Word expected tomorrow on St. Francis hospital closing
Empty beds, high fixed costs listed as culprits
Sunday, August 18, 2002
By Pamela Gaynor, Post-Gazette Staff Writer
The region's two biggest health care titans, UPMC Health System and Highmark Blue Cross Blue Shield, are expected to unveil a plan tomorrow that will shut down one of the city's oldest and biggest hospitals -- St. Francis Medical Center.
As startling as that may sound, observers believe the move could go a long way toward helping ease one of the region's biggest problems: too many hospital beds chasing too few patients.
"It's been published a number of times, not only Pittsburgh, but throughout the country, there are probably too many beds in the system right now," said Walter Wayne, the Hospital Council of Western Pennsylvania's chief financial analyst.
Indeed, Pittsburgh has long had more adult inpatient hospital capacity than it needs, with more than a quarter of the 3,273 beds that hospitals routinely staff and nearly half of their 4,059 licensed beds empty.
Since at least the mid-1990s, conventional wisdom held that the city's health care industry needed some radical surgery.
Unless at least one hospital closed or all reduced their bed counts, analysts said, the whole industry would suffer financially as new medical technology pushed more treatment into outpatient facilities and managed care insurance plans curbed hospital admissions and the length of patients' stays.
What's more, some suburban hospitals were siphoning away some of the most lucrative business with new services such as open heart surgery that at one time only city hospitals offered. In addition, UPMC Health System had begun an aggressive campaign to acquire doctors' practices to ensure that its patient admissions would grow at the expense of competitors.
Since the advent of managed care, most hospitals including UPMC's flagships -- Presbyterian, Montefiore and Shadyside -- have eliminated beds, and St. Francis Health System closed the smaller of its two city facilities, St. Francis Central Hospital, Uptown.
But even with the closure of Central two years ago, 28 percent -- more than one in four -- of the staffed beds at Pittsburgh's remaining eight general acute care hospitals are empty. For the fiscal year ended June 30, 2001, the latest tally available in state Heath Department records, the average occupancy rate of staffed beds in the city was 72 percent. Average occupancy of all licensed beds was 58 percent.
Alone, the city's average occupancy of staffed hospital beds isn't necessarily a sign of ill fiscal health. Hospitals, by design, generally staff more beds than they'll fill so that they'll be able to accommodate peak admitting days and seasons.
Having between 70 percent and 75 percent of staffed beds occupied on average is generally enough to help control the health care industry's biggest variable cost, which is payroll, said Beaufort Longest, director of the University of Pittsburgh's Health Policy Institute.
Nationwide, occupancy of staffed beds at very large hospitals -- similar in size to most of Pittsburgh's -- was pegged between 68 percent and 72 percent in 1999, the most recent year tallied by the American Hospital Association.
But profitability also depends on the level of fixed costs that must be recouped from each bed, including the amount of debt that was added to buy the beds and build and remodel facilities. The total number of licensed beds at a hospital is one indicator of those fixed costs, if only because it reflects the sheer size of the institution.
"St. Francis is sort of the personification of that. It has large fixed costs with declining [patient] volumes," Longest said.
A look at statistics for the past five years shows how St. Francis in part was a victim of city hospitals' over-capacity.
Pittsburgh's hospitals eliminated 13 percent of their licensed beds during the past five years, sometimes reallocating the space they occupied for bigger outpatient units or other purposes. That would appear to have been a way to drive down costs and improve their financial health.
But the reductions almost mirrored declining patient stays in hospitals, reflecting tight-fisted managed care policies that promoted shorter stays.
And among local hospitals, St. Francis Medical Center was hit the hardest by this shift to shorter patient stays as well as by other forces, including bidding wars that took away some of its key doctors. Since 1997, the number of days patients spent at the Lawrenceville institution fell 27 percent, vs. 11 percent for the city overall.
St. Francis moved to deal with the sharp drop-off by pulling beds out of service. In fact, the medical center's occupancy of staffed beds actually rose from 62 percent five years ago to 70 percent in June 2001, just a little shy of the city's overall average.
But that increase occurred only because the institution slashed the number of beds it staffed by 61 percent, compared with the citywide average cutback of 14 percent.
But even with the deep cuts in staffing, St. Francis still was forced to maintain a cavernous institution that at one time boasted 700 licensed beds. And a large share of its occupancy was for psychiatric patients, whose treatments generally command lower payments than those for medical and surgical patients.
Pamela Gaynor can be reached at firstname.lastname@example.org
ST. FRANCIS MEDICAL CENTER TO CLOSE
St. Francis Medical Center to close
Pennsylvania's St. Francis Medical Center will be closed and turned into a new Children's Hospital as part of a $520 million deal involving UPMC Health System and Highmark Blue Cross Blue Shield.
Pittsburgh Post-Gazette, Aug. 20, 2002