As part of its monthly Industry Outlook series, Nevada Business Journal invited healthcare professionals to discuss the various challenges brought about by the escalation of healthcare costs and the growing need for more medical services. They confronted concerns such as the shortage of physicians, specialists and residencies; recruiting healthcare professionals and educators; cost issues such as medical reimbursements, compensated care and charity; and preparing for a healthcare crisis. Connie Brennan, publisher of Nevada Business Journal, served as moderator for the roundtable discussion, which was held at the Renaissance Las Vegas Hotel in Las Vegas. The following is a condensed version, beginning with introductions.
Karla Perez: As CEO of Spring Valley Hospital, I’ve had the wonderful fortune of working in this community for the last 22 years and have had the opportunity to work at all four of the Universal Health Services hospitals in Las Vegas. We have seen a lot of growth over that time.
Linn Billingsley: Kindred is a specialty hospital certified in long-term acute care. We are currently facing some challenging new rules from CMS (Centers for Medicare & Medicaid Services). They would like to take away about 14 percent of our reimbursement, so working with the government and having them understand the needs for long-term acute care in communities like ours are great challenges for us.
Tim Hingtgen: I’ve had the privilege of being CEO at Summerlin Hospital for about 18 months now. Our biggest challenges are managing growth and managing capacity.
Paul Cohen: Comprehensive Cancer Centers of Nevada has six locations and 22 physicians. We do radiation oncology, medical oncology and pediatric oncology. Our biggest issues are declining reimbursements from Medicare and the increasing cost of pharmaceuticals.
Bill Bannen: Anthem Blue Cross Blue Shield has 14 franchises. In Nevada, we’re No. 2; in all other states, we’re No. 1. Our challenge is to become No. 1 in membership for Nevada in the next several years, and we’re pursuing that course aggressively.
Steve Dixon: Southern Hills Hospital just passed its two-year birthday as a hospital serving Southwest Las Vegas. Our biggest problems are a shortage of trained professionals and declining reimbursements from federal, state and others that are unable to pay for care.
Larry Matheis: I’m the executive director of the Nevada State Medical Association. The underlying, obvious challenge is that there are too few doctors trying to do too many medical procedures in a community where we can’t keep up with growth.
Charles Perry: I head the Nevada Health Care Association, which represents long-term skilled nursing facilities here in the state of Nevada. Recruiting healthcare professionals is a major problem for us, and reimbursement from payers is always a challenge.
Ken D’Amico: HealthSouth Hospital provides acute long-term care. We’re striving to meet the healthcare needs for medically complex patients.
Lacy Thomas: I’m CEO of University Medical Center, the largest public hospital in Nevada, which is owned by Clark County. We also act as the vehicle the county uses to evaluate access to healthcare services in the Las Vegas Valley.
Jim Miller: Washoe Medical Center is a four-hospital integrated health network in Northern Nevada. We serve populations from over 300 miles around our hospitals, including many patients from rural areas. Our biggest challenge is bringing additional excellent physicians, nurses and other healthcare workers to Nevada for our growing population.
Bill Welch: As president and CEO of Nevada Hospital Association, I think the lack of will to fund many of these issues and challenges is one of our biggest problems.
Brian Robinson: I’m president of HCA’s Las Vegas market, and also president of Sunrise Hospital and Sunrise Children’s Hospital. I would like to bring up the practice of the overcrowding and warehousing of mental health patients in the medical/surgical emergency departments. And I agree, it does come down to a funding issue.
Mark Howard: I’m CEO of MountainView Hospital, the first of the suburban hospitals in Southern Nevada, which is now 10 years old.
Anthony Pollard: I’m the president and founder of Rainbow Medical Centers. We employ about 145 people, including 12 physicians and two physician assistants, and we serve about 10 percent of the population of Nevada.
Recruiting Healthcare Professionals
Connie Brennan: Several of you mentioned challenges in recruiting healthcare professionals. How far behind are we with the ability to keep the right people in our hospitals and healthcare facilities?
Welch: Nevada’s very slow in the professional category. The key point there is that our education system in the state currently does not produce the workforce to fill the shortages we have.
Robinson: We rank 47th out of the 50 states in physicians per capita, and we rank 49th out of 50 for nurses per capita in this state.
Brennan: Where are the nurses coming from? Are you just cannibalizing from each other’s staff?
Robinson: There was less cannibalization three or four years ago, before the dramatic escalation in the cost of housing. In our system, we have seen a slowing of migration of healthcare workers from out-of-state. Lacy, are you seeing a slowing of people moving to Las Vegas to fill healthcare positions?
Hingtgen: The cost of housing is a big deterrent for people considering a move to Nevada. Despite the fact that our rates of pay are among the highest in the nation for nursing professionals, we still run into the cost of housing issue.
Brennan: Is recruiting an issue that’s going to get worse as baby boomers age?
Thomas: There’s only so much outside recruitment you can do. The Legislature made a commitment to double the amount of students in nursing programs in Nevada schools. That’s slowly coming to pass, but it will be a while before those nurses become trained to the same level as existing professionals in terms of experience. The solution is to tap the market we have. But the other problem becomes faculty. Who’s going to teach those nurses?
Brennan: Are healthcare educators in the biggest demand right now?
Thomas: It is a big demand and it’s getting bigger.
Brennan: That was my understanding. That’s one of the reasons Nevada Business Journal is sponsoring two Healthcare Heroes events in August. Proceeds from the events will be donated to programs to train healthcare educators.
Robinson: Nationally, the preponderance of nurse educators are reaching retirement, so there’s a need to replace about 50 percent of them. Lacy mentioned doubling the R.N. class size. If we do, that gets us about even with our needs. It doesn’t begin to address the shortfall that results in us ranking 49th out of 50 per capita.
Welch: The average age of the nurse educators is 55. The average age of a nurse working in this state is 46, and the national average is around 45.
Robinson: And that’s addressing only R.N.s. We have more than a nursing shortage in this state and in this nation. Healthcare professionals and other clinicians and clinical staff in our hospitals are reaching shortages that are almost as bad or worse than the R.N. shortage.
Brennan: Do any of you have programs to recruit internationally?
(Several Voices): Yes.
Welch: Hospitals are being very proactive in recruiting nurses. We had around 16,000 licensed nurses in this state in 1999. We are now pushing over 30,000. Those people were not produced by our education system. We’re only graduating about 300 nurses a year. We only started graduating close to 500 or 600 as of this year. Most of those nurse increases came from recruitment efforts of this hospital community.
Howard: The hospitals all have tuition programs or scholarship programs to help the young people, so finance is not the concern in a lot of them – it’s just opening the slots in the nursing schools.
Shortage of Physicians, Specialists and Residencies
Brennan: What about the shortage of doctors? Are you more concerned about the shortage of nursing professionals or about physicians?
Matheis: Underlying all the problems is going to be whether or not we have a sufficient number of specialists to be able to meet the needs of the growing population. It’s not just getting physicians – it’s getting certain specialties, and making sure each of the facilities has the capacity to do the kind of specialty care this state is going to need. And the people coming in are not just an average growing population. Our demographics are growing at the two ends of the age spectrum, with many senior citizens and young children, both of whom need more healthcare services. We need to fill our long-term physician needs through training here. That is more complex in some ways than the nursing training, because it’s not just having schools to produce M.D.s and D.O.s, but it’s the postgraduate work, the residency work, where they will make their permanent decisions about where they’re going to practice. Eighty-five percent of physicians choose to practice within the area where their residency is done, and we have the smallest residency capacity in the country. So, increasing the number and the variety of residencies to fill the long-term specialty needs we have is going to be our intermediate challenge. The longer-term need will be dealing with the fact that the average age of a physician in Nevada is 55. We need to replace those doctors, as well as deal with the continued growth.
D’Amico: Part of the challenge of physician recruitment is that we need to get to a less adversarial relationship with our insurance payers so reimbursements will be attractive to doctors coming in. We need the insurance companies to step up and support us.
Welch: As Brian pointed out, we rank 47th in the nation for physicians-to-population. The national average is 301 physicians per 100,000; Nevada has 211. If all things stay the same, that disparity will continue to get bigger and bigger and bigger.
Perez: I think it’s also important to remember that the problem is being understated by the statistics. Whether you’re talking about physicians or nurses, oftentimes when healthcare professionals leave a state they maintain a license in that state, so they’re still counted in the numbers, but they’re not practicing here. They’re not available to serve our community.
Robinson: That’s why the hospital community stepped forward to assist in addressing the nursing shortage by expanding the number of slots for nursing students. The hospital community joined with the physician community to form an organization to expand the medical school’s residency to take it from roughly 150 residents per year across the state to 400. Again, at tremendous costs to the facility, hospitals and hospital systems involved – and not at state cost, but at private cost.
Thomas: We’re really standing at a crossroads. The hospital community has banded together with physicians and said, “We need to take charge of the situation.” I’m very hopeful that taking this action will show the Legislature and the university system that we’re not just sitting back and pointing the finger of blame at them, saying, “You have failed the rest of the state.” We stepped forward and said, “We want to help. Here’s what we’re going to do.” And the feedback’s been fairly positive.
