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Pennsylvania Hospitals at Risk and the Policy Path Forward · Becker’s Healthcare Podcast

0:01
This is where health care leadership comes together.
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Becker's sixteenth annual meeting brings more than 3,500
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hospital and health system executives and nearly 800
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speakers to Chicago, April 13 through the sixteenth.
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This year's event includes keynote conversations with Dallas
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visit beckershospitalreview.com
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and click on the events tab in the
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upper right. We're looking forward to hosting you
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in Chicago.
0:31
This is Alan Condon back with another episode
0:34
of the Becker's Healthcare Podcast.
0:37
And today, I'm thrilled to welcome back Nicole
0:39
Stallings, president and CEO of the Hospital and
0:42
Health System Association of Pennsylvania.
0:45
I'm also delighted to be joined by Igor
0:48
Belikrynitsky
0:49
and Rand Strel, who are both partners leading
0:51
the health practice at the management consulting firm
0:54
Oliver Wyman. So, Igor, before we begin, I'm
0:58
gonna hand it over to you. For those
0:59
of our listeners here at Becker's who might
1:01
be as well acquainted with Oliver Wyman, do
1:04
you mind giving us a little bit of
1:06
information information about the company, your areas of
1:08
focus, and expertise?
1:11
Of course. And and and thanks for having
1:12
us on to have this important conversation. So
1:15
as you mentioned, Ron and I are partners
1:18
in Oliver Wyman. We're a global management consultancy.
1:21
Ron and I specifically work in our health
1:24
and life sciences team that serves health organizations
1:27
all over the world and certainly here in
1:29
The US
1:30
to help them solve their most important strategic
1:33
problems,
1:34
undergo transformation, and ultimately deliver
1:36
better care for everyone. And and we're very
1:39
excited to be a part of this conversation.
1:42
Fantastic. Very much reciprocal.
1:43
So without further ado, we'll dive right in.
1:46
I think at the time of recording this
1:48
podcast, it's early February. It's following that Oliver
1:51
Wyman report
1:53
commissioned by HAP
1:55
a couple weeks ago in in mid January,
1:57
so I believe. So that report essentially, Nicole,
2:00
warned that up to 14 hospitals could potentially
2:03
close in the next five years or so
2:05
without significant policy intervention,
2:08
really threatening access to care and the regional
2:10
economies across Pennsylvania.
2:12
Nicole, that's my very brief intro of the
2:14
report. You're a lot more well equipped to
2:17
kind of answer and share some more detail
2:19
than I am. But can you share a
2:20
little bit more about the backdrop of this
2:22
report and how it came about?
2:24
Sure. Thank you. And and and thanks for
2:25
having me back on. You know, I recall
2:28
when
2:29
we did the podcast back in the spring,
2:31
we talked a lot about the importance
2:34
of telling our story and and the story
2:36
that only hospital and hospital leaders could tell
2:39
to policy makers.
2:40
And we also know that we really need
2:43
to bring data
2:44
to that story.
2:45
But the headlines are also telling a story
2:47
about Pennsylvania, including for Becker's,
2:50
when they highlighted
2:51
service reductions
2:52
and growing,
2:54
maternity care deserts
2:56
when there were hospital closures.
2:59
And so we started talking about the need
3:01
for this report
3:03
well before
3:04
we knew what was going to be in
3:06
HR one and what that would mean for
3:09
our hospitals because we wanted to
3:13
understand what was so unique
3:15
about Pennsylvania.
3:16
How did we compare
3:19
to other states? Importantly, we wanted to project
3:21
that forward and say, what would it look
3:23
like
3:24
if we didn't have policy change? And then
3:27
finally,
3:28
what are the policy areas
3:31
that would be most impactful
3:34
given this trajectory? And and I have to
3:36
say it was just fantastic to work with
3:39
the Oliver Wyman team. They they really brought
3:41
deep experience
3:43
and data
3:44
to this analysis, which really highlighted why Pennsylvania's
3:48
hospitals face greater challenges than their peers elsewhere
3:52
and and what we can do about it.
