
Congress' desire to rein in rising medical costs is
commendable, but the 1997 Balanced Budget Act, which cut the
Medicare reimbursements for teaching hospitals, produced
serious unintended consequences. The nation must not
sacrifice the great institution of the teaching hospital to
the budgetary scalpel.
____
[From the Chicago Tribune, July 9, 1999]
UIC To Cut Hospital Jobs, Seek Merger
(By Bruce Jaspen)
In a rare move that highlights the deepening financial
crisis of one of the city's biggest teaching hospitals, the
University of Illinois said Thursday it will turn over
management of its West Side academic medical center to a
Florida consulting firm.
At the same time, the university reassigned the hospital's
director, announced that more than 10 percent of the
hospital's employees will lose their jobs and said it will
seek a merger with another health-care firm.
[[Page H9014]]
The dire measure for the University of Illinois at Chicago
Medical Center were recommended by The Hunter Group of St.
Petersburg, Fla., in the wake of millions of dollars in
losses, blamed in large part on drastic reductions in
Medicare spending growth as a result of the Balanced Budget
Act of 1997.
As part of the government's effort to slow the growth in
spending for Medicare, the federal health insurance for the
disabled and the booming elderly population, the Balanced
Budget Act is taking $33.5 million in projected revenue from
the UIC's budget over a five-year period, and thus far has
contributed to an $8 million deficit in the hospital's second
quarter. As recently as 1997, UIC had income of $6.1 million
on a budget of nearly $300 million.
UIC has also been vulnerable to an intensely competitive
health-care marketplace in Chicago, where one in three
hospital beds remains empty and managed-care companies and
developments in science are keeping patients out of the
hospital.
``We are struggling with making ends meet,'' said Dieter
Haussmann, vice chancellor for health services at UIC.
``Unless things change, you will see fewer teaching hospitals
in the next decade.''
Like all academic medical centers, UIC is particularly
vulnerable to managed care, which emphasizes low-cost
outpatient care.
Contracts with teaching hospitals are less attractive to
managed-care insurers because the costs of training the
nation's future doctors and conducting cutting-edge research
typically make services at teaching hospitals 20 to 25
percent higher than at community hospitals.
To keep the UIC's teaching mission of educating doctors
viable, The Hunter Group will begin looking for potential
partners, possibly leading to a merger or sale to one of any
number of possible buyers. Haussmann speculated about one
scenario involving the UIC forming some partnership with
Rush-Presbyterian-St. Luke's Medical Center or Cook County
Hospital, both within a block of the UIC on Chicago's West
Side.
``Without some sort of partnership, we are going to have
serious difficulties being viable,'' Haussmann said.
Rush executives Thursday seemed open to the idea. ``The
University of Illinois is a major institution within the
Illinois Medical Center District, and therefore it would be
logical for Rush and Cook County to pursue mutually
beneficial discussions with the University of Illinois,''
said Rush's senior vice president, Avery Miller.
UIC officials, however, said they would be exploring all
options.
``Anything is possible,'' Haussmann said. ``We won't leave
any stones unturned from the outset.''
Thursday's decision by the university's board of trustees
follows a 14-week study by the Hunter Group, which was paid
$1.2 million for its work and will now manage the hospital
for $140,000 a month over a period officials expect will be
less than a year.
Sidney Mitchell, the hospital's executive director for the
last several years, will be reassigned for the time being
within the university, Haussmann said. Mitchell was
unavailable Thursday for comment.
About 275 of the hospital's 2,600 full-time employees will
lose their jobs as part of The Hunter Group's
recommendations, but it remains unclear exactly when the cuts
will take effect and who will be affected.
Officials hope most of those employees, mainly clerical
workers and support staff, will be able to find jobs within
the university system, but negotiations on those positions
will also take place with some unions.
Earlier this year, the UJC implemented a hiring freeze and
eliminated 250 positions, and most of those workers were
placed elsewhere, university officials said.
Meanwhile, the proposed changes will also mean a different
employment arrangement for more than 300 physicians who are
either full- or part-time faculty at the University of
Illinois at Chicago College of Medicine and do clinical work
at the hospital. They will become more independent, with
employment contracts, much like doctors at other academic
medical centers where the physicians work for affiliated
practices.
Thus, doctors will be forced to build up a base of patients
and referrals for the hospital rather than relying largely on
the hospital's contracts with insurance companies.
``The idea that the board is looking at is, can these
physicians take on more responsibility for their actions?''
said David Hunter, chief executive of The Hunter Group, which
will officially take over management sometime next month,
once its contract is made final. ``Can physicians take more
control over their lives and their practice, and therefore be
more productive?''
Physicians appeared to support the changes. ``I'm very
positive, and I believe the physicians will be, too,'' said
Dr. Gerald Moss, a surgeon and dean of the medical school.
``We believe with these changes the hospital will return to
profitability.''
The hospital is also going to streamline billing and
collection systems and reduce supply expenses, aiming to save
more than $6 million by 2002.
uic announces changes
University of Illinois at Chicago Medical Center said
Thursday it will implement changes for improving hospital
operations.
Major recommendations include: Reduce staffing by about
275; Implement supply expense reduction program; Streamline
patient registration, billing and collection systems; and
Seek a merger or sale.
____
[From Crain's Chicago Business, June 21, 1999]
Deep Medicare Cuts Draw Blood at Teaching Hospitals--Top Med Centers
Take Largest Hit; Survival of Fittest
(By Meera Somasundaram)
Chicago's academic medical centers, known for treating the
most challenging cases and training the nation's top doctors,
are facing some tough medicine of their own.
