News last week that St. Mary's Hospital in Passaic, NJ, was emerging from bankruptcy after declaring about $100 million in debts last March provides an excellent example of what can happen when unions and management work together.
A key component of the reorganization plan was the unions' ratification in December of a plan to cut pay by 5%, with an understanding that the cuts would be restored incrementally in the coming months.
"Initially we fought court-ordered concessions," says Virginia Treacy, RN, executive director of JNESO District 1, which represents about 450 nurses at St. Mary's. "We'd represented RNs in this hospital since 1981, and we have seen three administrations come and go in the last seven years, two of whom went bankrupt. We didn't have much faith in the management to actually use financial concessions from us to turn things around."
The unions' intransigence shifted, however, after St. Mary's hired Michael J. Sniffen as president/CEO in July.
"I've been doing this for 32 years and I'm not easily swayed, but I find him to be a very credible administrator—honest, and very transparent," Treacy says.
"He was very credible, even on simple things," she says. "We had people who had not received a correct pay check in more than three years. We brought the problem to him, he said he would fix it, and he did! That is the first time in a good 10 years that I could have said somebody in administration listened, heard what the problem was, and said: ‘That is not acceptable. I will get it fixed.'"
Sniffen says he has worked very hard to earn the unions' trust. "I was very transparent with them about what I was doing, how I planned to do it, and the data I was using to make the decisions," he says. "I pledged a partnership and demonstrated that by being open to their suggestions, meeting with their members, listening to the issues they were dealing with daily, and trying to—in small ways—be responsive to the day-to-day issues."
While trying to find a big picture way to keep the hospital afloat, Sniffen says he also took time to address employees' basic grievances. "It really wasn't big earth shattering stuff, but the little things add up. It was a litany of things that would sound trivial if you heard them in isolation of one another," he says.
"On a global, more strategic bankruptcy issues, I'd show them the economics that we have to work through. At the end of the day, I'd tell them, ‘We either all rise or fall together. I'd like to hope we can figure out a way to do this together.'"
Recognizing that there was nothing he could to do correct the bad relations with previous administrations, Sniffen focused on what he could do going forward to build trust.
"I'm a firm believer that relationships are key in any situation, but you have to invest in the little things to understand who you are working with so it's not based purely on the black and white of a number," he says. "Spend time getting to know who the person is and what drives them. If you show an honest interest in the person and the overall situation, people will have a dialog with you."
To build staff unity, Sniffen created a "gain sharing" bonus based on productivity and cash flow that would be divided equally among all of the hospital's employees. "Under the formula, if there is money to be distributed, I don't want it weighted by salary. I want all of us together. If it is $1 million and there are 1,000 people, divide it," he says. "That was an important commitment that the unions made, which made me believe we could work together. Even though they weren't representing all employees, they understood it had to be equal for everyone."
Treacy says giving every employee an equal share in the gain sharing solidified a sense of commitment from all the stakeholders, even if no money is ever paid out. "It sounds kind of hokey, but there is a very nice sense that we are all on the same team and if we do well together we will all share the reward. And if we don't, we won't," she says. "The fact that the CEO's share of any economic windfall is identical to the housekeeper or the nurse—that there is no distinction based on title or department—we found that to be very attractive."
Challenges still remain and the future of the 292-bed nonprofit acute care hospital–the only remaining hospital in urban, working-class Passaic—remains cloudy. The track record for other financially troubled hospitals in the Garden State is not encouraging. St. Mary's is the first hospital to emerge from Chapter 11 bankruptcy in New Jersey. Since 2007, six New Jersey hospitals have filed for bankruptcy, five of which have either closed or sold their assets in bankruptcy.
Treacy concedes that unions and management likely would not have been so flexible in better times, if the hospital wasn't teetering on insolvency, leaving the city without a hospital, and employees without a job in a rough economy. "Out of desperation comes innovation, and I think everybody was desperate here—the community, the hospital, and the employees, and therefore the unions," she says. "Being desperate, we decided we would try to pull out together.
Even with considerable hurdles ahead, Sniffen is optimistic about the future of St. Mary's. "I'm very confident because there is an understanding to continue to be solid we have work together," he says.