Overcrowding and Mental Health
Brennan: At the last roundtable we talked a lot about the mental health situation and how those patients were occupying emergency rooms. Is the situation any better or has it gotten worse?
Perez: I think it’s gotten worse. In 2004, Clark County declared a state of emergency because of the mental health crisis, but about a year later that was lifted. We’re still a little dumbfounded about why the state of emergency was lifted, because from our perspective it got worse. Another important point is that the new psychiatric hospital coming online this summer is only a replacement hospital. The beds in that facility are not new beds, they’re replacement beds. In the last legislative session, paramedics testified they were holding for inordinate amounts of time in ERs because they couldn’t offload patients. If we move the mental health patients out of the emergency room, it will free up a significant amount of emergency room space for those patients, and paramedics can turn those patients over in a more timely manner.
Robinson: It’s a disservice to the mental health patients. They’re not receiving the type of care they would be receiving if they were in an appropriate psychiatric facility. Being housed in a medical/surgical emergency department is not the best place for a psychiatric patient. There is a need to correct this problem for the sake of seriously ill medical/surgical patients who are being displaced, and it’s the right thing to do for those with mental or substance abuse issues.
Pollard: This issue would have been better if we had cooperation between the hospitals and the state to develop some facilities instead of waiting for independent facilities to open up psychiatric beds.
Perez: When private hospitals consider adding mental health capacity, from a business perspective, they have to look at the fact that reimbursement, in most cases, doesn’t even cover costs. It’s very difficult to close medical/surgical beds, which we also need desperately, and put psychiatric beds in their place.
Pollard: Maybe we should come up with a separate facility as a joint venture. We’re paying for it anyway.
Miller: That’s an interesting perspective. I think that many in our community are pleased that hospitals step up and attempt to address this care on behalf of the community. What they’re not pleased about is that those costs then have to be passed along to consumers. The government is not stepping up to take care of the problem, business is not stepping up; they’re asking hospitals to step up and do it. All the things we’ve discussed today can be done. We can provide for the recruitment of nurses and physicians to meet the growth, we can have mental health beds to meet the growth, but the cost has to be passed along to somebody. It will either come out of the public policy and public funding arena, or it can be passed to hospitals and it can go back to the private funding arena, which is funded primarily by health insurance. Then health insurance costs go up, employers have to find a way to pay for those, and more and more people become uninsured.
Preparing for a Crisis
Brennan: In regards to the shortage of hospital beds, what would happen if we had a major crisis?
Dixon: The worst case scenario would be the outbreak of a pandemic like the bird flu that radically affects the number of people seeking care. If that happens, hospitals will become instantly overwhelmed. There’s no doubt about it. It’s not like we can suddenly declare everybody in our facilities “well” and send them on their way. A major pandemic in any state is going to immediately break the healthcare delivery system. If you talk to the CDC (Centers for Disease Control), they will tell you that sooner or later we will have a pandemic someplace.
Robinson: The hospitals in this community have done a great deal. Homeland defense has done a great deal. We have drug caches stored. We have a portable hospital that can be set up to assist in triage, and each one of the hospitals has practiced, year in and year out, what we would do in the event of those types of disasters, and how we would clear the hospitals of elective patients and handle a dramatic influx. Would we come to a grinding halt? Yes. Will we be self-sustaining until additional federal resources arrive? I believe so. But our community is no different than any other community.
Who Pays for Care?
Brennan: Are care providers getting squeezed on medical reimbursements?
Howard: It’s a major problem. About three months ago, a Wall Street Journal article said that in the last three years, the number of businesses that provide health insurance for their employees has dropped from 87 to 80 percent. There are 48 million uninsured we know about officially, and that doesn’t include increasing numbers of illegal immigrants coming in who don’t have any type of coverage.
Welch: In Nevada in 2005, the hospital community alone absorbed $417 million in costs for services provided to the uninsured/underinsured populations.
Robinson: The uninsured population is growing faster in this state than the national average.
Welch: The uninsured in this state represent 19 percent of the population, which is the fourth largest percentage in the country. We also need to consider who’s paying the costs of services provided to the uninsured: Medicaid doesn’t, Medicare doesn’t, and the uninsured do not. The laws in this state say we have to give a 30 percent discount for inpatient services, so all those people are paying less than cost. Every time we deal with a payer who doesn’t cover costs, the burden just shifts over to that small percentage of the population currently paying the bills. The large insurance companies might think, “Why do we have to pick it up?” Soon employers start reducing or eliminating insurance, and then we get more uninsured, which leads to more cost shift. We need to stop that spiral.
