Hospitals: Patients won't be paying price for facilities, technology
A shot in the arm?
Renovations, expansions and new construction are giving Rock County's health care sector a nearly $200 million boost. But who is expected to get well from it, and who will feel the pain? The Gazette looks at those and other issues in a two-day series.
Sunday: What's happening and why?
Today: What's in it for consumers, and who is footing the bill?
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Late in the day, a Dean doctor makes his way from the Riverview Clinic to Mercy Hospital across a cold, dark parking lot. In January, Dean physicians will be making their rounds at the new St. Mary’s Janesville Hospital, a key strategy behind the construction of the new hospital and clinic on Janesville’s east side.
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The oncology treatment area at the Dean Riverview Clinic is cramped and congested. At the new St. Mary’s Janesville Hospital and Dean Clinic-Janesville East set to open Jan. 9, more room and the option of treatment outdoors on good days are among the improvements.
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Dr. Dennys Maldonado consults with sports medicine patient Johanna Crabtree using the new electronic medical records system at Mercy Clinic East. While less visible to the public than outdoor construction projects, the expensive records system is an example of the capital spending Mercy does on its system each and every year.
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The new Dean Clinic has an an in-house MRI, a feature missing from Dean Riverview Clinic. When Dean doctors and staff move into the new Dean Clinic-Janesville East in January, Riverview and Dean Northview Clinic in the Village Plaza adjacent to ShopKo will close. Dean officials have not determined what will become of those two facilities.
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Mercy Hospital’s daVinci surgical system allows physicians to perform some operations with minimal invasiveness, allowing for a quicker recovery. In recent years, Mercy has spent, on average, about $25 million on capital projects designed to keep plant and equipment up to date.
JANESVILLE — How much will it cost me?
That's an obvious question for consumers as health care providers pump hundreds of millions of dollars into new buildings and expansions they say are designed to meet customer demand with convenient access to top-notch physicians and services.
John Cook, Mercy Health System's chief financial officer, understands patient fears that "if they build it, I will pay for it."
So, too, do Cook's boss, Mercy CEO Javon Bea, and Charlie Johnson, chief financial officer of SSM Health Care of Wisconsin.
All three health care executives, however, said that patients will not see line items on future bills that say "construction, new hospital" or "expansion, Mercy Clinic East."
Most health care pricing is set on fixed-price margins, they said. Medicare and Medicaid reimbursements are fixed, and all indications are that they will decrease. Also, insurance providers negotiate prices specific to a wide range of procedures and services, often determining what health care providers can charge.
"I know that consumers, patients are concerned that when they see a big expansion, they think, 'Well, it's going to cost me more,'" Cook said. "Just because we improve our facilities, improve the technology and improve the state-of-the-art health care facilities all in order to provide the best care to our patients, what it doesn't mean is that Medicare, Medicaid and insurance companies are going to pay us any more."
Bea compared his system's projects to home improvements.
"If you take out a home equity loan to put a new roof on, I don't think (your employer) is going to pay you … more," Bea said. "He's not going to raise your salary. No, you've got to pay that out of your earnings.
"That's what we have to do. We have to pay for these projects out of our normal operations. People say that's going to raise my costs. No, we're paying for them over 25 or 35 years."
Providers typically pay for larger projects with bond issues that run for decades. The debt service is spread over many years, and operating revenues from all components in the far-reaching Mercy, SSM and Dean systems support the local projects.
That doesn't mean providers don't have short-term construction obligations. They do, and those payments typically come from what Bea refers to as normal earnings.
He and the others said providers can't pass on much—if any—of capital expenditure costs in the form of higher prices. Instead, they must become more efficient in their operations and use gains there to pay short-term construction costs.
Head to head
In Janesville, cost control will soon take on an added incentive when SSM and Dean Health System open their $145 million hospital and clinic in January.
For the first time in Janesville, two fully integrated health care systems will be pitted against one another.
"In a one-hospital town with the possibility of another coming in, the issue becomes: Will the new hospital perhaps engender positive competitions?" said Alwyn Cassil, director of public affairs for the Washington, D.C.-based Center for Studying Health System Change.
"There often is a lot of talk about competition, but it rarely focuses on price or quality. It tends to come down on the side of who has the latest and greatest amenities."
True competition on price and quality benefits a community, said Cassil, who said she has no direct knowledge of the health care market in Janesville and could only speak in generalities.