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Budget proposals from the White House to reduce tax deductions for charitable donations and freeze discretionary spending will harm fundraising for nonprofit hospitals, said the Association for Healthcare Philanthropy (AHP).
The move, which includes capping charitable donations for those making more than $250,000 to 28%, will stop wealthy donors from giving to nonprofits and dry up funds to help the poor and underinsured, according to the group.
"Despite signs that the economy is starting to recover, nonprofits hospitals are struggling to keep up with the burgeoning numbers of under- and uninsured Americans that are seeking medical care in their local community emergency rooms," said William C. McGinly, president/CEO of AHP in a media release. "A limit on charitable deductions aimed at those who are in a financial position to make the most significant contributions sends the wrong message at the wrong time."
"This is a significant challenge," McGinly said.
"Hospitals have cut back on spending, mainly at the expense of necessary capital improvements. A three-year discretionary spending freeze is likely to cut back the ability of state and local governments to provide health-related grants and Medicaid funding, making it imperative for individuals, businesses and foundations to step up their philanthropic support."
A December survey of AHP members found them attempting to cope with strained economic conditions by boosting fundraising efforts and controlling costs. Three out of four reported increased contact with donors and many put more emphasis on major gifts.
Almost half applied for more grants and put more energy into annual giving and planned giving programs, while at the same time more than half reduced their fundraising budgets and about one quarter decreased staff, AHP said.
Despite these extra efforts, 85% of survey respondents said their philanthropy programs were negatively affected by the economy last year, forcing almost half to downgrade giving projections for the year. Annual direct mail campaigns and special event fundraisers were hard hit.
Overall, far fewer major gifts were secured, and 40% of respondents reported declines in revenue from government and private grants, and 80% cited declines in investment income, with 43% seeing a significant decrease.
Some 27% of development organizations used more of the money they raised in 2009 to meet increased demands for hospital charity care, the report found, underscoring the increased need for philanthropic support to cover costs that nonprofit hospitals are no longer able to fund from decreasing margins. A November 2009 American Hospital Association study found that 34% of U.S. hospitals expected financial losses in the first half of 2009—up from 29% for the same period in 2008—placing a growing need for philanthropic funding to fill the gap.
The healthcare sector created 14,500 new jobs in January and overall employment from all business sectors fell by 20,000 jobs, even as the unemployment rate fell from 10% to 9.7%, new Bureau of Labor Statistics preliminary data released this morning show.
Ambulatory services accounted for 15,000 payroll additions in January, physicians' offices accounted for 5,600 payroll additions, and hospitals accounted for 5,000 new payroll additions.
Some areas of the healthcare sector lost jobs in January. Nursing and residential care facilities reported 5,800 payroll reductions,
The healthcare sector created 267,000 new jobs in 2009, including 22,000 payroll additions in December.
The BLS information from the last two months is considered preliminary and may be revised.
An Illinois law that caps medical malpractice noneconomic damages awards at $1 million for hospitals and $500,000 for physicians was struck down today by the Illinois Supreme Court, which ruled that the five-year-old law violates the separation of powers provision in the state constitution.
The ruling stems from Lebron v. Gottlieb Memorial Hospital, a 2006 lawsuit filed by the family of a girl who suffered severe brain damage during her caesarian birth at Gottlieb Memorial Hospital in Melrose Park, IL.
The suit was the test care for several lawsuits challenging the constitutionality of the 2005 law, and partially affirms a 2007 ruling in Cook County Circuit Court. Today's ruling marks the third time since 1976 that the Illinois high court has stuck down malpractice damages caps.
"The crux of our analysis is whether the statute unduly infringes upon the inherent power of the judiciary. Here, the legislature's attempt to limit … damages in medical malpractice actions runs afoul of the separation of powers clause," stated Chief Justice Thomas R. Fitzgerald, writing for the majority. The case was sent back to the circuit court for further proceedings.
The state's leading physician and hospital associations immediately criticized the ruling as a serious blow to containing healthcare costs.
Illinois Hospital Association President Maryjane A. Wurth said the state's high court had "rejected the clear will of the people of Illinois who called upon their legislators to enact this fair and sensible landmark legislation."
