New providers / Old problems

Last updated on May 13th, 2019 at 02:22 pm

Health-care costs surge as building blitz continues

While the cost of the hospital building is a small fraction of the cost of hospital care, a current boom in hospital building drew fire from attendees to a listening session held June 24 at University of Wisconsin-Milwaukee’s Sandburg Halls.
The event was the Governor’s First Healthcare Listening Session. Those who spoke at the gathering ranged from heavyweights like Humana Wisconsin Market President Larry Rambo, and Ed Howe, president of Aurora Health Care, to a retired executive frustrated by high cost for individual insurance and the lack of advance information on health-care service prices.
Representatives of a Kenosha-based industry group presented information from a study conducted by Maryland-based Lewin Group. Geoffrey Schick, regional health-care manager for Daimler Chrysler, and Ken Johnson of the United Auto Workers gave an overview and left materials from the study, which was commissioned by the automaker to explain why Kenosha-based workers’ health-care costs were far and away the highest of all Daimler-Chrysler locations.
The study examined not only health care cost information from Daimler-Chrysler but those of other major area employers – along with additional data provided by health insurers serving the area. In all, data on more than 20,000 insureds were included in the project.
The Kenosha Daimler Chrysler workers’ expenses averaged $4,020 per worker, while care in the lowest-cost market, Syracuse, N.Y., cost only $1,331 per worker.
One factor in the high cost of care, according to the study, is an excess of staffed beds. That confirms the results of an analysis by Small Business Times published in the January, 2002 issue. The Lewin Group’s study was based on data from the year 2000. Since then, Aurora Health Care has entered the Kenosha market and the incumbent hospitals St. Catherine’s Hospital and Kenosha Hospital & Medical Center have merged under the same ownership group and relocated to a new facility. The fact that annualized bed demand was dwarfed by supply was due in part, according to the study, to the fact that many Kenosha County residents traveled to Racine or Milwaukee County for many of their health-care needs.
According to Schick, the study has value for the rest of southeast Wisconsin as well.
"I believe that we have gotten a good picture of the demographics of Kenosha County," Schick said. "If you can assume that Kenosha is similar to other southeastern Wisconsin counties, you can make some assumptions based on health status. More important is the economics factor on trying to control and get a handle on costs. This shows that it requires a regional effort if not a state effort."
Not surprisingly, a principal with a local architectural firm involved in hospital design took issue with the notion that the local hospital building boom was driving cost.
Kahler Slater "3EO" Jim Rasche stressed that newer structures could offer operational efficiencies that could actually reduce cost.
"Our health-care clients are looking for customer-focused centers of excellence that respond to marketplace expectations," Rasche said. "First and foremost is a place that promotes clinical excellence where the skill levels and technologies and spaces support excellent healing outcomes."
Rasche said his firm strived to create hospitals for a society that is "beginning to become more open to looking at healing and wellness in a broader light – looking at the metaphysical end and empirical aspects of health and wellness – considering individuals as systems of mind, body and spirit and to treat them as dignified, respectful, informed, intelligent individuals that are partners in their own health and well being."
Attractive interiors, according to Rasche, are important in hospitals as "much of what has to be done is painful, disheartening and sad. There is loss and grieving that needs to be minded in a health-care setting."
Other important factors in facility design include communication and education rooms and places for patients to access the Internet.
"There is documented evidence that shows that there are shorter lengths of stay that can reduce health-care cost when there are better physical environments," Rasche said. "We have seen clients put in whirlpool tubs for women’s birthing programs. This isn’t just a hotel-like frivolity. Hydrotherapy accelerates muscle relaxation and recovery after delivery – and can actually accelerate labor. It can cut the need for artificial means like C-sections or epidurals by providing a natural means for relaxation. We see some people not aware of the reduction in cost wondering if they are there just for frivolity."
Apart from creating a good environment for healing, new facilities can accommodate more efficient operations, according to Rasche.
"Construction accounts for only 6% of the cost of operating a health-care facility," Rasche said, stressing the role of staff.
Rasche and health-care consultant Sara Stanton stressed the importance of maximizing the efficiency of nursing staffs in particular. One trend in that direction is the use of decentralized nursing stations, which position nurses closer to patients, minimizing time spent walking up and down corridors while maximizing the time spent providing care.
According to Stanton, who founded and until recently served as vice president of a health-care division of Seroka & Associates, Waukesha, a building designed to allow multiple departments share various resources can provide cost savings.
"When designing a building that is service-oriented, it is important to realize economies of scale," Stanton said. "Another key factor is energy efficiency. With the incredible options available to hospitals now in regard to energy efficient designs, it would be beneficial to use energy-saving architecture and applications in new developments. Not only will this assist in maintaining low costs, but can also enhance the look and feel of the facility, which certainly leads to better customer service."
While rebuilding existing facilities to accommodate newer and better finishes and staffing trends like decentralized nursing stations is possible, according to Rasche it is not the best option.
"Remodeling in health care is a very expensive proposition," Rasche said. "The costs come very close to new construction costs if you truly completely remodel the space."
While most of the new hospital buildings under construction or recently completed in southeastern Wisconsin are owned by the a handful of nonprofit corporations, one facility slated for completion in the fall of 2003 will be owned jointly by a physician group and a Charlotte, N.C.-based company.
The 60,000-square-foot Medcath hospital, under way in Glendale’s Estabrook Corporate Park, would compete head-on with a for-profit heart hospital being developed on the grounds of Aurora’s St. Luke’s Hospital on Milwaukee’s south side. Medcath is planning for a 32-bed facility, expandable to 64 in-patient intensive care beds.
Medcath COO Mike Servais criticized those who oppose the project on the grounds that it would drain higher-revenue procedures from nonprofit hospitals.
"I think that is a self-serving argument." Servais said. "If any kind of a facility opens and provides a better quality of care and someone goes there, that is going to affect their business. Should someone be protected because they cannot provide adequate service? There are only 946 of the 5,000 hospitals through out the country that even have heart programs. Certainly, hospitals can provide care without them."
While Aurora heavily promotes St. Luke’s Cardiac Care Center – and is working closely with physicians on the new for-profit facility – the hospital group has draw fire for severing relations with at least one major health insurance provider and using its market strength to avoid discounting services to other insurers. Servais implied that some outside competition may help that situation.
"We work with all of the quality insurance providers," Servais said. "We feel our outcomes create value to them both in a sales opportunity through the quality and a cost basis. We would expect to be very cost-competitive with the market and we will negotiate fairly and aggressively with managed care and other types of insurers."
In fact, the high cost of care in southeastern Wisconsin – along with the high cholesterol of the state’s preferred diet – were inducements for Servais’ firm to locate a facility here.
"We look at several things – including the volume of cardiac disease in the market," Servais said. "The Milwaukee area has one of the highest levels of incidence in the nation. We do look at the cost structure. And we do feel we can positively impact the high cost and provide some savings in that direction."

July 5 2002 Small Business Times, Milwaukee

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Christine McMahon
Christine McMahon helps leaders develop strategies and improve speed of execution by developing leadership talent, creating alignment between business functions and improving communications and accountability up, down and across a business. She is co-founder of the Leadership Institute and is in partnership with the WMEP. For keynote presentations, executive coaching, sales and leadership training, she can be reached at: