Ed Howe – Where to from here?


G. Edwin Howe is the president and chief executive officer of Aurora Health Care, the largest health care provider system in eastern Wisconsin. In many ways, Aurora is at a crossroads. For the most part, the nonprofit company has saturated the eastern half of Wisconsin with clinics and hospitals. Still, Aurora is contending with aging buildings, changing technology and the emergence of competition from for-profit heart hospitals in the market. At age 62, Howe, also faces decisions for his personal future. Howe recently discussed a wide range of issues in an interview with Julie Sneider, an independent journalist who has been covering the health care industry in southeastern Wisconsin for 13 years. The following are excerpts from that interview.

SBT: Let’s start with St. Luke’s Medical Center’s recent decision not to pursue the construction of a 50-bed, for-profit heart hospital in Milwaukee. Why the change in direction?
Howe: It wasn’t so much a change in direction, because we didn’t halt it. We had never decided to build it. We explored the idea. Our feeling was that we have such a wonderful heart hospital in St. Luke’s, it really didn’t make sense to try to split the business into the less complicated surgeries in one place and the hard cases at St. Luke’s.
We had some physicians who thought it would be slick to have some equity or ownership in a for-profit heart hospital, and our feeling was that when we talked to them about the risks associated with it, they finally agreed that it wouldn’t make any sense. Some of our cardiologists are investors in the for-profit heart hospital with Covenant HealthCare (an Aurora competitor).

SBT: For those physicians who are investors in the Covenant-affiliated heart hospital, how will their relationship with St. Luke’s be affected?
Howe: Almost all of them will continue their privileges there (at St. Luke’s). They are a good group of doctors. My expectation is that maybe some of the simple or uncomplicated cases they will do at the for-profit hospital they are associated with, and the complicated heart cases that require the kind of skills that St. Luke’s has, they’ll continue to do those at St. Luke’s. I guess we don’t expect a huge impact on St. Luke’s, but time will tell.
But I think our expectation is that, between the hospital Covenant is building and the one that MedCath Corp., is developing that may consolidate things in Milwaukee. That may lead to some of the more marginal community hospital heart programs … closing. So we expect that the impact on St. Luke’s will be pretty minimal.

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SBT: Are you saying that the opening of the boutique heart hospitals will have a positive effect on the health care market in southeastern Wisconsin?
Howe: From our standpoint, it gives us someone to compete against, so it will make us work harder. So that’s probably good for us. If in fact it ends up reducing the number of marginally sized (heart surgery) programs, that should be good for the health care market.

SBT: Who do you think those marginal providers are?
Howe: I think a person would have to look at the numbers and see which ones don’t meet the national guidelines for how many (surgeries) a heart program ought to have.

SBT: Wisconsin for so long has had nonprofit health care, unlike other states. How far do you think this for-profit hospital trend will go in Wisconsin?
Howe: Well the reason I’m not as upset about it as other people are in the community is that I believe the market cleans all those things up. And when we’ve had other for-profit ventures, they seem to be hot for a while and then they tend to go away. There was a period of time where everyone wanted to do (for-profit) dialysis. Then there was the time everyone wanted to do urgent care centers. And the reality is that there are changes in regulations in how care is delivered, and they tend to have a short life lots of times. These for-profit entities are pretty risky business ventures.

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SBT: The trend of for-profit psychiatric hospitals that moved into the Milwaukee area several years ago and then closed – is that another example of the market forces you are talking about?
Howe: Yes, that’s another real good example.

SBT: If we could shift gears to talk about Aurora’s growth strategy. When you look back at Aurora’s growth over the last decade, are you now in all the locations you want to be? Do you think you are close to saturating the eastern Wisconsin market?
Howe: Yes, I think we are pretty much how we want to be. Eastern Wisconsin has 3 million of the 5 million people in the state. That’s about the size of Atlanta or a market area of that size, so that would make us the 12th- or 13th-largest market in the United States. And that gives us the size we need so we can get the computerization and the other things that are right where the future of health care will go. We’re real happy with that.
And one of our early desires as a system was to make sure there was good access to health care, and so we’ve invested a lot in clinics. We’ve always said we want to be within 15 minutes of all patients in eastern Wisconsin, and we’ve pretty much accomplished that. … We think we are positioned exactly where we need to be in the future.

SBT: Are there any gaps you need to fill? What about building a hospital in Appleton or in Waukesha County?
Howe: The gap is western Waukesha County. We have a large physician presence out there (with the Wilkinson Medical Clinic). With the growth of the population in western Waukesha County and with our physicians out there, we need to make sure people in western Waukesha County have (hospital) choices in the future. So that’s something we want to get accomplished.

SBT: What is the status of your proposal to build in western Waukesha County?
Howe: It is still in litigation and discussion.

SBT: Is the Oconomowoc area the preferred location?
Howe: Well, someplace in western Waukesha County. Oconomowoc could be a great site, and we have a wonderful piece of property, and it’s zoned the way it’s supposed to be zoned. And of course, that’s what the lawsuit is about.
Appleton is a very competitive market. People have choices. There are two really good hospitals in Appleton, and there doesn’t seem to be any need for us to have a hospital there. So, I would not expect that at any time we would have a hospital in Appleton.

SBT: Do you ever look to territory outside eastern Wisconsin, perhaps Madison or even farther west to La Crosse or Eau Claire?
Howe: No. Madison is a unique city, and I don’t think we would bring any value to Madison. And the rest of the state is great, but there is not much population there. If you get over toward the Mississippi River, the choices are with the systems in Minnesota. So, we’re real happy to be in a market with 3 million people.