"The hospital community is deeply concerned that this decision will renew the malpractice lawsuit crisis and make it more difficult for Illinoisans to access or afford healthcare as liability costs for physicians and hospitals are driven to unsustainable levels," Wurth said in a media release. "Hospitals across the state will again face even greater challenges recruiting and retaining physicians, especially specialists, such as neurosurgeons and obstetricians, who were leaving Illinois during the height of the crisis."
"It's profoundly disappointing that the wishes of millions of Illinois citizens have been ignored," said Illinois State Medical Society President James L. Milam, MD, in a media release. "And it's highly ironic the decision comes at the very time national lawmakers are searching for ways to expand patient access to care and contain unnecessary costs. Medical liability reform is a proven solution on both these fronts."
The 2005 law did not cap economic damages or other compensation, such as lost wages, potential future earnings, and medical expenses, for victims of medical negligence.
Peter J. Flowers, president of the Illinois Trial Lawyers Association, said the 2005 law was a decoy to draw public attention away from he said are the real drivers of healthcare costs, namely the anti-competitive practices of the health insurance industry.
"Our healthcare system is reeling and rather than trying to fix it, insurance companies across the country have tried to divert attention from the real reforms that would improve access and care," Flowers said in a media release. "The Illinois Supreme Court has decided that the healthcare crisis cannot be solved by further hurting the patients who are victims of medical errors."
However, Michael T. Carrigan, president of the Illinois AFL-CIO, said in a media release that the ruling reaffirms the right to a trial by peers to decide appropriate compensation. "Hopefully, today's decision will finally put an end to the efforts of greedy insurance corporations to deny victims their due process," he said.
St. Mary's Hospital in Passaic, NJ, says its reorganization plan was confirmed this week by a federal bankruptcy judge.
"St. Mary's emerges from Chapter 11 stronger and better than before," said Michael J. Sniffen, St. Mary's president/CEO, in a media release. "After less than one year, we emerge revitalized, improved, and re-committed to serving the community and the physicians that have so loyally supported us through this difficult process."
"We have already laid the groundwork for the hospital's renewal by opening a new ER fast track, acquiring new technology for our cardiology and oncology programs, and expanding other key services. This will be a banner year for St. Mary's Hospital and the community it so proudly serves," Sniffen said.
St. Mary's, a 292-bed nonprofit acute care hospital that is sponsored by the Sisters of Charity of Saint Elizabeth, is the first hospital to emerge from Chapter 11 bankruptcy in New Jersey. Since 2007, six New Jersey hospitals have filed for bankruptcy, five of which have either closed or sold their assets in bankruptcy.
"Hospitals across the state have struggled with a long list of financial pressures and policy burdens," said New Jersey Hospital Association President/CEO Betsy Ryan. "How encouraging it is to see one of our hospitals emerge from these many challenges and continue to serve their community with the healthcare services we all depend on. That's especially true for this community, where as many as three hospitals once stood in the not-so-recent past."
St. Mary's declared bankruptcy in March 2009, claiming debts of $100 million. Since then, more than 500 hospital employees, including nurses and technicians, have agreed to work for a 5% pay cut—which the hospital later reduced to 4%—through the reorganizing process. As part of the agreement, St. Mary's will restore the cuts incrementally, along with some pay raises, in the coming months.
Virginia Treacy, RN, executive director of Jersey Nurses Economic Security Organization District 1, a healthcare union that represents 5,000 hospital and clinic workers in New Jersey and Pennsylvania, called the announcement "a wonderful development for the hospital and its union employees, as well as for the community at large."
"In particular, Mr. Sniffen's willingness to offer us a true partnership has helped strengthen our commitment to work together toward a positive future for St. Mary's Hospital," Treacy said in the media release.
In December, St. Mary's was one of nine financially troubled hospitals in New Jersey that shared $40 million in state grants to maintain critical care services.
The Christ Hospital in Cincinnati has agreed to settle a federal whistleblower suit alleging that the hospital ran a kickback scheme with physicians to funnel patients to its cardiac care center.
Officials with The Christ Hospital admitted no guilt in the settlement, which could cost in the range of $100 million.