Already struggling with pressures from managed care, rising
drug costs and a surplus of local hospital capacity, they now
are bracing for one of the sharpest cutbacks ever in Medicare
payments to hospitals.
And the prognosis isn't good. Some top hospitals are
already in the red. Others have seen operating income fall
sharply. The most pessimistic observers question whether,
long term, the region can support all of its high-end medical
centers.
In Chicago, which has an unusually high concentration of
such facilities--five major academic medical centers and
seven medical schools--the effects of the statewide $2.5-
billion retrenchment will be staggering: The five academic
medical centers together will lose about $350 million over
five years.
Two of the five--University of Illinois at Chicago Medical
Center and Rush-Presbyterian-St. Luke's Medical Center--
already are feeling the pinch, having reported operating
losses in fiscal 1998.
Two that were in the black--Northwestern Memorial Hospital
and University of Chicago Hospitals--reported sharp downturns
from 1997. Loyola University Medical Center posted operating
income after a loss in 1997.
``Clearly, we are in for some difficult times for academic
medical centers over the next few years,'' says health care
consultant David Anderson of Health Care Futures L.P. in
Itasca.
The downward spiral is expected to worsen over the next few
years because the cuts--mandated under the Balanced Budget
Act of 1997 and phased in from fiscal 1998 to fiscal 2002--
widen each year. Some of the current losses have been offset
by a robust stock market, which has helped hospitals stay in
the black. But that can't continue forever.
how much they'll lose
Medicare payments are the lifeblood of many teaching
hospitals--accounting for 20% to 40% of total revenues.
In addition to receiving payments from Medicare for
treating elderly patients, the hospitals also are paid
through Medicare for training physicians in residency
programs. The larger a hospital's Medicare population and the
larger its residency program, the larger its Medicare
payment.
Rush-Presbyterian and the University of Chicago Hospitals
will lose the most because of their greater dependence on
public aid and larger residency programs: Rush will see $104
million in cuts over five years, and U of C will lose $95
million.
As for the other three. Northwestern Memorial will lost $65
million; Loyola, about $50 million, and UIC, $33.5 million,
according to Ralph W. Muller, president and CEO of U of C
Hospitals and chairman-elect of the Assn. of American Medical
Colleges, which is lobbying Congress to restore the cuts.
The fallout from the cuts could drastically change the
hospital landscape in Chicago.
The Illinois Hospital and Health-Systems Assn. (IHAA) has
predicted that some smaller area hospitals will be forced to
close. Others will turn to layoffs, cutbacks in programs or
consolidation. In addition, the loss of funds could put a
squeeze on research programs and bolster unionization efforts
among physicians and nurses seeking job security amid the
turmoil.
Notes Jonathan Kaplan, director of the Midwest health care
consulting division in Chicago at Ernst & Young LLP: ``As you
erode the revenue side, they're going to have to dramatically
redesign their business to make sure they can survive.''
Already, U of C says it won't fill 115 positions this year,
and UIC is eliminating 250 positions and has initiated a
hiring freeze. Experts say more layoffs are likely.
``What's going to happen is, we'll see cutbacks in
programs,'' says U of C's Mr. Muller. ``If you cut back
programs, then patients stop coming and doctors stop using
you. That's not in anyone's interest.''
Rush-Presbyterian, which includes expenses for Rush
University and faculty practices in its financial results,
posted an operating loss of $18.7 million on revenues of
$520.4 million in the fiscal year ended last June 30, on top
of an operating loss of $235,000 the previous year. Losses at
the university and the faculty practices more than offset
operating income of $8.3 million at the hospital--down from
$28.7 million in 1997--according to President and CEO Leo M.
Henikoff. He cites eroding Medicare revenues as the reason
for the decline.
In fact, Rush kicked off an aggressive three-year cost-
cutting program in 1997, aimed at saving $120 million, in
anticipation of Medicare cuts in 1998.
``A number of people thought that was overkill,'' says Dr.
Henikoff. ``It turns out it was underkill.''
Rush is also taking steps to boost growth, including plans
to buy or build 24-hour ambulatory surgery centers in the
suburbs, and to expand Rush System for Health, a network of
six hospitals with Rush-Presbyterian as a tertiary hub. He
also says the recent recruitment of Dr. Leonard Cerullo to
head
[[Page H9015]]
Rush's neurosurgery department will attract more patients.
u of c vulnerable
While Rush tries to increase patient volume, competitors
are undertaking changes of their own.
University of Chicago, whose operating income dropped a
whopping 72% to $6.3 million last year from 1997, also is
particularly vulnerable to federal cutbacks.
If losses associated with its Medicaid managed care plan
and a now-divested Meyer Medical Group and other affiliates
are included, the medical center posted a consolidated
operating loss of $32.6 million last year.
Even though the losses are steep, observers say U of C is
taking steps in the right direction, including selling money-
losing ventures.
Still, U of C has a high dependence on Medicaid, receiving
26% of revenues from the federal-state health insurance
program for low-income patients, while Loyola receives 14%;
Rush, 13%, and Northwestern, 11%, according to IHHA.
Northwestern Memorial Hospital, located in the affluent
Streeterville neighborhood, is perhaps the best-positioned to
withstand the Medicare cuts. Although it reported a 35% drop
in operating income to $35 million last year, it has
significant investments in marketable securities, as well as
a desirable payer mix. However, the hospital must absorb
depreciation costs and risks associated with its new, $580-
million building, which it funded with debt and cash.
Hospital officials say the new facility is more efficient and
will save costs in the long run.
a rush-uic merger?