SBT: What about Aurora’s existing hospital and clinics and maintaining those that are aging? How much will Aurora have to invest in order to maintain those structures so that you can continue to offer state-of-the-art technology and medical care?
Howe: Well, we’ve been trying over time to upgrade or replace the ones that need to be replaced. We replaced the hospital in Two Rivers with a new Manitowoc facility. Sometime in the next few years, the hospital in Sheboygan will need to be upgraded.

SBT: Are you more likely to take the replacement hospital approach in Sheboygan?
Howe: I don’t think the board and the staff have gotten to that point yet. They still need to think about that, and I don’t know what their recommendation will be.
And then in the southern part of the state, the board and physicians in Aurora’s southern (region) have recommended that, as opposed to having two hospitals (Memorial at Burlington and Lakeland in Elkhorn), it would make sense to consolidate into one. So they’ve made a preliminary decision on that, but they don’t know where the hospital should be or how big it should be, the services that would be offered, how to pay for it or what’s going to go in it. So they have a lot of decisions yet to make.

SBT: Any idea how much Aurora will invest in next five or 10 years, either to replace or to upgrade aging facilities?
Howe: No, I don’t have a projection on that. All those things need to compete with other issues such as buying the new diagnostic equipment that’s coming out. … Go out to GE Medical Systems and look at some of the incredible technological advancements that are being made for the future. That’s where we will have really tough decisions. We probably won’t have enough money to buy a third of what we would like to buy. None of those decisions are easy.

SBT: Aurora’s growth strategy over the last 10 years seems to have been a matter of territory. If you are now in nearly every location you want to be, what is Aurora’s strategy for the next 10 years?
Howe: I think it’s taking advantages of the opportunity to integrate. If we do that right, we think we can focus on improving patient safety, reducing costs and making sure people have access to care. That’s how we will measure our success.
We have the size now and the ability through new science, technology and information systems to make a really big difference in improving the health of the population. Already, when we measure what we do for diabetic care or people with heart disease or high cholesterol, the benchmark data say we are clearly in the top quartile in the country in those efforts.

SBT: The cost of health care, obviously, is a big concern to everyone, increasingly so to small employers in the Milwaukee area. Aurora recently announced a plan to keep its price increases below the medical consumer price index through 2005. Please explain your rationale for pursuing that plan and describe the reaction you are getting from the local business community.
Howe: Part of what we’re doing with our First Monday Report is to show, first, that we are going to control our prices. But what is more important than controlling our prices is addressing how much health care is used. We also have to try to stop the overuse of health care services, which we as a society do sometimes.
An example is end-of-life care. Advance directives can keep patients from getting more care than they want. And we still have people who want antibiotics for illnesses that antibiotics don’t help, so we over-treat in that area.
We also under-treat people. For instance, half the people who have diabetes don’t know they have it. So, if we (Aurora) can identify those patients and treat them, they should never show up in an emergency room in a medical crisis, so there are huge cost savings in doing that.
There also are a lot of things in the patient safety area that can be addressed to lower costs. So far this year, we have automated a large amount of our prescription writing. When we do that, we remove chances for error. So, I think there are big savings there, and that’s really where the opportunities (to lower costs) are.
What we are trying to do is to get the (health care cost) debate and discussion in Wisconsin to be constructive. At the moment, there are still a lot of people looking for easy answers and blaming others for the high cost of health care.

SBT: Recently there have been calls for universal health care in Wisconsin. What do you think of those proposals?
Howe: All those people are talking about how to finance health care. If I may make a case, the way we finance health care in this country is kind of weird. But none of that gets at how you utilize the health care. The savings in the improvement of quality is not in how you pay for health care, but how you actually deliver it and deliver it in a coordinated way, making sure that people get the right care at the right time. And that’s where the focus of the debate needs to be. If you do that right, you can go back and say, "OK, what’s the most fair way to pay for it?"

SBT: How can Aurora help small employers struggling to find affordable health care for their employees?
Howe: We’re not an insurance company, so from that standpoint, we can’t be real helpful in solving that part of the problem. From that standpoint, part of the problem is that with the small number of employees, they (insurers) begin individually underwriting people. Only 7 percent of the people make up 57 percent of the health care costs, and that’s the small group we have to work on.
Somehow, small businesses have to be able to group their people so that they can (get insurance) like a large employer can, so the risks are spread over a larger population. I don’t personally know the best way to do that, but that’s the kind of discussion small business, insurance companies, providers and the government should have. Perhaps we could have regional pools, or something of that nature, as some people have talked about.

SBT: You mentioned the idea of regional pools. The governor has talked about forming a pool for small employers. What do you think of that proposal?
Howe: It depends on how it’s set up. The disaster would be if it only picked up high-risk companies. You need a mix of risk. You can’t have adverse selection.

SBT: Is it possible to have any type of direct contract or relationship between a health care provider and small companies? Or is that idea impossible because of the numbers?
Howe: I think there are lots of things small companies could benefit from by having a relationship with a provider that talks about care management activities. But the business of the provider becoming an insurance company won’t work.
So, I think small employers should be able to get to a point where they can go to an insurance company and say, "Most of our employees live near a certain provider and use that provider, let’s work with that system to get something that works for our company." So yes, I think there should be opportunities like that.

SBT: What are your personal plans for the future? How much longer do you want to stay in this job?
Howe: This job is incredibly fun, and there are so many things left to do. I would like to keep at this until it no longer seems fun.

SBT: Do you have plans to retire at a certain age?
Howe: Oh heavens, no. The breakthroughs in science and medicine are so exciting right now. I think health care is going to go through an amazingly wonderful period of time as the new genetic information is brought into play and starts affecting drugs and other treatments. We will be able to design care and treatment to the individual. It’s a great time to be in health care.

April 18, 2003 Small Business Times, Milwaukee

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