Overview
Case Study
5. The Struggle of a Safety Net Hospital The costs of caring for uninsured and underinsured patients are shouldered by both public and private organizations but often fall primarily on older, publicly owned facilities. The cost pressures and demands for care often far exceed the budgets and resources of many public providers. Wishard Health Services, located in Indianapolis, Indiana, is an example of a public provider that has struggled to position itself strategically to achieve its mission to care for the poor or Marion County. Its missions, vision, and values are as follows (Wishard Health Services, 2013): Our Mission The mission of Wishard Health Services is to: • Advocate • Care • Teach • Serve With special emphasis on the vulnerable populations of Marion County. Our Vision Wishard Health Services will enhance continuously our ability to meet the needs of the underserved and all people of Marion County, will be sound economically, and will lead innovatively in clinical care, research, education, and service excellence Our Values • Professionalism • Respect • Innovation • Development • Excellence By 2003, Wishard was under tremendous pressure. The hospital was owned and operated by the county and, as noted, had a mission to care for the vulnerable and underserved population of the county. Although there were almost a dozen other hospitals in its service area that provided some care to the indigent, the county hospital was seen as the main provider for this segment of the population. Although the other hospitals did not refuse to provide emergency care for the poor, most elective Medicaid and indigent patients were routinely sent to Wishard’s facilities. Almost 90 percent of its patients were covered by a government program or had no insurance coverage. As a result, revenues were always short, operating losses had to be subsidized by tax revenues, and capital projects were constantly deferred. With no funds to expand or refurbish its facilities.
Wishard Hospital and Wishard’s clinics were extremely crowded and looked old and worn. The
facilities’ condition, coupled with their location in a poor part of Indianapolis, Indiana, discouraged the patronage of insured patients. In 2003, the situation seemed to be worsening further. Wishard was in deep financial trouble, and its executives discussed ways to reduce the system’s losses. Wishard’s CEO publicly stated a deep concern about the 144-year-old institution’s future. Wishard Health Services included its 492-bed hospital, six community health clinics, and Midtown Community Mental Health Center, which together served about 800,000 patients per year. According to Dr. Robert B. Jones, the hospital’s medical director, 50 percent of those patients were insured by Medicaid or Medicare, and 40 percent had no insurance. City officials were also worried about the financial health of Wishard and talked about a potential shortfall of between $20 million and 80 million out of a $385 million budget. The best estimate was that Wishard was on track to end the year with spending at $35 million, but it could turn out to be much worse. The hospital did have cash reserved that could cover this deficit in 2003, according to Wishard’s president Matthew Gutwein. But if the deficit continued and worsened in 2003 as expected, this reserve would be completely empty, and Wishard essentially would be broke by the end of 2004 with even worse years to come. Wishard’s ability to survive and fulfill its mission was seriously challenged. The primary factors contributing to the deep losses included the following: o Declining reimbursements from the Medicare and Medicaid programs for the elderly and poor (For every $1 in hospital bills submitted to the two federal programs, Medicare paid just 82 cents, compared to 89 cents four years earlier. Medicaid paid 70 cents for every dollar of service, down from 90 cents.) o Increasing number of patients without insurance to pay their bills (nationwide, the number of uninsured had reached 43 million residents, 700,000 of whom were in Indiana) o Continued hikes in the prices of drugs and new equipment and in wages for nurses and specialists, who were always in short supply o Stiff competitions from specialty hospitals and surgery centers that appeals to well- off, paying patients, whom mainline hospitals dependents on to earn their profits o A weak stock market that sent hospital endowment investment income plummeting Something had to be done, and Wishard was seriously considering almost all of its options, including these: • Closing Wishard’s heavily used and highly respected emergency department • Merging with Clarian Health, which operates Indiana University, Riley Children’s and Methodist hospitals, or entering joint ventures, potentially involving construction projects • Building a hospital to replace Wishard facilities, some of which had been built in 1914 • Increasing copayments for outpatients to reduce unnecessary outpatient visits Wishard’s CEO stressed that construction of a new hospital would not be likely for another 5, 10, or even 15 years, depending on the pace at which fundraising set aside sufficient monies for construction or the ability to pass a county bond to fund the construction. The construction would