3:55
Yeah. And I think that's a great kind
3:57
of jumping off point. Just to stick with
3:58
you for this one, Nicole, I know
4:01
with time of recording, we saw some very,
4:03
very minimal,
4:05
things passed in terms of the partial government
4:07
shutdown, some federal Medicaid, the ASH cuts, for
4:10
example, disproportionate to your hospital cuts, elimination for
4:12
two years.
4:14
Small stuff happening at the federal level. But
4:16
what do you see as the most immediate
4:18
action that state lawmakers could take to really
4:21
prevent further hospital cuts, closures, really preserving that
4:24
access to care in Pennsylvania?
4:27
Yep. Hospital sustainability
4:29
really starts with addressing the structural deficit that
4:33
our report
4:34
highlighted.
4:35
Largely, it's Medicaid reimbursement
4:38
that is driving the financial challenges that Pennsylvania's
4:41
hospitals are facing. And, you know, Medicaid reimbursement
4:44
doesn't cover the cost of care in any
4:47
state, but Pennsylvania
4:49
lags behind other states.
4:52
And this report demonstrates
4:54
that Medicaid reimbursement
4:56
in our Commonwealth was 11 percentage points below
4:59
the the national median. So for us,
5:02
the most important
5:03
action as well as the most immediate opportunity
5:06
was addressing the structural deficit.
5:09
And I say immediate opportunity because our governor
5:12
just released,
5:13
the budget for our state,
5:16
that has to be approved by the June.
5:19
And so our advocacy for the next
5:21
five months is going to be hyper focused
5:25
on,
5:26
ensuring that that final budget includes investments that
5:29
move us closer
5:30
to sustainable payments for hospitals and what they
5:33
really need to
5:35
continue to provide care that communities depend on
5:38
that looks like
5:40
maximizing
5:41
allowable Medicaid reimbursement. That also really,
5:45
bolstering funding for distressed hospitals.
5:49
But I'll say our advocacy has to go
5:51
beyond the budget and address the other factors
5:54
that were outlined in this report, be it
5:56
persistent workforce shortages,
5:59
really
6:00
burdensome and outdated regulatory
6:03
environment, and also restoring balance to our state's
6:06
medical liability environment. Because once again, Pennsylvania
6:10
is an outlier. We have the highest cost
6:12
per capita of medical liability payouts among all
6:15
states. And this isn't an issue of quality.
6:18
Pennsylvania's
6:19
hospitals provide some of the highest quality care
6:21
in the country, but we do need partnerships
6:24
really at all levels
6:25
of state government to address the crisis to
6:26
advance some common sense reforms. And,
6:27
policy levers. Mhmm. And it's really state action
6:30
that can help preserve care in our hospitals
6:33
in Pennsylvania. Mhmm.
6:38
And
6:39
action that can help preserve care in our
6:41
hospitals in Pennsylvania.
6:44
Yeah. They they just saw that Governor Shapiro
6:46
recently proposed that budget for the year. I
6:48
guess, Nicole, just a quick follow-up to something
6:50
you mentioned earlier there. In terms of those
6:52
investments for sustainable
6:54
payments for hospitals, in an ideal world, in
6:57
a realistic world, what what might that look
6:59
like?
7:00
Pennsylvania
7:01
already has a, fund for,
7:04
distressed hospitals. We would like to see a
7:08
five year commitment to really, boosting the funding
7:11
available there because, unfortunately, we know and and
7:13
this report demonstrates that in the coming years,
7:16
the financial pressures are going to really, increase
7:19
exponentially for our hospitals. We need to have
7:19
funding to support care. We
7:33
decades, and so we think there's a real
7:34
opportunity there as well.
7:36
Well. Yeah. Yeah.
7:38
Nicole, last question for you. Again, I'd love
7:40
to turn it over to to Igor Oran
7:41
to kind of to dive a little bit
7:43
deeper into the report. But from your conversations
7:46
recently with the hospitals in your state, how
7:48
are leaders talking to you in terms of
7:50
how they're balancing
7:51
short term cost savings with long term
7:54
sustainability
7:55
planning?
