Friday, October 19, 2012

One myth destroyed, two added.

I have been amused by the misdirection of both parties that Partners Healthcare System views Steward Health Care System as competitor. I have often pointed out that such is not the case.  Maybe, finally, the media will drop this mantra.  In today's Boston Globe, we learn:

Expanding ties between the state’s two largest medical care providers, fast-growing Steward Health Care System has struck a deal with Partners HealthCare System to send its most severely injured patients from emergency rooms at Steward’s 10 community hospitals to Partners-owned Massachusetts General and Brigham and Women’s hospitals in Boston.

But another myth persists, even in this story:

The alliance isn’t the first between Partners hospitals — which have been cited by state Attorney General Martha Coakley as among the most expensive in Massachusetts — and two-year-old Steward, which many in the state health care industry welcomed as a lower-cost alternative.

I don't know who the "many" are, but the evidence collected by the state's Attorney General showed that the Steward (then Caritas Christi) hospitals are actually not lower cost providers than their community competitors.

And yet another myth is created.  A Partners' spokesperson says:

“This provides us an opportunity to be altruistic in sharing our knowledge about treating some of the most critically sick and injured patients. . . .  She noted that critical emergency care is usually labor- and technology-intensive, and that many patients don’t have commercial insurance.“Trauma is not a profit center for either the Brigham or the Mass. General.  We’re not doing this for economic gain.”

Right.  We could spend time parsing this, but let's keep it simple.  First, incremental volume like this does not have to cover fully allocated cost to be profitable.  Any contribution above direct marginal costs is profitable in this circumstance. Second, trauma patients tend to stick around for a while beyond the original diagnosis and treatment and become regular in-patients, who are profitable on both incremental and fully-allocated cost bases.


Anonymous said...

I have to say, I have been skeptical of your position in the past regarding these two, but you have proven me wrong, once again. Good for you, Paul.

Anonymous said...

Steward’s Growth is being used as justification for allowing Partners to continue it’s growth. This despite the fact that Partners is already dominant in eastern Massachusetts according to the Attorney General. Partners is negotiating to acquire additional hospitals with various stages.

Steward has ten acute care hospitals in Mass, Partners has seven. Is this meaningful?

We keep reading about Partners new competitor, Steward. Mostly because it has bought so many hospitals, so quickly in the last few years. But can Steward compete with Partners?

First some numbers. We will first look at Net Patient Service Revenue (NPSR) for Steward and Partners acute care hospitals in Mass. The data is from the Massachusetts Division of Health Care Finance and Policy.

Steward’s ten acute care hospitals in Massachusetts had $1.3 billion of NPSR in 2011. The current seven Partners Group of hospitals had $ 4.8 billion. MGH alone had $2.1 billion, the Brigham had 1.6 billion and simple math tells us that Partners community hospitals had $1.1 billion in NPSR, which is close to Stewards ten hospitals. .

The contrast is starker if you look at profitability. In 2011, Steward’s ten acute care hospitals lost 39 million. Partners hospitals made $371 million. Both of these numbers are on a total basis as opposed to operating. The current Partners hospitals made 44% of the total profits of all of the hospitals in Massachusetts.

Now what are plans for the future? Steward has no more hospitals in it’s pipeline in Massachusetts, and it will have a competitor in the new Tufts/Vanguard alliance when additional Mass hospitals become available.

As is mentioned above Partners is in various stage of negotiations to acquire additional three hospitals: Cooley Dickinson, South Shore and Hallmark. These three hospitals have $ 839 million in NPSR and $38 million in total profit bringing Partners to 48% of the total industries profit in Massachusetts.

All of the above assumes that Steward is trying to compete with Partners. But things are much more complicated. As we saw in todays globe Steward has a new agreement to funnel severely injured emergency room patients to Partners MGH and the Brigham. Currently St. Ann’s and in two months St Elizabeth’s will have cancer programs affiliated with Dana Farber/Brigham and Woman’s. Primagroup, a Partners affiliated doctors group in Fall River signed an agreement in the last year to develop cardiac programs at St Ann’s. Steward has a recent affiliation with Compass, a doctors group formerly with Partners, that is designed to continue sending patients to the Brigham for Tertiary care.

Steward also has two limited network insurance plans one administered by Tufts Health Plan, the second by Fallon Community, that has MGH and the Brigham, as the only Tertiary options if Stewards Tertiary hospital, St Elizabeth’s can not meet the patients need.
What does all of this mean?

Partners is the dominating financial force in Massachusetts health care. Steward can not compete with Partners financially. And in fact Steward is not trying to compete with Partners. Steward is cooperating with Partners and at least partially serving as another community hospital network for Partners.

Steward will not save Massachusetts from Partners market dominance. Far from it. Steward’s actions are another symptom of Partners market control..