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PART ONE
Where does Columbia go from here?

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Illustrations by Malcolm Garris

PART TWO

After the Columbia/HCA turmoil
Where does health care go from here?

By Barbara Bronson Gray, MN, RN
September 17, 1997

Nurses, other healthcare providers, and policy pundits are wondering how the healthcare industry ultimately will be affected by Columbia’s recent woes. Known for its aggressive acquisition of hospitals and related properties, incredible cost control capability, and business acumen, Columbia may inadvertently be moving the industry into yet another stage of evolution.

"The Columbia experience will lead to a new softening of the corporate culture in health care," said George Mack, MHA, vice president for business development for GeriNet, a division of Cove HealthCare, in La Jolla. "It’s a wake-up call for every hospital to check its own practices, goals and objectives, and methods for obtaining those goals."

Columbia has recently been criticized for its aggressive, business-like approach to re-inventing hospitals and healthcare systems. But many experts believe that tough approaches to cost containment and new efficiencies were essential to the industry and will not now diminish. Mack thinks Columbia should be credited with helping bring essential business standards to health care; he calls the company’s results astounding. "They have created cost-effective hospitals in many markets and done a very good job of rendering care at a very low cost. They’ve cut out costs that we thought for years we just had to have. I give them credit for being there first."

Experts say that the "corporatization" of health care was not due just to Columbia and its rapid growth or unparalleled size. They argue that the business orientation of the industry will not change as Columbia downsizes and downshifts. But they say it’s possible that the pendulum will swing back a bit to a less aggressive business approach.

"The primary motivation to merge is to have more bargaining clout with health plans; you want to have your system be indispensable," said Paul Ginsburg, PhD, president of the Center for Studying Health System Change, a Washington-based think tank funded by The Robert Wood Johnson Foundation. "Columbia is going to be behaving very differently now. It will be less aggressive, retrenching, going back to being a hospital company." But Ginsburg thinks health care increased its business focus more in response to an overbedded market than to Columbia. "In fact, now I see the business climate of health care even intensifying," he said.

Yet Ginsburg believes the industry can learn important lessons from some of the issues Columbia faces. For example, he says hospitals now have a heads up that the federal government is serious about applying considerable resources to enforce its rules. And he says that other healthcare companies will be far more careful about using strong financial incentives and goals to inspire managers. "Incentives create enormous pressure; typically some managers succeed in reaching the goals, some will quit, and some will cross the line."

Sara Singer, MBA, director of healthcare management at Stanford University’s Graduate School of Business, credits Columbia with showing the industry how it can make tough decisions about hospital closures and how economies of scale can increase efficiency. "The country needs better discipline when it comes to containing costs, particularly in hospitals, and Columbia showed us how this can be done," she said. "But unfortunately, Columbia often confirmed people’s bad impressions of what it means to be a for-profit company."

Shrinking numbers of Americans believe for-profit hospitals and health plans offer better quality care, are more responsive, or are more efficient than are nonprofits, according to a recently released survey from the Henry J. Kaiser Family Foundation. The survey also showed declining support for for-profit hospitals. When asked about for-profit hospitals in March, the majority of respondents thought they provided better quality. But five months later, in August, support for nonprofits had dropped by about 10 percentage points.

Some wonder whether Columbia’s August announcement that it plans to sell off its 570 home health centers will have a major effect on the home healthcare industry. But specialists in home care say that Columbia is only reacting to the same changes that others in the industry are facing. After Jan. 1, Medicare and to a lesser extent Medicaid will use a prospective payment system to reimburse for home health care. Those and other changes in Medicare and Medicaid reimbursement have made some hospitals radically rethink their strategies. "The escalation of home health costs under fee-for-service reimbursement has created the need for tighter controls," Singer said.

Other changes in how the federal government oversees home care could further affect the industry. A recently released draft report by the Department of Health and Human Services inspector general’s office alleges that some hospitals abuse their discharge planning powers over patients, referring Medicare beneficiaries only to their own home care agencies. Hospitals currently own about 2,600 of the more than 18,000 home care agencies in the country.

"Home care is going to have a shake out," said Bonnie Faherty, PhD, RN, associate professor in the department of health sciences at California State University, Northridge and a specialist in long-term care. "Home care was never profitable if it was done right, and everyone has been abusing the system. But the proprietary firms will flee from home care faster than will the nonprofits."

Kaye Daniels, MBA, RN, president of Hospital Home Health Care Agency in Torrance, predicts that home care will grow much more slowly in the next few years and the field will be greatly changed by prospective reimbursement. "We will all have to tighten our belts. And it will be up to the home care industry to market itself and learn to be more cost-effective."

Daniels said the government’s new attention to the business of home care has forced many companies to review their billing policies and procedures. Daniels, who owns a small home care agency in Hawaii, said she has had billing problems that have surprised her. "Frankly, staff just did not know any better," she said. "I don’t see how you can go through and review every individual bill; there’s such a great opportunity for error. It’s become this ambiguous game [to get the most out of the system]."

Daniels said the new scrutiny of billing procedures has taught her that everyone in the industry must be very careful. "You can look at empires being built and be envious of them, but everyone in health care has the responsibility to be sure everything they do is what is right for the patient," she said.

Will health care gradually seem less corporate as hospitals try to strike the delicate balance between systematic cost-cutting and mission-centered care? David Grant, director of patient action for the Health Access Foundation in San Francisco, said he expects hospitals will continue to appear extremely cost-conscious to patients. "I don’t think the pressure to cut costs will decrease. It’s been like a force of nature that’s been let loose; everyone has to be the low-cost provider [to get contracts]," he said.

Some experts predict that as hospital consolidations gradually level off, the healthcare industry will back off a bit from its aggressive stance, better accommodating the needs of consumers and providers. "We’ll go back to our roots of truly caring for people—but we’ll still have to be cost-effective," Daniels said.