Loyola University Medical Center, which posted operating
income of $6.2 million in 1998, after a loss of $4.2 million
in 1997, is trying to shore up operations at its 19
outpatient care clinics.
UIC earlier this year hired a consulting group to help
improve operations. In the first nine months of fiscal 1999
ended March 31, the medical center reported a $5.8-million
operating loss, following a loss of $7.1 million in fiscal
1998 due to a drop in revenues and patient volume.
In response, UIC could turn to mergers or affiliations,
including a potential merger with its nearby competitor,
Rush.
Although Dieter Haussmann, vice-chancellor for health
services at UIC, says he's not in formal talks with Rush, he
doesn't rule out the option. The most difficult task for any
academic medical center would be the melding of medical
schools, he adds.
``It's clear that, ultimately, there have to be fewer
academic medical centers,'' says Mr. Haussmann, ``How we get
there is the big question.''
Observers say UIC would have more to gain from a Rush-UIC
combination than Rush because UIC could gain patients from
Rush's network. Dr. Henikoff agrees with that assessment, and
says a merger with another teaching hospital wouldn't make
sense for Rush.
Finance-driven outcome
``When you end up with two hospitals, you don't save
money,'' says Dr. Heinkoff. ``You would get saddled with
another infrastructure. The last thing I want is an
infrastructure that isn't utilized.''
Still, if Congress doesn't reverse the cutbacks, mergers
here may be inevitable.
Says consultant Mr. Anderson: ``Financial pressures are
going to drive very serious evaluations by boards of
hospitals about whether the enemy across the street now needs
to be their friend.''
MEDICARE FLU--OPERATING INCOME (LOSSES) FOR CHICAGO'S FIVE ACADEMIC
MEDICAL CENTERS
[In millions]
------------------------------------------------------------------------
1998 1997
------------------------------------------------------------------------
University of Chicago Hospitals..................... $6.3 22.7
Northwestern Memorial Hospital...................... 35.0 53.9
Rush-Presbyterian-St. Luke's Medical Center, (18.7) (0.2)
including Rush University and faculty practices....
Loyola University Medical Center.................... 6.2 (4.2)
University of Illinois at Chicago Medical Center.... (7.1) 2.7
------------------------------------------------------------------------
Source: Hospitals' financial statements.
____
[From the New York Times, May 31, 1999]
Teaching Hospitals in Trouble
The nation's teaching hospitals are facing deep financial
trouble, brought on by the growth of managed care and cost-
cutting measures in government health programs. Congress can
help by restoring some cuts made to Medicare funding in 1997
that squeezed these institutions severely. But their long-
term financial health will depend on new ways of financing
their special missions. They also should be required to live
by reasonable cost controls.
All hospitals are facing the same pressures, chiefly cuts
in government payments and managed care's demand for lower
hospital fees and shorter hospital stays. Most have responded
by reducing staff and merging with other institutions.
Teaching hospitals have also taken these steps, but their
problems are compounded by the extra obligations that
teaching hospitals have long assumed--training new doctors,
conducting medical research and providing charity care for
the poor. These functions have traditionally been indirectly
underwritten in part by the private sector.
Managed care has changed that by making it much harder to
pass along charity care and education costs through higher
fees. At the same time, these hospitals have been especially
hard hit by government cuts because they derive much of their
revenue from Medicaid and Medicare patients. These pressures
are especially severe in New York City, which has the
nation's largest concentration of teaching hospitals. City
hospitals have cut their staffs by 10 percent since 1993.
Still, Gov. George Pataki has proposed trimming roughly $150
million in state Medicaid payments to hospitals in the new
fiscal year, and Clinton Administration is also proposing
further Medicare cuts.
But the worst blow comes from the 1997 Balanced Budget Act.
That law has produced the welcome and unexpected result of
actually cutting Medicare expenditures in the first half of
this fiscal year. But it also had a disproportionate impact
on teaching hospitals. Among other cost controls, the law
sharply cut the Federal subsidy for graduate medical
education that is financed as part of Medicare. By 2002, when
all the cuts are fully phased in, New York State hospitals
will have lost $5 billion in Federal revenue, with $3 billion
of that squeezed out of the metropolitan area hospitals.
Senator Daniel Patrick Moynihan introduced legislation that
would reduce some of the damage. One bill would freeze the
graduate medical education subsidy, rather than allow further
annual reductions for the next two years, as required under
the 1997 law. That would save teaching hospitals $3 billion
in losses over five years. Another bill would take the
Federal subsidies for serving low-income patients that are
included in payments to Medicare managed-care plans and
redirect the money to the hospitals that provide the care. In
theory, Medicare H.M.O.'s pass on the subsidy to the
hospitals, but in practice they often do not. A similar bill
would redirect the subsidy for training nurses from Medicare
H.M.O.'s to teaching hospitals.
Congress should make these adjustments without unraveling
other cost-containment measures of the 1997 law. Mr. Moynihan
has also proposed broader legislation that would spread the
burden of paying for medical education. His plan would
establish a separate Medical Education Trust Fund that would
be financed by a fee levied on private health insurance
premiums, as well as contributions from Medicaid and
Medicare. The bill calls for an advisory commission to debate
alternative approaches.
Something has to be done to shore up this key part of the
nation's biomedical infrastructure. Simply plugging holes in
the current patchwork of funding will not insure stability
for the future.