Miller: The other day someone in the state government commented to me, “It’s going to be difficult for you to ask the state to pay for the cost of care when hospitals are making money.” The hospitals must make money in order to provide for the growth of our community. Anytime the state does not pay for the cost of care, that cost must be shifted somewhere, and of course it shifts to the population who pays for care.
Robinson: Hospitals must remain viable business institutions in order to remain viable clinical institutions.
Brennan: Is your profit margin shrinking?
Howard and Robinson: Every day.
Perez: Individuals are choosing lower-premium plans that have significantly higher deductibles and co-pays – perhaps $5,000 deductible with a 50 percent co-pay. They choose these programs because they can’t afford a higher premium, but when they need care, they can’t pay the deductible or the co-pay, so we have a significant increase in bad debt.
Pollard: As a physician, I can tell you that least 18 percent of our costs are not reimbursed. Most of the clinics I know of are making only 3 percent to 6 percent profit margin. A lot of that is a reflection of people reducing the insurance for themselves, but also an increase in co-pays. Not everybody can pay their co-pay up front, but it’s a very difficult thing for physicians to deny someone who is very sick. I do know we’re going to have to make a lot of changes. I think physicians have just about had enough.
Welch: As this happens, those physicians are electing not to see those Medicaid and Medicare patients in their office practices. Physicians are saying they are not going to accept reimbursements they don’t believe are adequate to cover costs. What we’re doing is driving more and more patients to the hospital ER for primary care, and that results in increasing healthcare costs, and the spiral starts again.
D’Amico: Inevitably, this directly affects the quality of care we can provide. We’ve set this new benchmark of striving for mediocrity to maintain our viability. In the end, it affects one of our most important goals – improving the quality of patient care.
Brennan: From a small business perspective, I know how expensive it is to provide healthcare for employees. As a representative of an insurance provider, Bill, you might want to comment.
Bannen: Okay. The real-world environment of selling health insurance is extremely competitive, particularly in this state. We have to provide an insurance product that is price-competitive for small and large businesses. For example, in Southern Nevada right now, Wellpoint, our health benefits company, has been completely shut out by many large self-funded employers, because they think we pay physicians too much money. We pay physicians 15 or 20 percent more than some of the other third-party administrators or healthcare insurers in this area. We developed a strategy, which received a lot of media coverage, to lower the reimbursement to some of the physicians in Clark County, and in doing that we are simply becoming competitive. The cost of healthcare insurance continues to rise with the cost of drugs, with new technologies, with reimbursements for hospital beds that have to be shifted somewhere; that all ends up coming back to a commercial insurer. In spite of what people say about wanting accessibility and quality and depth of insurance, the reality is they want the lowest price they can get.
Robinson: Of each healthcare premium dollar paid nationally, hospitals receive only 35 cents. In Nevada, it’s less, because our reimbursements are lower than the national average. Of that same dollar, 22 cents goes toward overhead and profit for the insurance company. Yet, the Legislature and the community always look to hospitals for the quick fixes.
Bannen: I would like to respond to that. Included in that figure are 3.5 cents for premium tax and 2 cents for commissions. It costs us between 13 and 15 cents of each dollar to administer the plan – making sure premiums come in and are recorded, and claims are processed and paid. We hope to make 2 or 3 cents profit on that dollar. After all is said and done, if our loss ratios rise above 81 or 82 percent, we make nothing.
Matheis: To the extent we do not pay adequately for the services we need, we will not get those services. We’re seeing the pressure on the whole medical care system to do what the insurance industry and government payers have done now for several years, and that is to find creative ways to not cover or not pay for those services that use up too many resources. It’s informal rationing, but it’s rationing. We’ve created a system so complex, and with competing priorities for the different sectors, that we’re now at a crisis point where we may not be able to deliver on a regular basis the standard of care we all believe we should be able to deliver.
Bannen: Nobody in America has been willing – whether it’s state Legislatures or anybody else – to acknowledge that medicine has moved forward considerably in technology, in pharmaceuticals and other things that raise the cost of delivering healthcare. We’re going to need a cash infusion, and it will have to come from government; it’s not going to come from small and large business. Otherwise, America has to look at rationing. It’s a bad word, but we have to look at priorities. Are we going to cover everything, cradle to grave? If we do, it’s going to be very expensive. If we aren’t, then let’s talk about what we’re not going to cover. I challenge any Legislature to start talking about that issue.