"We cannot comment on any terms of the settlement because the parties are currently finalizing the written agreement; however, this settlement allows the hospital to avoid the risk of the multi-billion dollar award sought by the government," says Heather Adkins, chief strategy officer at The Christ Hospital, in a written statement.
"While we continue to disagree with the government's allegations that the assignment of physicians to our cardiac testing station resulted in the inducement of local cardiologists to refer patients to the hospital, we decided to contribute to the joint settlement agreement with the Health Alliance of Greater Cincinnati instead of risking a potential catastrophic judgment that could jeopardize our ability to provide service to this community," Adkins says.
Officials from the Healthcare Alliance of Greater Cincinnati, the hospital's former parent company, did not immediately respond to a request for comment. The Christ Hospital withdrew from the alliance in 2008.
Glenn Whitaker, the attorney for plaintiff Harry Fry, MD, a retired cardiologist who filed the whistleblower suit in 2003, says the settlement could be in the range of $100 million, and Fry could collect up to 25% of the settlement.
"This is a real big one. I don't want to give you precise numbers, but that is pretty accurate," Whitaker says of the estimated $100 million figure. "The number that is the subject of this settlement speaks for itself."
The U.S. Justice Department investigated the allegations for five years before intervening in 2008. Calls to the U.S. Attorney's Office in Cincinnati were not immediately returned.
Whitaker says the government alleges that The Christ Hospital set up a scheme with a physician group known as Ohio Heart & Vascular Center that would give it preferred access at specialized non-invasive testing areas for EKGs, echocardiograms, and other tests based on the volume of their referrals to the hospital.
OHVC was sold to The Christ Hospital in 2008. An attorney for the OHVC group told The Cincinnati Enquirer that the physicians would not be required to share the cost of the settlement.
Adkins maintains that the hospital was providing "necessary and often life-saving medical care by ensuring sufficient cardiologists coverage to read heart tests provided in the hospital."
"There was no challenge in this case to the medical necessity or quality of patient care. Nor did the government suffer any loss as it did not expend any money for the services beyond standard Medicare payments," Adkins says.
By paying a portion of the settlement, Adkins says, "The Christ Hospital can move forward without years of ongoing litigation and the risk of a crippling judgment. We will proceed with our plans to improve and grow services provided for this community with the region's most respected hospital, staff, and physicians."
IBM has signed a definitive agreement to acquire privately held Initiate Systems, a Chicago-based provider of information-sharing software for healthcare organizations and government. The deal is expected to be finalized by the end of March. Financial terms were not disclosed.
It's the 30th acquisition IBM has made in the information and analytics arena, as Big Blue positions itself for the release of about $20 billion in federal stimulus money for the comprehensive, nationwide adoption of electronic medical records.
"With the addition of Initiate's software and its industry expertise, IBM will offer clients a comprehensive solution for delivering the information they need to improve the well-being of patients at a lower cost," said Arvind Krishna, general manager, Information Management, IBM, in a joint media release. "Similarly, our government clients will now have even more capabilities for gathering and making use of information to serve citizens in a timely and efficient manner."
Initiate has clients at more than 2,400 healthcare sites, more than 40 health information exchanges, and multiple government health systems around the world. Its software allows clinicians to recognize patients at any facility within a health network with access to complete medical histories. Initiate’s technologies support healthcare regulations and standards including HL7 and HIPAA, according to the company.
"Our clients will be the ones who benefit most from this acquisition," said Bill Conroy, president/CEO, Initiate Systems, in the media release. "They will continue to get the software and expertise they depend on, plus the incalculable advantage they will gain through IBM's global reach and its capabilities in enterprise software, hardware, and services."
Initiate's healthcare clients include: Alberta (Canada) Ministry of Health and Wellness, BMI Healthcare (UK), Calgary (Canada) Health Region, CVS/Caremark, Humana, Ochsner (New Orleans) Health System, North Dakota’s Department of Health and Human Services, and the University of Pittsburgh Medical Center.
Sutter Health, which serves more than 100 communities in Northern California, uses Initiate technology to link its entire health network. The North Dakota Department of Human Services uses Initiate to access a single view of all its clients so it can share information across its other programs to increase enrollment, speed eligibility screenings, and measure program effectiveness, according to the media release.