____
[From the New York Times, May 6, 1999]
Teaching Hospitals, Battling Cutbacks In Medicare Money
(By Carey Goldberg)
BOSTON, May 5.--Normally, the great teaching hospitals of
this medical Mecca carry an air of white-coated, best-in-the-
world arrogance, the kind of arrogance that comes of
collecting Nobels, of snaring more Federal money for medical
research than hospitals anywhere else, of attracting patients
from the four corners of the earth.
But not lately. Lately, their chief executives carry an air
of pleading and alarm. They tend to cross the edges of their
palms in an X that symbolizes the crossing of rising costs
and dropping payments, especially Medicare payments. And to
say they simply cannot go on losing money this way and remain
the academic cream of American medicine.
The teaching hospitals here and elsewhere have never been
immune from the turbulent change sweeping American health
care--from the expansion of managed care to spiraling drug
prices to the fierce fights for survival and shotgun
marriages between hospitals with empty beds and flabby
management.
But they are contending that suddenly, in recent weeks, a
Federal cutback in Medicare spending has begun putting such a
financial squeeze on them that it threatens their ability to
fulfill their special missions: to handle the sickest
patients, to act as incubators for new cures, to treat poor
people and to train budding doctors.
The budget hemorrhaging has hit at scattered teaching
hospitals across the country, from San Francisco to
Philadelphia. New York's clusters of teaching hospitals are
among the biggest and hardest hit, the Greater New York
Hospital Association says. It predicts that Medicare cuts
will cost the state's hospitals $5 billion through 2002 and
force the closing of money-losing departments and whole
hospitals.
Often, analysts say, hospital cut-backs closings and
mergers make good economic sense, and some dislocation and
pain are only to be expected, for all the hospitals' tendency
to moan about them. Some critics say the hospitals are partly
to fault, that for all their glittery research and
credentials, they have not always been efficiently managed.
``A lot of teaching hospitals have engaged in what might be
called self-sanctification--`We're the greatest hospitals in
the world and no one can do it better or for less'--and that
may or may not be true,'' said Alan Sager, a health-care
finance expert at the Boston University School of Public
Health.
But the hospital chiefs argue that they have virtually no
fat left to cut, and warn that their financial problems may
mean that the smartest edge of American medicine will get
dumbed down.
With that message, they have been lobbying in Congress in
recent weeks to reconsider the cuts that they say have turned
[[Page H9016]]
their financial straits from tough to intolerable.
Hospital chiefs and doctors also argue that a teaching
hospital and its affiliated university are a delicate
ecosystem whose production of critical research is at risk.
``The grand institutions in Boston that are venerated are
characterized by a wildflower approach to invention and the
generation of new knowledge,'' said Dr. James Reinertsen, the
chief executive of Caregroup, which owns Beth Israel
Deaconess Medical Center. ``We don't run our institutions
like agribusiness, a massively efficient operation where we
direct research and harvest it. It's unplanned to a great
extent, and that chaotic fermenting environment is part of
what makes the academic health centers what they are.''
Federal financing for research is plentiful of late,
hospital heads acknowledge. But they point out that the
Government expects hospitals to subsidize 10 percent or 15
percent of that research, and that they must also provide
important support for researchers still too junior to win
grants.
A similar argument for slack in the system comes in
connection with teaching. Teaching hospitals are pressing
their faculties to take on more patients to bring in more
money, said Dr. Daniel D. Federman, dean for medical
education of Harvard Medical School. A doctor under pressure
to spend time in a billable way, Dr. Federman said, has less
time to spend teaching.
Whatever the causes, said Dr. Stuart Altman, professor of
national health policy at Brandeis University and past
chairman for 12 years of the committee that advised the
Government on Medicare prices, ``the concern is very real.''
``What's happened to them is that all of the cards have
fallen the wrong way at the same time,'' Dr. Altman said. ``I
believe their screams of woe are legitimate.''
Among the cards that fell wrong, begin with managed care.
Massachusetts has an unusually large quotient of patients in
managed-care plans. Managed-care companies, themselves
strapped, have gotten increasingly tough about how much they
will pay.
But the back-breaking straw, hospital chiefs say, came with
Medicare cuts, enacted under the 1997 balanced-budget law,
that will cut more each year through 2002. The Association of
American Medical Colleges estimates that by then the losses
for teaching hospitals could reach $14.7 billion, and that
major teaching hospitals will lose about $150 million each.
Nearly 100 teaching hospitals are expected to be running in
the red by then, the association said last month.
For years, teaching hospitals have been more dependent than
any others on Medicare. Unlike some other payers, Medicare
has compensated them for their special missions--training,
sicker patients, indigent care--by paying them extra.
For reasons yet to be determined, Dr. Altman and others say
the Medicare cuts seem to be taking an even greater toll on
the teaching hospitals than had been expected. Much has
changed since the 1996 numbers on which the cuts are based,
hospital chiefs say; and the cuts particularly singled out
teaching hospitals, whose profit margins used to look fat.
Frightening the hospitals still further, President
Clinton's next budget proposes even more Medicare cuts.
Not everyone sympathizes, though. Complaints from hospitals
that financial pinching hurts have become familiar refrains
over recent years, gaining them a reputation for crying wolf.
Critics say the Boston hospitals are whining for more money
when the only real fix is broad health-care reform.
Some propose that the rational solution is to analyze which
aspects of the teaching hospitals' work society is willing to
pay for, and then abandon the Byzantine Medicare cross-
subsidies and pay for them straight out, perhaps through a
new tax.
Others question the numbers.
Whenever hospitals face cuts, Alan Sager of Boston
University said, ``they claim it will be teaching and
research and free care of the uninsured that are cut first.''
