New faces, new challenges in Phila./PA health care

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Business Journal

New faces, new challenges in health care

Malpractice insurance crisis grips the industry

John George Staff Writer

After years of stability in the leadership ranks, 2001 saw several new faces take over the chief executive slots at some of the region's largest health systems.

The major issues they inherited -- including soaring malpractice insurance costs and the growing shortage of RNs -- will continue to pose problems this year.

The University of Pennsylvania, which started the year exploring the possibility of selling its health system, named Dr. Arthur H. Rubenstein executive vice president for the health system and dean of the school of medicine. Rubenstein was previously dean of Mount Sinai School of Medicine in New York. Robert Martin, promoted from interim CEO to permanent CEO of the health system in May, reports to Rubenstein.

Penn, which ultimately decided not to sell any of its hospitals, instead formed a nonprofit entity for its health system, called Penn Medicine, which is wholly owned by the university.

Temple University Health System announced in September that its president and CEO, Dr. Leon Malmud, was returning full time to teaching and clinical service. Joseph W. "Chip" Marshall III, a lawyer and chairman of the health system's board of trustees, was picked to succeed Malmud.

A few months earlier, Main Line Health brought back a former administrator, Leland I. White, to take over as president after Ken Hanover left the post to become CEO of the Health Alliance of Greater Cincinnati.

At other health systems, changes were announced well in advance.

During the summer of 2000, John C. "Jack" McMeekin announced his intention to retire as CEO of Crozer-Keystone Health System in January 2001. McMeekin, who had been at the helm of Delaware County's largest health system since it was first formed in 1990, is now chairman and CEO of the nonprofit University Technology Park in Chester. Gerald Miller is serving as president and CEO of Crozer-Keystone.

Later this year, the region's largest hospital group, Jefferson Health System, is slated to name its new chief executive. CEO Douglas S. Peters announced late last year that he will be stepping down by next July. Peters has served as chief executive and president of the Jefferson system -- consisting of Thomas Jefferson University Hospital, Main Line Health System, Albert Einstein Healthcare Network, Frankford Healthcare System and Magee Rehabilitation -- since it was formed in 1996.

Two of the region's biggest health-care trade organizations, the Hospital and Healthsystem Association of Pennsylvania and the Pennsylvania Medical Society, joined forces to lobby elected officials on the need to reform the state's professional medical liability system.

The organizations support separate legislation to privatize the state's Medical Professional Liability Catastrophe Loss Fund and to curb frivolous lawsuits. The battle is expected to resume this month in Harrisburg. Several physician groups said they may stop performing surgery, or move to another state, this year because of the rising cost of malpractice insurance. Several hospitals also scrambled to keep their trauma centers open after Jan. 1, 2002, because of malpractice insurance issues.

In late December, Pennsylvania Gov. Mark Schweiker provided doctors covered by the Joint Underwriting Association some temporary relief by giving them until April 30 to submit their CAT Fund surcharge. The JUA is the state's insurer of last resort.

Mercy Health System cited soaring malpractice premiums as among the reasons for its decision to shut its inpatient services at Mercy Community Hospital in Havertown and eliminate 400 jobs. Also blamed were inadequate reimbursement rates from commercial and government insurance programs.

Another ongoing issue affecting health-care providers locally and nationally is the shortage of registered nurses.

The Delaware Valley Healthcare Council estimated that local hospitals had about 1,000 nursing vacancies last year, and that the number was expected to grow to 3,200 by 2008. More than 70 percent of the hospitals in Pennsylvania relied on flexible scheduling and tuition reimbursement to recruit and retain nurses.

Main Line Health, the parent organization for Lankenau, Bryn Mawr and Paoli Memorial hospitals, took the most aggressive step to address the issue when it offered signing and retention bonuses of up to $25,000 to nurses who agreed to stay with the system for three years.

Almost 1,000 nurses at Main Line's three acute-care hospitals signed up for the bonus, and the system hired or made offers to almost 200 other nurses. "We decided we needed to kick things into a higher gear. We needed to be bolder in our approach," said Barbara Tachovsky, senior nursing executive at Main Line Health.

The area's biggest hospital sale last year involved the region's two largest Roman Catholic-sponsored health-care organizations. In June, Catholic Health Initiatives of Aston transferred ownership of five of its hospitals and two long-term-care facilities to Catholic Health East of Newtown Square.

Daniel F. Russel, CHE's president and CEO, said the deal provides the "unique opportunity to unify the Catholic health ministry in this region."

One of the hospitals involved in the transaction, St. Agnes, made news of its own when it announced a laboratory error involving patients taking the blood-thinning drug Coumadin may have contributed to several patient deaths. Three patient deaths were linked to the lab error by city heath officials. In October, the Pennsylvania Department of Health fined St. Agnes $447,500 because of the incident.

Last year also witnessed a growing presence of for-profit hospital management companies expanding into the Philadelphia region. Community Health Systems Inc. of Brentwood, Tenn., acquired two Chester County medical centers: Brandywine Hospital and Trauma Center in Coatesville and Southern Chester County Medical Center.

King of Prussia-based Universal Health Services, which has long avoided the Philadelphia acute-care market, reached a deal to acquire North Penn Hospital in Lansdale. UHS operates several behavioral health-care centers in the area.

Two other providers, nursing home operator Genesis Health Ventures of Kennett Square and King of Prussia-based Home Health Corporation of America, emerged from Chapter 11 bankruptcy protection.

On the managed-care front, members of Medicare and Medicaid HMOs saw their choice of options reduced. In June, the Pennsylvania Department of Welfare canceled its Medicaid HMO contract with Health Risk Management Inc. of Minneapolis, which operates Oaktree health plan, because of the managed-care company's weakened financial condition.

HRM was one of four companies offering Medicaid HMO plans in the region under the state's HealthChoices program. The company's HealthChoices contract was later acquired by one of the other competitors, AmeriChoice of Pennsylvania.

This year, Blue Bell-based Aetna U.S. Healthcare, a unit of Aetna Inc., is scaling back its Medicare HMO product in the Philadelphia suburbs and some counties in South Jersey.

While remaining in Philadelphia, Delaware and Chester County, Aetna pulled out of Bucks and Montgomery counties this month. Aetna also left Burlington and Gloucester counties in New Jersey.

Dr. John Rowe, chairman and CEO of Aetna, said the decision was based on three factors: "persistent double-digit medical-cost inflation, a 2 percent cap on federal Medicare reimbursement increases and limits on the supplemental premiums we can charge."

In December, Aetna announced its was cutting 6,000 jobs this year, including 659 in Pennsylvania. The actions should help Independence Blue Cross, which offers Medicare HMO and PPO plans, bolster its position as the region's largest health insurer.

John George can be reached at [email protected].

http://bizjournals.bcentral.com/industries/health_care/health_insurance/2002/01/07/philadelphia_story9.html

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