IBM says it will continue to support Initiate's technologies while helping clients access the broader IBM portfolio that includes clinical analytics, information discovery and transformation, and data warehousing and business intelligence.
IBM said its acquisition of Initiate extends its business analytics strategy through its new Business Analytics and Optimization Consulting organization, which includes 4,000 consultants, analytics solution centers, and investments of more than $10 billion in organic growth and acquisitions.
A senior executive from Aria Health, owner of the Philadelphia hospital where Joaquin Rivera died in November as he waited for emergency treatment, said that staff did not follow company policy requiring periodic checks on patients in the waiting room. Chief operating officer Linde Finsrud Wilson, testifying at a City Council hearing on Rivera's death, said the hospital had since trained staff to keep better watch on waiting patients. She said it also had added a second full-time security guard in the 25-seat waiting room, where Rivera's watch was stolen after he died, the Philadelphia Inquirer reports.
The benefits and cost-sharing requirements of the Medicare Advantage plans that serve 10 million Americans vary widely from plan-to-plan with little explanation for the variance, a new Kaiser Family Foundation study finds.
Medicare Advantage enrollees could pay between zero and $3,325 for a five-day inpatient hospital stay, depending upon where they live and the plan they select.
Average cost-sharing for some Medicare-covered services has increased rapidly between 2008 and 2010 among Medicare Advantage plans—up 18% for an average stay in a skilled nursing facility and up 36% for an average inpatient hospital stay.
In 2010, about four in five Medicare Advantage plans set an annual limit on enrollees' out-of-pocket spending, providing protection from catastrophic costs that traditional Medicare does not provide. However, 31% of all plans have limits above the $3,400 level recommended by the Medicare program and 21% have no limit.
Nearly half of 2010 plans provide some coverage in the "doughnut hole" for Medicare's drug benefit—28% cover generic drugs only, and 21% cover generics and some brand-name drugs.
Robert Zirkelbach, spokesman for America's Health Insurance Plan, says he doesn't "know enough about the report to dispute it."
"The key point is that Medicare Advantage plans across the country provide a variety of options for seniors to choose from," he says. "The data show that the overwhelming majority of seniors are satisfied with the coverage they are getting from their Medicare Advantage plans. They are benefitting from benefits and services that aren't available in the traditional Medicare program."
Marc Steinberg, deputy director of health policy at Families USA, says the study "really shows how Medicare Advantage is a very uneven program and one that where there is quite a bit of waste and risk for consumers."
"I'm sure there is some reason for their pricing, but it's not one that most beneficiaries or even analysts can understand. It's a very difficult program for people in Medicare to understand. It's hard to understand what you are getting, when you will get it, and under what circumstances," Steinberg says.
A Medicare Payment Advisory Commission report to Congress last March showed that Medicare Advantage, on average, cost 14% more per beneficiary than traditional Medicare. Steinberg says the new KFF study likely will renew criticism that Medicare Advantage is a windfall for the health insurance industry.
"The system as currently structured is clearly designed to promote the private health insurance industry for its own sake," he says. "That is not to say there aren't good plans out there that provide high-quality services at reasonable costs. But the payment system that is in place today, that was most recently revised in 2003, was designed to promote any and all private plans, regardless of what is efficient. There is no effort to reward quality or efficiency. It's just money for money's sake."
However, Zirkelbach says studies have shown that Medicare Advantage delivers higher quality of care and customer satisfaction than traditional Medicare, in part because of additional programs, such as disease management and care coordination plans.
Steinberg says the new programs and benefits that Medicare Advantage offers often are designed to attract healthier people.
"So they will add things like vision tests, which is nice, but they will make up for that by raising the costs for things like inpatient hospital stays or skilled nursing facilities and that way the plans become less attractive for sicker people and more attractive for healthy people," Steinberg says. "That is a troubling trend for all of Medicare. You end up with a system where the sicker people stay away from these plans, and with good reason. But then you have to ask 'are these plans doing what they were designed to do, which was to provide high quality and affordable care for everyone?'"