If the hospitals want more money, Mr. Sager argued, they
should allow in independent auditors to check their books
rather than asking Congress to rely on a ``scream test.''
For many doctors at the teaching hospitals, however, the
screaming is preventive medicine, meant to save their
institutions from becoming ordinary.
Medical care is an applied science, said Dr. Allan Ropper,
chief of neurology at St. Elizabeth's Hospital, and strong
teaching hospitals, with their cadres of doctors willing to
spend often-unreimbursed time on teaching and research, are
essential to helping move it forward.
``There's no getting away from a patient and their
illness,'' Dr. Ropper said, ``but if all you do is fix the
watch, nobody ever builds a better watch. It's a very subtle
thing, but precisely because it's so subtle, it's very easy
to disrupt.''
____
[From the Chicago Tribune, Apr. 25, 1999]
Medicare Cuts Hit Big Centers
teaching costs lower immunity
(By Bruce Japsen)
For years Dieter Haussmann has been far from the tremors of
managed care, but the government's effort to drastically slow
Medicare spending growth is quickly pushing him toward the
epicenter.
As vice chancellor for health services at the University of
Illinois at Chicago Medical Center, Haussmann was forced to
disclose recently a deficit of $8 million that will result in
a hiring freeze and the elimination of more than 250 jobs at
the West Side academic medical center.
Although UIC said the shortfall was ``unexpected,'' the
changing economic landscape made it bound to happen sooner or
later.
Like all academic medical centers, UIC is more vulnerable
than community hospitals to managed care, which emphasizes
low-cost outpatient care. Teaching hospital costs are
traditionally higher because such hospitals also train the
nation's future doctors and conduct cutting-edge research.
Until federal spending began slowing under the Balanced
Budget Act of 1997, Chicago teaching hospitals seemed largely
immune to financial forces squeezing hospitals elsewhere.
Health maintenance organizations--the most restrictive form
of managed-care insurance when it comes to paying medical-
care providers fixed rates--insure only one in four Chicago-
area consumers and the insurance industry is largely
fragmented.
``Maybe we are late compared to other academic medical
centers,'' Haussmann said.
Now, with HMOs gaining more leverage here through
consolidation and with Medicare slicing millions from
hospitals' projected revenues, everything from more job cuts
to mergers may be in store for Chicago's five major academic
medical centers, analysts say.
A substantial number of the more than 22,000 workers at
UIC, Rush-Presbyterian-St. Luke's Medical Center, University
of Chicago Hospitals, Northwestern Memorial Hospital and
Loyola University Medical Center could be affected.
This trend has already passed through other markets, where
storied teaching hospitals have merged and been forced to
make deep cuts in their workforces.
For example, Massachusetts General Hospital in Boston said
it will eliminate 130 positions in the wake of a $5 million
loss in its first quarter.
The hospitals' plight has been made worse by the Balanced
Budget Act of 1997, which seeks to drastically hold down
spending.
``The crunch is coming,'' said Haussmann, who concedes that
consultants recently hired by the university may recommend a
merger. ``We need to develop a strategic partnership with
somebody.''
Indeed, without the pressure from managed care to keep
Chicago consumers out of hospitals, acute-care hospitals here
have remained bloated with beds and staffing. Much like at
the rest of Chicago hospitals, one in three beds at UIC lies
empty on any given day.
In fact, Chicago has more acute-care capacity than
practically every major metropolitan area in the country,
according to a Dartmouth Medical School study published last
week by the Chicago-based American Hospital Association.
The Chicago area had 4.4 acute-care beds and 21.9 acute-
care employees per 1,000 residents in 1996, compared with a
national average of 2.8 beds and 13.2 employees per 1,000,
the Dartmouth study said.
Even New York, Boston and Philadelphia--cities where
academic medicine is also a hallmark of health-care service--
ranked lower than Chicago in the study.
``If we have a higher utilization than New York, then that
is a problem,'' said Ralph Muller, president and chief
executive of University of Chicago Hospitals. ``We need to
bring that down to be in line with national averages.''
With five major stand-alone academic medical centers,
analysts say, excess capacity here is costing consumers and
employers more than elsewhere. That's because consumers here
aren't encouraged to use wellness programs and other
outpatient services designed to keep people out of the
hospital.
``There seems to be a great under-use of preventative
services in some of the lesser managed-care areas,'' said
Carol Schadelbauer, a spokeswoman for the American Hospital
Association.
``It's a tremendous waste,'' said Larry Boress, executive
director of the Chicago Business Group on Health, a business
coalition that includes 65 employers that represent $1.5
billion in health-care spending. ``I don't think there is any
doubt this is costing us. You have beds sitting empty and yet
it's coming out of the budget [of the hospitals] to maintain
those.''
But teaching hospitals here are now beginning to make
serious efforts to reduce the size of their workforces. Last
week, Michael Reese Hospital and Medical Center said it would
lay off 400 full-time employees, while Muller said the
University of Chicago ``will not fill well over 115 positions
this year . . . and the number may get higher.''
The UIC has pared 200 hospital positions through attrition
or retirements since the beginning of the year, and is
looking to eliminate 50 more by next month.
``It's a long, slow struggle,'' Haussmann said. ``We aren't
getting paid as much as we used to. The managed-care market
is becoming much tougher.''
Chicago's other academic medical centers, too, saw their
operating income drop last year when it came to operations.
University of Chicago's operating income dropped by $10
million last year to $6 million.
Even cash-rich Northwestern Memorial Hospital saw its net
operating income fall 35 percent last year to $34.9 million
from $53.9 million in 1997. ``Medicare reimbursements were
part of the decrease,'' said Northwestern Memorial
spokeswoman Paula Poda.
