Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, February 12, 1995 TAG: 9502130071
SECTION: HORIZON PAGE: G-1 EDITION: METRO
SOURCE: SANDRA BROWN KELLY/Staff writer
DATELINE: LENGTH: Long
Anchored on Mill Mountain, Roanoke Memorial Hospital has always been a symbol of success and promise, always in transition, always growing.
Until now.
Health care is being reborn through pressures to deliver quality care cheaper - and outside the hospital as much as possible - and the birth could stress the economy of the entire Roanoke region.
The health care business will "never be as robust as before," said an executive with Carilion Health System, which owns Roanoke Memorial and Community Hospital of Roanoke Valley and has 70 percent of the valley's health business.
Carilion is the Roanoke Valley's largest single employer with 5,688 people on its payroll; 9,000 if you count employment for its entire system.
When Norfolk Southern Corp. - then known as Norfolk and Western Railway - reigned as the Roanoke area's most important business, it employed 4,500. The much-remembered American Viscose rayon factory, which closed in 1958 and sent shock waves through the local economy, accounted for only 1,755 jobs.
All total, 383 businesses employing 12,595 workers do something related to health care in the Roanoke Valley. The health services industry is the third largest employer in the Roanoke Metropolitan Statistical Area, behind retail, with 25,303 workers, and manufacturing, with 19,271.
Every time hospitals, laboratories or psychiatric centers eliminate jobs or downgrade them or a company sends workers out-of-town for speciality health care, the Roanoke area's economy is weakened a little.
It's a bad idea for a community to bank any part of its economic development future on a service industry, said Karl Miller, president of Lewis-Gale Hospital in Salem.
"You don't build baseline industry on service, especially on health care. It builds on itself. It is an adjunct," he said.
Miller doesn't believe that health care will retain its status among the valley's major employers, either.
The effect of the reinvention going on in the health care industry, especially at hospitals, is not as abrupt as when American Viscose closed and sent more than 1,700 of its people into jobless lines. In health care, when one job is abolished, sometimes two new ones are created, but the new jobs are often for lower-paid, lower-skilled workers.
Health service jobs in the region actually grew by 200 in 1994.
"There has been no huge siphoning off of dollars" from the economy, Lucas Snipes, Carilion senior vice president, said. "Below the surface, though, the jobs we perform within the skin we call health care are different."
Changes made by the health businesses have resulted in income drops of as much as $10,000 a year for some professionals. In other cases, subprofessionals have replaced more highly trained workers, such as a physician assistant hired instead of a doctor.
But is what's happening as simple as replacing a $35,000 worker with two $17,000 workers? Snipes doesn't think so.
Workers at the bottom of the scale are being asked to do more and are being compensated more, Snipes said.
Nevertheless, the number of workers, especially in hospital settings, has declined.
At Carilion's Roanoke facilities, which also include Gill Memorial Hospital and Burrell Nursing Center, employment dropped by about 4 percent - about 150 jobs - from 1993 to 1994. With plans to consolidate its hospitals' laboratories into a subsidiary and combine psychiatric facilities in Roanoke and at St. Albans Psychiatric Hospital in Radford, further declines are likely when 1995 employment figures are calculated.
What has taken place is not unique to one facility or one company. Lewis-Gale Hospital in Salem, which is owned by Columbia/HCA Healthcare Corp., keeps a close eye on employment, and increasingly is using part-time workers so that staffing can easily go up and down with patient census. Its sister operation, Lewis-Gale Psychiatric Center, recently announced 14 layoffs, including 12 professional staff, bringing its work force down to 150. The Veterans Affairs Medical Center in Salem, which employs 1,049 full-time workers, cut 31 jobs in 1994 and expects to cut 35 this year.
"We've been able to get along with fewer middle managers," said Dr. John Presley, VA director. Seven managers, who made $55,000 to $75,000, left in a 1994 buyout.
"We hired more troops with the money," he said.