The employer movement to ban hiring smokers is just the latest—but not the last—intrusion of companies into the rights of individuals, and it's all perfectly legal, says Lewis Maltby, an expert on the issue.
"There are a lot of people in line to get hammered," says Maltby, who is president and founder of the Princeton, NJ-based National Work Rights Institute and author of Can They Do That? Retaking Our Fundamental Rights in the Workplace.
"This is not about smoking. This is about employers telling you what to do in your own home to cut down on the company's medical bill," he says.
As companies struggle to provide workers with healthcare coverage, there will be increased pressure to find ways to control costs through prevention and lifestyle changes. Maltby says the next target will be obese and overweight applicants and employees.
"The CDC has reported that obesity is rapidly overtaking smoking as the leading cause of preventable death. It is not the least bit speculative to say that employers are going to come after people for diet next," he says.
For the most part, unless those employees or applicants are classified as morbidly obese, and subject to the Americans with Disabilities Act, or some other state or federal antidiscrimination laws, Maltby says there really isn't much they can do about it.
"If you are just 20 or 40 pounds overweight, you have no protections. The HR manager can say ‘You're a fat slob. I don't want to hire you,'" Maltby says. "You go to court and the judge says to the HR manager 'Did you say that?' And he says 'You betcha your honor! That is exactly what I said. I don't like fat slobs and that is why I didn't hire him.' And his lawyer says 'I move the case be dismissed.' And the judge says 'motion granted,' because it's not illegal.
"An employer can refuse to hire you for any reason under the sun unless there is a statute that says a particular basis like age or race is not legally permissible."
Hospitals that have imposed hiring bans on tobacco users say it's less about cost and more about sending a message about healthy behaviors.
"Really we intend to model healthy behavior rather than just accepting the fact that it's a fact of life," says Walt Schwoeble, vice president for Human Resources at Akron (OH) Children's Hospital, which imposed a ban on hiring smokers in November 2008.
Schwoeble says there were also concerns that cigarette residue in smokers' clothing would trigger respiratory ailments for some patients. "I'm proud to be part of an organization that is willing to step forward and do the right thing," he says.
Schwoeble says ACH is sensitive to the notion of infringing upon employees' off-duty rights to engage in legal activities.
"I wouldn't be truthful if I said it never crossed our minds, but to me it is not an issue," he says. "Our intent is to employ the individuals who care the most about their health to begin with and model their behavior to the families and patients that come here. These candidates aren't our employees to begin with. We are just screening the candidates who are coming in the door."
Schwoeble says ACH has no plans to expand applicant or employee screens for "body mass index or diet or anything like that. Wellness is a huge initiative that our CEO [William H. Considine] is 100% behind. It's not to say it would never happen, but there is nothing in the foreseeable future that is in the planning stages to do that," he says.
Attorney Jacqueline B. Jones, a partner at the Syracuse, NY-based MacKenzie Hughes LLP, and a specialist in labor discrimination issues, says 29 states—including New York —have laws in place that protect smokers' off-duty rights. The laws were enacted after lobbying by the tobacco industry, she says.
Without similar state laws in place, Jones says it's likely that employer intrusions into employees' personal habits will grow. "There is a lot of talk in the labor employment arena about protecting folks who are overweight, protecting them against discrimination in the workplace. So, I suspect that we will see legislation to protect folks that are overweight," she says.
"You will definitely see more employers trying to encourage employees to be healthier, but in a way that is lawful," such as providing access to weight loss and smoking cessation programs, Jones says.
Maltby says hobbies could soon come under scrutiny. "If your boss is going to get exercised about your smoking at home, they aren't going to be thrilled about the motorcycle you ride," he says. "We've already seen a few companies say 'no motorcycles, no skydiving, none of that stuff.'"
Maltby says an employee's most-personal lifestyle could come into question.
"The problem is there isn't much in your personal life that doesn't affect medical costs, including your sex life, Sexually transmitted diseases are expensive, particularly HIV," he says. "Will employers go after sex life? There is no logical reason—in principle—why they shouldn't because there is money involved. Will they do it? Maybe not. Will they come after people with diet and exercise? Of course they will. That is why we see 1,000 wellness programs pop up every day."