7:57
You know, one of the first questions that
7:59
we asked Oliver Wyman to help us with
8:01
was,
8:03
where the opportunities were. We we wanted to
8:05
hold up the mirror to understand
8:07
where we as a hospital community,
8:10
could improve. And the report demonstrated that hospitals
8:14
have been putting in the work,
8:16
in terms of cost savings and efficiency.
8:19
Our cost per discharge was nearly 30% lower
8:22
than neighboring states. It was growing at a
8:25
slower rate.
8:26
And so that's very positive. But on the
8:28
flip side, what that means is there aren't
8:30
a lot of rabbits that hospitals can still
8:33
pull out of their hat.
8:34
And,
8:35
for years,
8:37
some hospitals have had to have, some really
8:39
difficult discussions around their board table and make
8:42
those decisions around the future of services,
8:46
partnerships, investments,
8:48
facilities,
8:49
because that's the reality that we were facing
8:51
here in the Commonwealth. But what I know
8:53
to be true for every hospital is they
8:55
don't just want to survive,
8:57
in this very tumultuous time. They really want
8:59
to thrive. And so we took that to
9:02
inform the way in which we engaged,
9:05
our state agencies as they developed the rural
9:08
health transformation plan application. Really looking at where
9:11
the opportunities
9:12
were, where investments were necessary to act as
9:15
a bridge for those hospitals to prepare in
9:18
the future to sustain cuts and continue to
9:22
be there
9:23
for their community.
9:25
We know that,
9:28
those opportunities are around workforce development,
9:30
infrastructure, and technology. And so workforce,
9:34
I'll I'll focus there first. It's critically important,
9:37
I believe, as an advocate that when you
9:39
approach policy makers and ask for support, you're
9:42
able to demonstrate what you're trying to do
9:43
on your own to address problems.
9:45
And our hospitals for years have been building
9:48
local pipelines, partnerships, starting their own schools of
9:51
nursing and health sciences.
9:54
And and yet there is still opportunity
9:56
for support from policy makers.
9:59
And AI is another one, and this is
10:00
featured prominently in our report.
10:03
It is a workforce multiplier. Certainly, we have,
10:06
many of our members that have dash boards
10:08
right now tracking the thousands of hours that
10:11
have been returned
10:12
to providers so that they can be,
10:14
where they need to be, which is at
10:16
the bedside. And we know that it it
10:18
boosts,
10:19
both provider satisfaction efficiencies
10:25
with AI
10:27
around supply chain and scheduling
10:30
optimization,
10:32
the
10:33
ways in which
10:34
we interact with payers.
10:36
But I do have two concerns.
10:38
One is related to policymakers. We wanna make
10:40
sure that we don't over regulate
10:42
AI,
10:43
so that our hospitals are not able to
10:45
innovate. And the second is a digital divide.
10:48
We
10:49
have many hospitals that are leaders in the
10:52
way in which they are using AI, but
10:54
we have others who haven't quite taken that
10:56
first step yet. And so I think there's
10:57
a a real opportunity there,
11:00
to kinda bring those groups together and ensure
11:02
that we're providing them with case studies and
11:04
governance documents and and reviews of different products
11:08
because we don't want those hospitals to be
11:10
left behind. And the rural health transformation funding
11:13
can certainly
11:14
help us there. But at the end of
11:16
the day,
11:17
while hospitals are certainly trying to play a
11:19
role and to help solve these problems locally,
11:22
they cannot do this if they don't have
11:24
margins to make the necessary investment. So this
11:27
really brings us back to
11:29
HAP's role as an advocate
11:31
to these policymakers
11:33
and that real focus on reimbursement and policy
11:36
change.
11:37
Yeah. No no margin, no mission, and indeed
11:40
no mission, no margin from what I hear
11:41
from one recent CFO.
11:44
Nicole, so greatly appreciate your insight there. Respect
11:46
all the work that you do at HAP.
11:49
Igor Aran, to Nicole's point, there's there's a
11:52
lot in this report.
