Some hospitals bedside manner can be costly

April 9, 2012
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The Economic Alliance for Michigan is trying to put to bed what it considers a costly problem.

EAM is based in Novi and is celebrating its 30th anniversary this year; companies and unions formed the private nonprofit corporation in 1982. The organization claims to represent hundreds of thousands of individuals in Michigan. Ford Motor Co. Chairman William Clay Ford and Sergio Marchionne, CEO of the Chrysler Group, are just two of its many officers.

“We are a statewide business-labor coalition. We have business members, small and large, from around the state, as well as unions whose members primarily work in the for-profit sector,” said Bret Jackson, the alliance’s president.

“And we’re very unique because in this particular forum, business and labor figure out ways to work together on public-policy issues. We only work on things that business and labor agree upon. We don’t get in the middle of collective bargaining or issues that are divisive between business and labor.”

The latest issue EAM has tackled concerns the number of empty hospital beds in the state. On an average day, 6,747 beds go unused in Michigan, according to data compiled by the state Department of Community Health — and that is too many as far as EAM is concerned. So the organization decided to do something about it.

“We think empty beds have an impact on cost,” said Jackson.

EAM filed a proposal last year with the state that called for hospitals with low historical occupancy rates, like 40 percent or less, and want to spend money on beds should only be allowed to renovate or replace beds. The idea is to prohibit these providers from adding new beds, and possibly even requiring some to remove empty beds to raise occupancy rates.

“We’re asking them to adjust to where they would be at 60 percent occupancy, which is still low. From the alliance’s perspective, we wish it was higher and wish it applied to more hospitals. But this is politics — it’s the art of compromise, and we’re trying to come up with a proposal that a lot of people could live with,” said Jackson.

“We’ve never really done anything like this before in the state. So we see this as a first step.”

The state’s Certificate of Need Commission put together a committee consisting of hospital executives and payer and consumer representatives to suggest what changes could be made regarding how hospital beds are regulated in the state.

“During that process, we brought forth this proposal to take out, hopefully, unneeded capacity,” said Jackson.

However, Jackson added that forcing a hospital to yank some beds from its capacity won’t have a significant impact on cost. The real cost savings would come from keeping low-occupancy hospitals from building a new patient tower or a new facility.

“What they’re eventually going to do is reflect their capital expenditure in the rates that they charge the purchasing community. So we, the businesses and the patients around the state will eventually pay that money back for that new bed tower, for that new hospital,” said Jackson.

“You want hospitals to be able to update from time to time. But you want them to be able to do it within the number of people that they actually serve because hospitals are a community resource.”

Jackson said the CON committee finished its work late last year, and the commission adopted all of the panel’s recommendations last month, including the one from EAM that attempts to right-size hospitals with the lowest bed-occupancy rates — “those below 40 percent,” he said.

EAM, which believes medical and insurance costs are too high in Michigan, plans to keep a watchful eye on a proposal that McLaren Health Care Corp. filed with MDCH Feb. 1. It involves transferring 200 beds from its hospital in Pontiac to property it owns near Clarkston, where it wants to build a new $300 million facility.

McLaren Health already has a medical-office building and a cancer center on the 80-acre site. If the state approves the initial bed transfer, McLaren plans to petition the state for an additional 100 new beds once the hospital opens.

“Right now, that area of the state shows it has 770 excess beds,” said Jackson, who feels the state will likely deny McLaren’s application because patients already are receiving the care they need there. He added that the occupancy rate at the existing nearby hospitals is 56 percent.

“So there are plenty of beds available to take care of patients in that area. There are six or seven hospitals within a 20- or 25-minute drive from that (proposed) hospital,” he said. “And there aren’t new patients.”

The state Department of Community Health is expected to take up the McLaren matter this summer. In 2005, the department reported that hospitals across the state had an overall bed-occupancy rate of 57.6 percent. In 2009, the Kaiser Family Foundation reported that the average number of beds per 1,000 people in the U.S. was 2.6, the same figure it reported for Michigan that year.

Jackson said exactly what the cost is to employers and employees for those unused beds is impossible to calculate. He said the figure of 6,747 empty beds wasn’t arrived at by assuming that every hospital in the state should be running at a 100 percent occupancy rate.

“It’s not assuming that every hospital is full all the time. It’s assuming that hospitals are full at about 75 percent. We don’t count the extra 25 percent, and it’s every hospital bed above that,” said Jackson.

Jackson emphasized that EAM isn’t trying to put hospital executives on a life-support system regarding the number of beds a facility has. But what it is trying to do is control costs to payers by applying some common-sense logic to their bedside manners.

“You need wiggle room in hospitals because some days you’ll have a flu outbreak,” he said. “And some days, everyone is generally healthy and a hospital is not as busy.”

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