"But if the competition is based on perceived quality because of amenities, then it's not so much of a benefit," she said.
With more than $70 million committed to high-visibility construction projects in Rock and Walworth counties, Mercy has launched an advertising campaign emphasizing community and employees who provide the "very best care."
On Jan. 9, SSM and Dean will throw open the doors to their facility on Janesville's southeast side, and there has been no shortage of ads and billboards touting that project.
Johnson believes that stiff competition is good for health care consumers.
He sees it every day in the highly competitive Madison market, as well as others.
"We believe that choice in health care will improve health care for all," he said. "We believe a second hospital will actually help control health care costs in Rock County, so not only will you have improved access, you'll have choice."
The Federal Trade Commission has studied choice and its role in providing high quality, cost-effective care and found that vigorous competition can provide important benefits and hospital cost controls, he said.
"If you look at the Madison market, we have extreme competition here, and you compare the health care costs structure of Madison to other markets, even in Milwaukee where they're dominated by just a few systems, and our costs, quality and access rate very highly," he said.
"We actually think there are a substantial number of benefits to employers and certainly our patients and customers in general."
Johnson said the SSM/Dean studies that showed substantial out-migration from Janesville build the business case for the new hospital and clinic.
"When you capture the local health care element that should be being done in Janesville that is leaving, that will way more than offset any incremental costs to your community," he said. "And it keeps us from having to do a further expansion in Madison as we continue to grow.
"…It makes less sense to do an expansion in Madison than where the patients actually are. We want to meet their complete needs, not only on the insurance side and the physician side, but also on the health care side by keeping health care local where it can be done in a more economical way."
Since plans for the new hospital were unveiled, Mercy's Bea has said St. Mary's 50 beds are unnecessary. The area, he said, already has too many hospital beds, particularly as the industry shifts its focus to more outpatient procedures.
There's no formula that says a city should have a given number of hospitals, but an industry benchmark suggests that a population should have 2.6 hospital beds per 1,000 residents.
SSM officials have said that Rock County is expected to have a population of 161,000 next year. That would require about 420 beds.
The county has three hospitals: Mercy in Janesville, Beloit Memorial Hospital and Edgerton Hospital and Health Services. Together, they staff just more than 300 beds, which supports the contention of SSM and Dean officials that the area will need 100 more hospital beds.
But the three existing hospitals are licensed for 414 beds.
Throw in St. Mary's 50 beds, and the licensure level in Rock County will increase to 464, with about 370 of them staffed.
SSM and Dean officials have said the new beds will be filled by Dean patients who were charged a premium for inpatient services at Mercy, as well as patients who previously left Rock County for hospital services.
Mercy typically averages about 100 inpatients a day at its hospital, and about 30 percent of those have been Dean patients that—at least in theory—would immediately fill 30 of the 50 beds at St. Mary's Janesville Hospital.
It's that time of year
Local employers and employees are once again wrapping up that time-honored tradition, the meeting at which they discuss changes in employer-sponsored benefits for the coming year.
Often, one of the most significant changes is the cost of health insurance premiums, both to the employer and employee.
After several years of relatively modest premium increases, annual premiums for employer-sponsored family health coverage increased 9 percent in 2011, according to the Kaiser Family Foundation.
On average, workers pay $4,129 and employers contribute $10,944 toward a premium that this year totaled $15,073.
Premiums increased significantly faster than workers' wages (2.1 percent) and general inflation (3.2 percent).
Since 2001, family premiums have increased 113 percent, compared with 34 percent for workers' wages and 27 percent for inflation, the foundation reported.
Bea, citing industry reports, said that neither construction costs nor health care costs appear to be fueling this year's increases.
"The health care providers haven't contributed to the new premium increases," he said. "Have there been periods when health care costs have caused premium increases? Absolutely, but we're not in one of those periods right now."
Bea said much of the increase is due to uncertainty, including provisions of the 2010 Affordable Health Care law.
One example, he said, is the provision that extends coverage to age 26 for dependents on their parents' plans.
Kaiser estimates that change provides coverage for an additional 2.3 million people.
Bea knows this because he is also chief executive officer of MercyCare Insurance, which covers 40,000 lives, including 23,000 in Rock County.
At many company meetings, his MercyCare plans compete with Dean plans associated with the new hospital and clinic that will open in January.
Construction or no construction, Bea expects the two plans will be competitive.