When an orthopedic surgeon left the staff recently, the VA didn't hire another surgeon. Instead, it contracted with outside physicians for orthopedic care for patients.
Presley plans to use more nurse practitioners and physician assistants in lieu of physicians. Both of those can treat patients for basic illnesses, and they cost far less than a doctor.
The VA pays an average of $125,000 to $130,000 for a physician and about $60,000 for one of the sub-specialists.
"It's almost two for one," Presley said.
The loss to the community from his vantage point is the loss of higher-paying jobs, not dollars. Although more of the money goes for drugs and supplies and less to salaries, the VA has been able to keep the same budget, he said.
Also, the federal government no longer requires the VA to buy supplies through a central system so it can purchase them locally. About $85 million of the $95 million annual budget stays in the Roanoke Valley, Presley said. And the recent construction of a new clinical building infused about $110 million into the local economy, he said.
Currently, a $25 million renovation project is under way at the site.
Competing
across state lines
But while the VA gained freedom to buy more supplies from local businesses, home-based Carilion moved its purchasing out-of-town by joining a North Carolina buying group, which can get higher discounts because it buys in volume.
In addition to companies' shopping out-of-town for supplies at better prices and the shifting downward of higher paying jobs, other changes could rewrite the role of health care in the Roanoke Valley economy.
If Medicare, which pays most of the health costs for senior citizens, forces them into a managed care program it could lower the dollars spent for their care and, in turn, bite into hospitals' incomes. Fifty percent of Carilion's inhospital business is from Medicare users, and its even higher at Lewis-Gale.
What will happen to other hospitals' bottom lines, too, if the VA is allowed to provide care to veterans' families as is being discussed? Currently, the VA can serve only ex-military personnel who have service-connected wounds, who were prisoners of war or who make less than $20,000.
And will the Roanoke Valley be able to keep its role as a regional medical center when large industries search nationally to find the highest-quality, lowest-cost specialty medical care as Ingersoll-Rand has done for heart surgery?
Ingersoll-Rand, which employs 422 in the Roanoke Valley and 35,000 nationwide, has selected seven medical centers - including ones in Atlanta and Allentown, Pa., but none in Virginia - to provide cardiac surgery and several other cardiac procedures such as angioplasty for its employees. In choosing the hospitals, the company looked at the number of cardiac surgeries each did and the results for patients, as well as the cost, said Nancy Gladden, supervisor of employment services in Roanoke.
The company pays for the treatment plus transportation and other traveling expenses for the patient and a companion. There is a limit on coverage for employees who go outside the network, Gladden said.
Ingersoll-Rand intends to "identify centers of excellence" for other procedures too, Gladden said.
Such decisions threaten Roanoke Memorial especially. A new high-tech section that opened last year was designed for cardiac and transplant surgeries.
And if competition crosses state lines, it also might intensify closer to home, experts say.
The University of Virginia Medical Center is under the same stress as any other hospital to cut costs and increase volume. It could try to attract more of the specialty cases from the Roanoke Valley.
Centers such as UVa have always had a long reach for patients and used to be the only places where very specialized care was found.
Lewis-Gale, for example, contracts with Henrico Doctors Hospital for transplant services and has a similar arrangement with Duke University for cancer treatments.
Perhaps the greatest concern for the Roanoke area, though, is over how many hospitals will be left when everyone has to push pricing to a minimum to compete for the business of insured workers.
Lewis-Gale's Miller suggests that his facility and Roanoke Memorial will survive as the valley's only acute-care hospitals. That once again raises questions about the future of Community Hospital, which merged with Roanoke Memorial in 1990.
Since the merger, Community has lost jobs and seen more and more beds go unused.
Carilion officials are adamant, however, that Community has a strong future as a children's and women's hospital. They also say that RMH does not have the capacity to handle all of the patients now cared for by the two facillities.
By the same token, though, the corporate officials don't really speak of Community and RMH as separate operations.
The Roanoke Valley market is big enough to support two health care systems, Carilion's Snipes said.