Northwestern and University of Chicago are each getting
more than $60 million less
[[Page H9017]]
from Medicare through 2002 than earlier projected. The UIC is
amid a five year hit of $33.5 million out of a projected
$334.5 million.
Most of Chicago's academic medical centers have remained
well in the black, however, because of multimillion-dollar
gains on their investment income. University of Chicago
Hospitals, for example, made $50 million on stocks, real
estate and other investments last year.
The UIC medical center's balance sheet would be in even
worse shape if the hospital didn't get state support. Through
the University of Illinois, the state provides the hospital a
$45 million subsidy per year and another $32 million directly
from the state for hospital employees' fringe benefits.
``In some ways, among the academic medical centers, we may
be the first to come to grips because we don't have a big
endowment that we can sort of exist on for awhile,''
Haussmann said. ``We have to go back to the state treasury .
. . and that's not a very likely prospect.''
With UIC already losing money, the hospital's only recourse
may be to form a partnership or enter into a merger with
another hospital or academic medical center.
Over the last two decades, UIC has talked merger at various
time, but negotiations have never come to anything, including
talks with its neighbor across Polk Street, Rush-
Presbyterian-St. Luke's Medical Center.
``Just because we tried in the past doesn't mean we
wouldn't try again.'' Haussmann said of Rush. ``Circumstances
are different for both of us.''
As operating margins here sink, U. of C.'s Muller said,
it's only a matter of time before academic medical centers
here will be swimming in red ink like those in other parts of
the country.
``This is going to start putting hospitals like us in
difficulty,'' Muller said. ``When you do that, you start
weakening the regional health system.
____
[From The New York Times, Apr. 15, 1999]
Hospitals in Crisis
A deep financial crisis is spreading like a virus through
the nation's teaching hospitals. It is undermining their
honorable and historic mission, which has been to train new
generations of physicians, to conduct critically important
medical research and to provide treatment for, among others,
the poor.
A devastating combination of financial pressures ``has
produced a situation in which our best hospitals are now
essentially all losing money,'' said Dr. Joseph Martin, dean
of the Harvard Medical School. He was referring to hospitals
in the Boston area, but similar pressures are being felt at
teaching hospitals across the country.
The teaching hospitals (or, more accurately, academic
medical centers) have been hammered by the Medicare cuts that
were part of the Balanced Budget Act of 1997. As teaching
hospitals are the key providers of the nation's charitable
care, they are affected disproportionately by cuts in
government funding. At the same time, they are being squeezed
by the drastic reductions in payments that have resulted from
the changeover to managed care in recent years.
Meanwhile, the cost of delivering care continues to rise.
The bottom line has been an explosion of red ink that
threatens not just the mission but the very existence of some
of the finest teaching institutions.
``The only payers who help balance the books have been
those who pay through private insurance, and the payments for
that are declining as well,'' said Dr. Martin.
In California, the medical center known as UCSF Stanford
Health Care expects operating losses of $50 million this
year. Layoff notices have already been sent to 250 employees,
and officials said 2,000 of the center's 12,000 staff members
would probably be let go over the next year and a half.
Without the layoffs, UCSF Stanford would see an operating
loss of $135 million next year, according to the center's
chief executive, Peter Van Etten.
Inevitably the center's mission will be diminished. Said
Mr. Van Etten: ``I have to say the services we will provide
can't be of the same quality that we would provide with 2,000
more people.''
You cannot overstate the importance of teaching hospitals
to the health care system in the U.S. They offer the most
advanced and sophisticated treatment in the nation. They
are essential to the health of the poor, providing nearly
40 percent of the nation's charitable care. They are also
the places, as Neil Rudenstine, the president of Harvard,
noted, ``where physicians get educated,'' where they get
their first, carefully guided exposure to the connection
between scientific study and the real world of clinical
treatment.
And they are medical research centers, the places where
cures are found, treatments developed, miracles realized.
Toying with the future of such a system is as dangerous as
Russian roulette.
When asked yesterday how much of a threat the financial
problems pose to the mission of the teaching hospitals, Mr.
Rudenstine replied: ``It's a total crisis, a complete crisis.
I think anybody who would call it less than that would really
just not know what's going on. I'm not quite sure what the
cumulative deficit of our four or five closely related
hospitals is, but it's certainly well over $100 million so
far, and we haven't even finished the year yet.''
The outlook is not good. The cutbacks in Medicare funding,
the single biggest source of revenues for teaching hospitals,
will accelerate over the next few years. This is not a case
of administrators crying wolf. The situation is dire. The
University of Pennsylvania Health System lost $90 million
last year and the Temple University system lost nearly $25
million.
When he mentioned the financial losses at Harvard's
affiliated hospitals, Mr. Rudenstine said: ``Two or three
more years like that and you're going to see either some
people go out of business or become for-profit institutions,
which means they will drop the research and teaching
components because those things don't make any money. They'll
become perfectly good hospitals up to a certain level, but
not up to the level at which we now treat disease, and not up
to the level where you can actually train the best
physicians.''
____
Teaching hospitals and academic medical centers are the
primary sources for complex care. Continued failure to
support these institutions threatens their long-term
viability.
``Illinois' teaching hospitals need adequate funding to
remain viable for people like . . .'' Vanessa Blaida, Age
21, Children's Memorial Hospital, Asthma Study.
``I was known as the girl who didn't have asthma,'' Vanessa
Blaida explains about growing up with asthma. ``I would
pretend I didn't have it, because I didn't want it.''