"I think we've been very competitive," he said. "We're providing care pretty cost effectively."
Lon Sprecher is chief executive of Dean Health Plan, which insures about 20,000 people in Rock County. He expects the same competition.
"I think the competition will really find its way into the competing health plans in the marketplace," he said "The underlying provider cost and quality will find its way into MercyCare now, and it will find its way into Dean Health Plan.
"In the past, 38 percent of our cost was controlled by somebody else besides us, so I think there will be more price competitiveness on the two health plans now than what there was historically."
Does that mean Sprecher expects costs will decrease?
Hardly.
"Will you ever see costs going down? I don't think so," he said. "But will you see a bend in the cost curve? I think the answer is absolutely yes."
Competition appears to be working
Bill Boyd is a partner and chief financial officer of Boyd Consulting Group in Janesville.
Since its inception in 1995, Boyd Consulting Group has grown from a two-person operation to a company that designs and implements employee benefit plans for more than 100 companies in six states.
Many of those are in the Janesville area, and Boyd is seeing health insurance plans with single-digit premium increases.
From his experience this year, Boyd said the increases for Mercy and Dean plans have been highly competitive, in some cases offering no increases.
"In many cases, those two have easily been the lowest," Boyd said. "I really think it has to do with the competition.
"They are very competitive with each other."
Boyd said he's seen substantial increases in some other plans not sponsored by Dean or Mercy.
"I think the competition is good, and our residents, our community will benefit and come way out ahead," he said. "I also think it will last, as the competition isn't going to go away."
Dec 14, 2011 at 10:17 a.m.
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What gets me is Mediacid/Medicare is something that is paid for for the duration of our work history and when we are intitled to collect it We are shunned and treated less then those with insurance and I will say this as I have experienced it, have seen with my own eyes people with insurance and less severe ailment get priority over those who don't. prior to getting my Medicaid I was denied service at MERCY without 189 dollars upfront for Urgent care services. and Having been injured at work I had no problem to be seen and when my injury cost me my job and I had to fight for the little I won after several months I will tell you no insurance no medical at Mercy and treated less then can be pretty devastating when you are already down and lost it all. I switched to Riverview and have never once been treated poorly In fact I am treated great and with respect So Javon you say people don't pay for your facelifts Well we all know that is untrue and your increases in your salary and bonuses tells us we do everytime we get the bill from Mercy in our mailbox on a weekly basis and see what it costs for services at your PRETTY FACILITY.
Dec 14, 2011 at 1:51 a.m.
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What a joke the costs for care will rise to cover the costs for all the unneeded facelifts.The level of care people look for is not in HOW PRETTY the building is, Dean/Saint Marys will be a welcome medical facility in this area as then MERCY can't bilk the people and treat the ones with less then or no insurance like crap anymore.
Dec 13, 2011 at 10:47 p.m.
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We have had a high deductible policy for many years. Sad to say but Janesville is and continues to be a high cost area. When you have your own money in the game this becomes obvious. You look for the best value. Here is a link to Monroe Hospitals retail clinic at Shopko in Monore http://www.monroeclinic.org/fastcare/
A visit including lab test is $52. Retail clinics are not available in Rock County. I can only presume that our providers try to keep them out. True competition will not be here until consumers are provided these sort of options.
Dec 13, 2011 at 8:30 p.m.
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"Patients won't be paying price for facilities technology"...NOT!
Ha ha ha ha ha!
Dec 13, 2011 at 8:08 p.m.
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Yes, none of the profit for CEOs, shareholders, etc. and none of the bureaucratic costs for middle managers (who work to deny us healthcare) has any impact on the cost of healthcare. LOL!
Dec 13, 2011 at 7:11 p.m.
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I am twice as PO'ed now that I reread the story. My indignation will worsen if I see more unsolicited glossy Mercy advertorials in my mailbox or ostentatious Mercy billboard ads.
Dec 13, 2011 at 11:14 a.m.
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I looked at the birth costs, pretty high when compared to when my wife was born. She told me it cost her dad $250.00 for the hospital & delivery, it sure has gone up.
Dec 13, 2011 at 10:06 a.m.
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But of course, the cost of health care/insurance has nothing to do with the money these CEO's receive. I'm sure that money comes from the health care fairy.
Dec 13, 2011 at 9:58 a.m.