be very expensive, replaced of the whole facility could cost up to $750 million. While Wishard was struggling to decide what to do, a construction boom, occurred and competition increased among area hospitals. Hospitals around Indianapolis were spending lavishly, investing more than $700 million in new or updated facilities, most with interior décor and lobbies fit for luxury hotels. There elaborate new facilities made Wishard appear even worse off. This new focus on consumerism and profligate spending in the hospital business gave rise to what Daniel Evans, president of Clarian Health, called “mindless competition.” For example, the $60 millions Heart Center of Indiana in Carmel, which opened in December 2002, offered cooked- to-order meals. City-focused Clarian, the largest healthcare system in the area, expanded its market to the suburbs by building a $150 million hospital in Hendricks County and a $235 million hospital in Carmel. The Hendricks County Medical Center was situated in a parklike setting that included a half-mile of walking trails in a serene environment intended to reduce the stress of a visit or stay in the hospital. To keep patients and attract new ones, both St. Vincent and Community Hospital took on physician groups as equity partners in their heart hospitals projects, while Clarian sought to partner with physicians at its two for-profit suburban hospitals. St. Vincent opened a $24 million children’s hospital in 2003, becoming the first facility to compete head to head with Clarian’s Riley Hospital for Children, previously the only children’s hospital in central Indiana. St. Vincent also opened a $15 million cancer center, complete with a serenity garden and an indoor waterfall, while Clarian planned to counter with an even larger cancer center near IU Hospital. Area hospital’s struggle to compete was compounded by the market entry of national for- profit providers. For example, almost all local hospitals offering cancer care lost business to an aggressive for-profit operator, U.S. Oncology, which opened four cancer treatment centers in the Indianapolis area in the previous six years under the name Central Indiana Cancer Centers. There freestanding canters were projected to treat more than 43,000 patients in 2033. The cancer centers could handle patients at a lower cost because they lacked large hospitals’ overhead stemming from their big maintenance staffs, parking garages, and building needs. The hospitals also faced competition from OrthoIndy, a large orthopedics practice that was building a $30 million orthopedic hospital, and the 60-room Heart Center of Indiana, which featured a highly trained staff, one of the first all-computerized patient record systems, and furnishings befitting a Fortune 500 firm. Other hospital sites also demonstrated opulence. Clarian’s futuristic $40 million People Mover was designed to ferry doctors and staff over city streets to its scattered hospitals, and the lobby of Clarian’s two-year-old, $30 million cardiovascular center featured a terrazzo stone floor. Amid all of this change, most hospitals were receiving lower reimbursements from insurers than they had previously, and the growing demand for charity care decreased the profitability of three of Indianapolis’s four largest hospital networks. The following table shows these three networks’ revenue, earnings (profits), and full-time equivalents in 2002 and the percentage change in revenue and earnings from 2001. The figures for St. Vincent, the fourth network, are from the first eight months of the 2002-2003 fiscal year and include its hospital in Carmel.
Although their reimbursement and profits decreased, all of the healthcare systems except Wishard
still made money in 2002. Citation: Walston, S. L. (2018). Strategic healthcare management: Planning and execution. Association of University Programs in Health Administration.
Answer the following questions. Make sure you follow the assignment guidelines found in syllabus.
- From a strategic standpoint to remain solvent, if you were the CEO of Wishard Health Services, what option would you choose out of the four options that are provided in the case study?
- List at least 2 pros and 2 cons of the strategy you selected
- Provide at least two additional strategic option for Wishard Health Services to consider to generate additional revenue. Remember its a safety net hospital. Need to explain and expound on these options.
Remember to follow the written assignment guidelines found in the syllabus and keep the paper to 2-3 pages max. If you go over a little (like half a page), that's fine.
Also, keep in mind the AI percentage threshold which is 30%. Please see syllabus for the full details.