Instead, she played volleyball every fall, and softball every
spring. She also missed weeks of school and spent days in the
hospital.
Throughout college, Vanessa's illness grew worse. Though
she continued to participate in sports, she was getting
sicker and sicker. ``It was frustrating. I would be rushed to
the local emergency room and the nurses would tell me I was
just hyperventilating. I wasn't hyperventilating, I was
having an asthma attack.''
In August of 1998, Vanessa became part of a year-long
asthma study. Children's Memorial Hospital is one of only
seven hospitals nationwide participating in the study to
decrease the level of asthmatic morbidity.
Under careful supervision, Vanessa is trying a new
experimental inhaler designed to prevent future asthma
attacks, long-term.
Doctors monitor Vanessa's health with a Peak Flow Meter.
Every morning she blows into the device which determines the
level of her condition, and alerts her if she's getting sick.
``It's great because it gives the patient control over the
illness. You can tell when you are getting sick and you know
what to do to help yourself,'' she said.
Since she began using the experimental inhaler, Vanessa's
condition has dramatically improved. ``Usually fall and
spring are my worst times. I didn't get sick at all in the
fall. I got a little sick in the spring, but I haven't had to
go to the hospital at all. That's unusual for me.''
Vanessa graduated from St. Xavier University in May, with a
degree in psychology. She hopes to become a counselor for
chronically ill children. ``The thing that's so great about
Children's Memorial is no matter what's wrong with you, they
don't ignore you. They don't make you feel like an outsider.
They're working to give children a normal life.''
``Illinois' teaching hospitals need adequate funding to
remain viable for people like . . .'' Heather Marker, Age
27, Northwestern Memorial Hospital, Robert H. Lurie
Comprehensive Cancer Center.
For 14 years, Heather Markel has struggled against systemic
lupus. Systemic lupus is a devastating, chronic disease in
which the immune system attacks normal tissue. It can cause
joint inflammation, severe pain and permanent damage to
internal organs.
During the spring of 1997, Heather's life changed. As a
patient at Northwestern Memorial Hospital, Heather had access
to one of the most cutting-edge treatments for lupus.
Northwestern Memorial Hospital is participating in the
first comprehensive research program to develop techniques--
traditionally used to treat cancer--to treat autoimmune
diseases such as lupus, rheumatoid arthritis and multiple
sclerosis.
Heather's treatment for lupus included chemotherapy and
transplanted blood stem cells. Within ten days of the
procedure Heather's immune system began to rebuild itself.
For the first time in 14 years, Heather was free of the
disease she had struggled with since childhood. She is
currently planning on returning to medical school and hopes
to fulfill her lifelong dream of becoming a physician.
The procedure was discovered through research at the Robert
H. Lurie Comprehensive Cancer Center of Northwestern
University. Northwestern Memorial Hospital's connection to
Northwestern University, and its status as a teaching
hospital, provides patients with cutting-edge technology and
experimental treatments based on University research. To date
Northwestern Memorial Hospital's program is one of the few in
the country using this procedure.
Heather was the first person to receive the treatment, and
doctors are optimistic about her condition.
``Illinois' teaching hospitals need adequate funding to
remain viable for people like . . .'' Philip Gattone, Age
12, Rush-Presbyterian St. Luke's Medical Center, Rush
Epilepsy Center.
Phil and Jill Gattone's son Philip began having seizures as
a baby. Doctors diagnosed
[[Page H9018]]
Philip with intractable epilepsy. The disease interfered with
Philip's development so much that by age six he still
couldn't speak in full sentences.
An estimated 2.3 million Americans suffer from epilepsy.
While about 75 percent find medications or other treatments
to control their seizures, the other 25 percent, like Philip,
try everything available to alleviate their seizures, but
find no relief.
The Gattone's search for help from specialists around the
country ended at the Rush Epilepsy Center. Rush-Presbyterian
is one of the few hospitals in the nation that offers
advanced treatment options and research capabilities for
people with epilepsy.
Philip went through various tests at Rush to diagnose his
condition and to discover the right way to treat his
particular form of the disease. During the test period,
Philip was videotaped 24-hours-a-day so doctors could
identify his type of epilepsy, recording certain symptoms
including facial expressions and unusual or abnormal
behavior.
Doctors experimented with a variety of medications, but
Philip's seizures persisted. His IQ was dropping, and he was
losing critical cognitive abilities. His father, Philip Sr.
said, ``We knew we had to do something.''
Doctors agreed that surgery was the only option. ``If you
can stop epileptic activity at its original site, you can
stop the spread,'' said Thomas Hoeppner, PhD., a Rush
neuroscientist.
In 1993, Philip underwent the first of two surgeries
designed to prevent epileptic activity in areas of the brain
critical to speech, movement and sensation.
Philip, now 12, has been seizure-free for the last five
years. His parents are thrilled to see their dark haired,
bright-eyed son doing so well. ``This is what happens when
research, dedication and commitment come together,'' said his
father.
____
Tertiary Care in Illinois: A Resource at Risk
Request
Because the costs associated with delivering more complex
care limit the ability of these hospitals to compete on price
in the health care marketplace, their continued ability to
provide leading-edge technology and specialized care depends
heavily on government reimbursement policies. Several bills
that would give teaching hospitals and academic medical
centers some relief from BBA cuts have been introduced in
Congress. All deserve the support of our state's U.S.
senators and representatives.
S. 1023/H.R. 1785, the Graduate Medical Education Payment
Restoration Act of 1999, would freeze the IME payment
reduction at its current level of 6.5%. It would restore
nearly $90 million of Medicare funding to Illinois teaching
hospitals and academic medical centers.