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Humana Inc. CEO Michael B. McCallister
57, received compensation valued at $6.5 million for 2009, according to an Associated Press analysis of a proxy statement filed Tuesday.
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CEO of UnitedHealth Group Stephen J. Hemsley was paid $13.2 million in 2007. Last year, he had to get by on only $3.2 million. Fortunately for Hemsley, he has his own rainy-day fund; he owns $744 million in unexercised stock options. Despite the pay cut, Hemsley's job comes with quite a few perks. He travels on UnitedHealth's corporate jet, a Gulfstream Aerospace, which cost $37.5 million.
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The top earner at Blue Shield of California was Chief Executive Bruce Bodaken, who made $4.6 million last year — more than four times the salary of his counterpart at the state's largest for-profit insurer, Anthem Blue Cross.
Dec 13, 2011 at 8:15 a.m.
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When are the "Occupy Wall Street" folks going to move to "Occupy Health Care failities?" Those outrageous prices are destroying lives as much as anything in this country.
Dec 13, 2011 at 6:32 a.m.
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Yeah right. The patients won't pay for the building, equipment or technology and The Mercy North Side was NOT built because of the new St Mary/Dean building and its planned opening date of Jan. 9, has NOTHING to do with St Mary/Dean planned opening of Jan. 9 and Bea's salary has NO effect on what patients or insurance companies pay. Yeah right
Dec 13, 2011 at 6:12 a.m.
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Of course patients are going to pay. Who does he think he's kidding? Oh, wait, I know, he's going to pay for it out of his obscene salary.
Dec 13, 2011 at 6:07 a.m.
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Won't be paying the price? My Mercy Care insurance cost me $1650.00 per month for a family plan.
Dec 13, 2011 at 1:36 a.m.
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Just a thought. This article screams to me that I don't want government in the health care business. They seem to use the same smoke and mirrors mentality.
Dec 13, 2011 at 12:38 a.m.
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Being a non-profit corporation, Mercy Health System's Form 990 is a public document made available by the IRS and can be found on many websites. This is a link to their most recently available Form 990 on GuideStar. -- http://www.guidestar.org/FinDocuments/20...
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Page 17 of their Form 990 shows compensation of officers and highly compensated employees.
Dec 12, 2011 at 11:12 p.m.
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"Hospitals: Patients won't be paying price for facilities, technology"
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Just exactly who will be paying for it? The only source of income that health care facilities have is from patient charges for services rendered.
Don't me wrong, I think we need more competition in the health care industry, not less. Competition drives prices down and improves quality, when done in a true market-driven setting.
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The first step in achieving that is to quit treating hospitals as charitable institutions. They are not. They are profit generating businesses like any other and need to pay taxes just as other businesses do.
Dec 12, 2011 at 10:04 p.m.
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Cook said. "Just because we improve our facilities, improve the technology and improve the state-of-the-art health care facilities all in order to provide the best care to our patients, what it doesn't mean is that Medicare, Medicaid and insurance companies are going to pay us any more."
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HORSE PUCKEY!!!!! Who are these clowns kidding. Next they will tell us that they pay this stuff off over 25 to 35 years. Good God, the gall of liars. No one finances technology that has a short life span. It is cash flow from tests and procedures that you and I get billed for that pays for all the new toys.
Dec 12, 2011 at 9:18 p.m.
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factsplease- Perfect....Exactly.
Dec 12, 2011 at 8:39 p.m.
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It makes me sick that while people have to make the choice of death or bankruptcy, hospital and insurance company CEOs are taking home millions and millions of dollars and building fancy new buildings with the very money that is bankrupting sick people!!!!
Dec 12, 2011 at 8:27 p.m.
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#1 reason for personal bankruptcies...MEDICAL COSTS!
http://finance.yahoo.com/news/pf_article...
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Harvard researchers say 62% of all personal bankruptcies in the U.S. in 2007 were caused by health problems—and 78% of those filers had insurance
http://www.businessweek.com/bwdaily/dnfl...
Dec 12, 2011 at 8:11 p.m.
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Patients are paying for everything
unless there is a large amount in donations.
Dec 12, 2011 at 8:10 p.m.
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So when they say that prices are high because of uninsured people using the ER, that is a lie because these hospitals are getting huge tax breaks to cover those costs....