But will Carilion be as large as it is now in five years?
"There are too many wild cards to know," Snipes, senior vice president, said.
"Tell me what's going to happen to Medicare? Are we going to have Medicare managed care?"
Baby boomers
turning gray
Sixteen percent of the local population is 65 and older and some parts of Western Virginia, Bedford County for one, have higher percentages of senior citizens.
The older population accounts for 50 percent of the hospital days, admissions and dollars in the Roanoke Valley and as much as 70 percent of the business in some areas.
Managed care could change the usage because it would restrict access as many worker insurance plans now do. Currently, citizens covered by Medicare can go to any doctor at any time; there's no gatekeeper physician to stop them and no specified group of doctors or hospitals that they must use to get reimbursement.
An aging population, though, may be what keeps health care business vital. Even if senior citizens had to go through gatekeepers to get to health care or answer more directly to health care monitors, their sheer numbers will increase business.
In 15 years, the baby boomers will swell the numbers of elderly citizens.
Based on U.S. Census data, the number of senior citizens is projected to be about 39 million by 2010 and 69.8 million by 2030. The highest growth will come in the West and South.
The downside, though, is that the number of poor people also is expected to increase, creating a need for more uncompensated health care.
There are so many variables, Snipes said, that the statistics hospital systems once used to plan for the future don't work and looking at old business cycles is no longer useful.
Hospitals used to price their services a la carte. Every procedure, every medication, every step had its own price, right down to aspirin. Managed care companies, which are starting to do business in the valley, want one-price health care. The fee for an operation covers all the patient's needs connected to that surgery.
Managed care companies are also setting standards for procedures, Snipes said. One company negotiating in the Roanoke Valley wants hospitals to come up with a gall bladder removal price based on a 24-hour hospital stay with the surgery done with a laproscope. The laproscopic surgery requires only two Band-Aid-sized incisions and gets a person back to a regular routine faster than the traditional surgery.
How quickly Western Virginia will move to the capitation tactic of managed care is another question facing the health care industry. In capitation, doctors and hospitals are asked to provide health care to groups for a set amount per member. If the group's health care costs go beyond the fees, the hospitals and doctors take a loss.
A capitation system requires that providers know what their costs are, which means accumulating sophisticated data, Snipes said.
Part of the $50 million Carilion expects to need for capital expenses in the next two years will be for information systems, he said.
If Carilion is able to be "leaner and meaner," UVa professor Tom Massaro called it "a good horse to bet on."
Massaro teaches in the medical school and in the Darden School of Business.
Both Carilion and UVa, as home-grown systems, will face their greatest challenges, Massaro said, from large outside health care systems that will try to come in and "overcome" the local ones.
"Carilion has an intelligent resistance strategy to offset those forces," he said.
Besides, as long as people want health care close to home, the systems will survive in some form, he said.
In the Roanoke Valley, Lewis-Gale is part of a large outside network. If, as expected, Columbia/HCA completes a merger with HealthTrust Corp. this month, it will represent more than 300 hospitals in 37 states.
The purchasing power of such a vast network, will allow Lewis-Gale to reduce its expenses from 9 percent to 15 percent, Miller, the president, said.
That will allow Lewis-Gale to do more competititve bidding, he said.
A getting-tougher atmosphere has already developed in the valley. Lewis-Gale has bought billboard space in the Smith Mountain Lake-Franklin County area where Carilion is the dominant health system because of its hospital in Rocky Mount. Recently, the Southwest Virginia Health Alliance, a Lewis-Gale-led consortium of hospitals and doctors in an area from Salem to Bluefield, W.Va., affiliated with Memorial Hospital of Martinsville & Henry County. This expands the realm of competition between the two local hospital systems.
The Lewis-Gale billboards, which feature a night-time photograph of the hospital with lights burning warmly in its windows, display the slogan:
"From here, you can almost see the future."
When it comes to envisioning the future of health care as a driving force in the Roanoke area economy, "almost see" may be the key words.
by CNB