S. 1024/H.R. 1103, the Managed Care Fair Payment Act of
1999, would pay disproportionate-share hospitals (DSH)
directly from Medicare for services provided to beneficiaries
who are members of Medicare+Choice health plans.
S. 1025, the Nursing and Allied Health Payment Improvement
Act of 1999, and H.R. 1483, the Medicare Nursing and
Paramedical Education Act of 1999, would carve out funding
for nurse and allied health training from payments to
Medicare+Choice plans and pay the money directly to the
hospitals that provide the training. Illinois Rep. Philip
Crane (R-8th Dist.) is the sponsor of H.R. 1483.
Tertiary teaching hospitals and academic medical centers
also support:
A halt in implementation of further DSH payment reductions.
Payment of 100% of their DME and IME costs in lieu of the
current partial carve out under Medicare+Choice, beginning in
FY 2000.
July 23, 1999.
Draft
As members of the Illinois Congressional Delegation, I am
writing to share our concerns over the fate of Illinois
teaching hospitals and academic medical centers absent some
form of relief from reimbursement cuts authorized in the '97
Balanced Budget Act (BBA). While we recognize that all
sectors of society must sacrifice to achieve BBA objectives,
we strongly believe that the unintended consequences of BBA
threaten the viability of these valuable health care
resources. As envisioned, BBA was intended to cut $104
Billion from Medicare reimbursement to hospitals. However,
BBA, if implemented as enacted, will result in nearly $200
Billion in reductions.
The people of the State of Illinois deserve and have come
to expect the high-quality medical care delivered by our
teaching hospitals and academic medical centers. The benefit
derived by residents of every region of the state is
incalculable. These teaching hospitals and academic medical
centers are the primary providers of complex medical care and
high-risk specialty services such as trauma care, burn care,
organ transplants and prenatal care to all patients--
regardless of ability to pay.
In fact, the 65 tertiary care teaching hospitals in
Illinois provide approximately 63% of all hospital charity
care in the state. Aggressive BBA cuts are jeopardizing their
ability to fulfill their vital mission of maintaining state-
of-the-art medical care and technology, providing quality
learning and research environments, and serving as a safety
net for those unable to pay.
Not only do these institutions enhance our health and
physical well-being, they also are some of our largest
employers and consumers and, as a result, are an integral
part of our overall economy. In total, our Illinois teaching
hospitals and academic medical centers employ more than
56,000 of our constituents and add almost $3 Billion to the
state's economy in salaries and benefits alone.
Yet, despite the great benefits Illinois residents derive
from our teaching hospitals and academic medical centers,
these institutions suffer disproportionately under the BBA.
In total, Illinois teaching hospitals face five-year
reductions of more than $2.5 billion. Consequently, while
teaching facilities comprise 27% of Illinois hospitals, they
will bear the brunt of 59% of BBA reductions. These cuts are
compounded by increasing fiscal pressures from managed care
companies and inadequate Medicaid reimbursements on the state
level.
We believe we must act now to prevent the unintended
consequences of BBA from eroding the high quality medical
care we in Illinois take for granted. We respectfully urge
you to make relief for our teaching hospitals and academic
medical centers a high priority in this legislative session.
Mr. Speaker, I am looking at an editorial from the Peoria Star
Journal that says, ``Medicare Reductions Threatening Hospitals.''
I am looking at one from the St. Louis Post Dispatch that says,
``When Hospitals Get Sick,'' that hospitals can be sick if they are not
being provided the necessary resources with which to operate.
I am looking at one from the Chicago Tribune which says, ``University
of Illinois to cut hospital jobs, seek merger.''
I am looking at one from Crain's Chicago Business Magazine that says,
``Deep Medicare cuts draw blood at teaching hospitals,'' and they are
not talking about the kind of blood that needs to analyzed. They are
talking about the blood that is going to cause the institutions to
hemorrhage; and, of course, if one does not stop a hemorrhage we know
that institutions, as well as individuals, can die. If institutions
die, then they threaten the life of communities.
I am looking at one from the New York Times that says, ``Teaching
Hospitals in Trouble.''
Then one that says, ``Teaching Hospitals Battling Cutbacks in
Medicare Money.'' Another editorial from the Chicago Tribune,
``Medicare Cuts Hit Big Centers.''
So all around America, both rural and urban, we are experiencing
difficulties that unless there is relief we do not really know what to
do about it. It is understandable if our economy was in bad shape, if
we were on the verge of disaster, if we were on the verge of
bankruptcy; but all of us continue to talk about how fortunate we have
been that the economy has been holding steady, that we continue to
experience economic growth. If we are experiencing economic growth,
then it would seem foolhardy to allow institutions that provide the
most needed of services to dissipate and perhaps even go under.
Now, there are some things that are being proposed. There are bills
that have already been introduced that could provide some relief. One
is Senate bill 1023 and House Resolution 1785. The Graduate Medical
Education Payment Restoration Act of 1999 would freeze the IME payment
reduction at its current level of 6.5 percent, and it would restore
nearly $90 million of Medicare funding to Illinois teaching hospitals
and academic medical centers. Obviously, we are asking people to
support that legislation.
Senate bill 1024 and House Resolution 1103, the Managed Care Fair
Payment Act of 1999, would pay a disproportionate share to hospitals
directly from Medicare for services. So we would hope that these
legislative initiatives would be seriously looked at by the Members of
Congress and that we could move to provide the kind of relief that is
necessary to keep our institutions alive, viable, healthy, and well.
____________________