Glad to see this articles in the Gazette, maybe this will open people's eyes to the drain that the medical industry has been on the middle class. Occupy Hospitals! ;)
"Not-for-profit hospitals are exempt from most income and property taxes, and their tax status is based, in part, on a requirement that they provide charity health care and other services for which they often aren't compensated."
http://www.gazettextra.com/news/2011/dec...
Dec 12, 2011 at 6:31 p.m.
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Thank you for pointing out that Mr. Bea makes THREE TIMES as much as ALL SEVEN of the highest paid leadership of the WEAC combined. And this does not consider his huge payout in 2004 that was over TEN TIMES what these seven people make. Glad to see you're throwing your support behind the WEAC, vato. Welcome aboard.
Dec 12, 2011 at 6:30 p.m.
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Who are they kidding? If the patients didn't pay the nickle, who does?
Dec 12, 2011 at 6:15 p.m.
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vatoloco
Dec 12, 2011 at 6:09 p.m.
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http://www.rhinelanderdailynews.com/main......
The hypocrisy wreaks.
"Well, what do WEAC president Mary Bell and other WEAC officials make for salary and benefits?
In July Lakeland Times investigative reporter Richard Moore dug into that question and found out the real answers.
Moore found that: Dan Burkhalter, WEAC executive director, was raking in $242,807, with $177,366 in wages; government relations director Robert Burke hauled in $189,505, with wages of $128,428; information and communications technology director Nathan Harper made $189,528, with wages of $129,221; financial and membership services director Jane Oberdorf made $188,164, with wages of $131,328; affiliate relations director Robert Baxter was paid $186,461, with wages of $127,774; and collective bargaining director Daniel Holub made $165,112, with wages of $110,534.
And what about WEAC president Mary Bell, who describes herself as a teacher from Wisconsin Rapids? She made $173,466, with wages of $138,031. That's on par with Gov. Scott Walker's salary of $144,423.
All totaled, those seven employees collected $1,335,043, with wages of $942,682.
Dec 12, 2011 at 6:07 p.m.
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And you all like to complain about the teachers salaries!!!!
Dec 12, 2011 at 6:05 p.m.
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Hospital leaders in Madison earn more than the national average of roughly $630,000...
At least one nearby executive makes considerably more than any in Madison. Javon Bea, CEO of Janesville-based Mercy Health System, made $3.6 million in total compensation in 2009 and $4.5 million the year before.
http://host.madison.com/mobile/article_c...
Dec 12, 2011 at 5:59 p.m.
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"That's what we have to do. We have to pay for these projects out of our normal operations."
And where does he think all this extra money from their "normal operations" comes from? From HIGH costs for the patients, that's where. Is it that hard to understand? Javon Bea makes about $4 million/year (and had a $14million payout in 2004) and he doesn't seem to understand where the money comes from that pays for it. So they have enough "profits" to pay multi-million dollar salaries to administrators and the build multi-million dollar projects, but the cost of health care is getting so high that no one other than millionaires will be able to afford it!
Dec 12, 2011 at 5:26 p.m.
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"People say that's going to raise my costs. No, we're paying for them over 25 or 35 years."
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In another article today, Mr. Bea said this about his compensation increases, "Bea said his salary has no effect on health care costs or the premiums MercyCare subscribers pay each year. He likened his salary to capital costs, which he also said don't affect what patients are charged."
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It quite frankly doesn't matter what the depreciation schedule is on these items -- and if they are capitalized or expensed. Someone still has to pay for it and it surely isn't Mr. Bea as his salary and deferred compensation continues to increase. So, Mr Bea, come clean with us. Just exactly who is paying for these improvements and your compensation?
Dec 12, 2011 at 5:26 p.m.
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Have any of these people ran a business with their own money. Everybody with half a brain should know that the escalating costs of medical care are in part due to the having the latest and so called best equipment and facilities. Is the end result better care? I do not think so. It definitely results in an increase in billing to medicare and the insurance companies. Forget about line item expenses for new equipment or facilities. It has to come from somewhere. It will not long before many will not be able to afford the insurance, employers or individuals. What then?
Dec 12, 2011 at 5:25 p.m.
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Competition in a marketplace is good? Who woulda thunk it?
Dec 12, 2011 at 4:36 p.m.
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There is something wrong with this person thinking. Patients pay for everything Mercy does either directkly or insursurance wise.
Dec 12, 2011 at 4:27 p.m.
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LOL. we're not paying for it????? must be the money fairy sprinkling pixie dust in their pocket books.
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