Community Hospitals Shouldn’t Complain About Steward

December 7, 2011
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An important reason that medical costs are so high in Massachusetts is that residents are accustomed to visiting major teaching hospitals for routine care. The big academic centers, especially the Harvard-affiliated hospitals, have done a great job persuading people that there is no worthy substitute. They’ve done a great job of branding and investing in facilities –and of course they really are excellent places to obtain care.

An important reason that medical costs are so high in Massachusetts is that residents are accustomed to visiting major teaching hospitals for routine care. The big academic centers, especially the Harvard-affiliated hospitals, have done a great job persuading people that there is no worthy substitute. They’ve done a great job of branding and investing in facilities –and of course they really are excellent places to obtain care.

Community hospitals in Massachusetts have long complained about the power of these big systems, and have gotten worked up as Partners HealthCare in particular has expanded into the suburbs. Employers and health plans have generally been sympathetic to community hospitals –because Partners’ expansion means higher costs for them.

Community hospitals have a strong story to tell, especially in an era of cost-consciousness and transparency. Their clinical quality is typically comparable to the teaching hospitals’, locations are more convenient, level of personalized service is relatively strong, and costs are lower.  Community hospitals could also do more to learn from one another’s experience by sharing information with one another more freely than is done now.

But in general community hospitals in Massachusetts have not taken the initiative to exploit their competitive advantage. That’s why I’m grateful that private equity backed Steward Health Care System has seized the opportunity to create a cost-effective, high quality, high service offering that can thrive in the marketplace. Not surprisingly Steward is now taking heat from other community hospitals, who are running to the Attorney General (failed Senate candidate Martha Coakley) to complain about “apparent predatory practices against community hospitals” –in this case related to Steward’s move to ally with a group of physicians, Whittier IPA.

As is often the case with groups running to the government or media to seek special protection, community hospitals are trying to argue that Steward is harming the public –when the real concern is that Steward is eating their lunch through competition. I’m glad to see a profit-maximizing entity such as Steward come in and take on the market opportunity aggressively. And I agree with the sentiment expressed by Steward in the Globe:

“This letter seems to be saying a system of 10 community hospitals is damaging community health care, which is our own business,’’ [Steward] said. “Without us buying these hospitals, most, if not all of them, would have failed or closed. We’re out there as a business saving community hospitals and keeping patients in the community.’’

Don’t be fooled by community hospitals ranting against big bad capitalists. The important objective for the public interest is not the comfort of traditional community hospitals but the ability to finally bring the costs of health care under control in this state.

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