Connect these dots to form a hospital chain

By Steven Pearlstein
Friday, July 9, 2010

Let's play the columnist's favorite game, connect the dots.

Dot No. 1: Sometime today, the government of the District of Columbia is scheduled to take control of United Medical Center, a.k.a. Greater Southeast Community Hospital, foreclosing on loans made to a private operator back in 2007 as part of a deal to keep open the only hospital serving the city's poorest neighborhoods east of the Anacostia River. As the only likely bidder at the auction, the city will become the proud new owner of a medical facility that, depending on who you believe, will either require annual operating subsidies from the city of up to $15 million (that's the conservative, everything-will-go-wrong estimate from the city's chief financial officer) or is on the verge of breaking even and may even soon turn a small profit (that's the more hopeful projection from the hospital's top administrator). The one thing on which everyone agrees, however, is that over the long term, UMC is not viable as a standalone hospital and needs to be part of a larger hospital chain.

Dot No. 2: Sometime in the next month, Baltimore-based Johns Hopkins Medicine will ask the D.C. government for approval to take over Sibley Memorial Hospital, located in one of the District's richest neighborhoods. For years, Sibley has been the preferred hospital for many doctors in private practice in Northwest Washington, and in 2008 it earned an operating surplus of $58 million on $222 million in revenue -- not bad for an outfit that claims to be not-for-profit. More recently, however, Sibley's patient volume has been in steep decline as many of its affiliated physicians have decided to opt out of private insurance networks because they are unhappy with the fees. Concluding that it could no longer go it alone, Sibley invited proposals from a number of hospital chains before choosing Hopkins, which promised to recruit a cadre of new primary-care physicians to the salaried staff, send down students, residents and researchers from its medical school and expand Sibley's array of services.

For years, Hopkins has been gradually moving out from its base in Baltimore -- where its world-class medical care, teaching and research have been confined to a poor, inner-city neighborhood -- and in the direction of the richer, faster-growing Washington region. Hopkins' first stop was Columbia and Howard County General Hospital, followed by a big research campus in Shady Grove. Then last year, it picked up Suburban Hospital in Bethesda, with its burgeoning complex of private medical offices and respected surgical and coronary care units.

Sibley would complete Hopkins' push into Washington. It would also intensify its rivalry with MedStar Health, with which it already competes head to head in Baltimore and the Maryland suburbs. With Sibley and Suburban, Hopkins would have ideal platforms from which to compete with MedStar's highly profitable cancer and transplant business at Georgetown University Hospital and with MedStar's world-beating cardiac care center at Washington Hospital Center.

So what is the connection between Sibley, a prize much sought after by competitors that comes with its own $500 million-plus endowment, and UMC, the ugly duckling that nobody else wants but tens of thousands of underserved residents desperately need?

None, other than the fact that both happen to have come on the market at the same time. This happy coincidence gives Mayor Adrian Fenty an opportunity to go back to Hopkins with a package deal: Work with us to operate UMC and bring it up to Hopkins standards, and we'll be happy to provide the speedy approvals you need to take over Sibley and expand there.

I concede this idea is a bit unconventional, even mischievous, but it would allow the city to directly confront the reality of a health-care system that has become increasingly segregated by race, class and health status.

In the past, the health-care system was a hotbed of cross-subsidy, with people who were young and healthy subsidizing those who were old and sick, with those who were insured subsidizing those who were not, and with everyone having access to the same doctors, hospitals and medical plans. But as health care has become more expensive, those doing the subsidizing have sought hospitals and doctors and insurance plans that shield them this financial burden -- and hospitals and doctors and insurance plans have been only too happy to oblige.

The differing fortunes of Sibley and UMC are symptoms of this trend -- and putting the two institutions together as a package deal would, in some small way, help reverse it.

It is hard to believe that the God-fearing Methodists who founded the Lucy Webb Hayes National Training School for Deaconesses and Missionaries nearly 120 years ago would have wanted to limit their concern to the wealthy neighborhoods surrounding what has since become Sibley Hospital, to the exclusion of other citizens of the District. And if Hopkins is to reap the substantial financial benefits of a Sibley takeover, then surely it is not too much to ask it to share a fraction of those winnings with the wider community.

While UMC will never be a big moneymaker, there is no reason it has to be a financial drain on Hopkins. Over the past three years, the city has invested about $75 million upgrading UMC's facilities and equipment, and pending changes in the District's Medicaid formula are expected to boost UMC's revenue by $11 million -- enough to erase the current operating deficit. There are also 17 acres of land around UMC that can be sold or developed to create an endowment that could be used to protect Hopkins from any operating losses.

You won't be surprised to learn that when I floated this idea by officials from Hopkins and Sibley, they weren't particularly enthusiastic. By contrast, it seemed to intrigue Peter Nickles, the District's attorney general who is leading the city's efforts surrounding UMC.

Not long ago, community hospitals were run in the interest of the community -- not the doctors, not the administrators and certainly not the giant health-care organizations. Hospital consolidation is now a reality and a necessity, but what we are learning is that we can't rely solely on the invisible hand of the market to deliver what's best for the entire community and the larger health-care system.

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