11:54
You know, clearly outlines the very real challenges
11:57
the Pennsylvania hospitals providers are facing, but I
12:00
think also clearly outlined some of the unidentified
12:02
some of the opportunities for investment for progress
12:05
down the line too. I guess, Igor, maybe
12:07
to you first or around whoever wants to
12:09
kind of fill me in in terms
12:11
of methodologies
12:12
for this.
12:13
Outlines that what methodology did you use to
12:16
project that 12 to 14 hospital closures over
12:18
the next five years? And maybe if you
12:20
could share what assumptions underlie that estimate?
12:24
Yeah. That's a great question, Alan. Thank you.
12:26
And,
12:27
delighted to be here. I would say, first,
12:30
it's it's important to note that
12:32
that number, 12 to 14 hospital closures in
12:35
five years, is a number we hope we
12:37
won't get to. Right? So that's under an
12:39
assumption and scenarios where there are no interventions
12:42
and no support,
12:44
of the nature that Nicole was, illustrating earlier.
12:47
So should there not be any change in
12:50
course and speed, we may indeed see that,
12:52
and we definitely hope we won't.
12:55
Per per your question specifically, so we we
12:57
don't have a crystal ball. Right? And so
12:59
we can't predict the future entirely. But we
13:02
we can do a number of things,
13:04
which we did.
13:06
We looked at historical
13:07
financial performance of hospitals across the state.
13:11
Unsurprisingly,
13:12
and obviously that's a national phenomenon,
13:14
And when a facility is consistently operating
13:17
at a loss
13:18
year after year, that's the very strong predictor
13:21
of about to be close.
13:24
And we've seen that in Pennsylvania, and we've
13:26
seen that
13:27
elsewhere. And we have identified a group of
13:30
larger than 12 to 14 hospitals in Pennsylvania
13:33
that are suffering
13:35
through these significant financial pressures.
13:38
We also looked at
13:40
the nature of the entity that owns the
13:43
hospital and its ability to sustain a facility
13:46
that may be challenged. And we know that
13:49
single hospitals or smaller entities are more challenged
13:52
to overcome and support,
13:55
areas where they are challenged
13:57
financially.
13:58
And then finally, we also looked at the
13:59
historical rate. Right? And, unfortunately, Pennsylvania
14:02
has experienced a closure of between two to
14:05
three
14:05
hospital facilities per year over the last decade.
14:08
So just by that
14:10
extrapolating forward, plus identifying
14:12
a group of hospitals
14:14
at risk,
14:16
we came to
14:18
should there be no intervention, we may see
14:20
a 12 to 14 hospital closure.
14:22
I I do wanna add, Alan, it's important
14:24
to know the the hospital closure
14:27
statement takes a lot of,
14:29
attention and headline as it should, but we
14:32
should know that hospitals don't close in a
14:34
day. Hospitals don't operate
14:37
perfectly one day and then close the next.
14:39
They are
14:40
those closures are preceded
14:42
by a long deterioration
14:45
in a sense of the services they offer,
14:48
the access they offer, the scope of physicians
14:50
and expertise that they offer.
14:52
So
14:53
while it comes to the news and people's
14:55
attention
14:56
when the hospital close, the community
14:59
has
15:00
suffered or felt the consequences
15:03
of that deterioration in services
15:05
over a period of years leading up to
15:07
that closure.
15:08
So
15:10
the the closure
15:11
or the impact of impeding closure starts years
15:15
before that facility actually closed their doors and
15:18
continues, of course, afterwards.
15:21
I think that's such an important point, Ron,
15:23
in terms of especially in some of these
15:25
smaller, more rural communities,
15:27
hospital leaders, the community itself will really do
15:30
everything in their power to keep that care
15:32
to keep that hospital open. Now that we'll
15:34
see a slow trickle down effect of service
15:36
cuts and whatnot before it, unfortunately, ultimately becomes
15:39
an enclosure. But I think that's an interesting
15:41
kind of area for a quick follow-up question
15:44
on the larger impacts of hospital closures. Maybe
15:46
Igor or Ryan, could you talk a little
15:49
bit about the variety of factors that were
15:51
looked at here in terms of the those
15:53
larger impacts, whether it be jobs, the local
15:55
economy, health care access? We'd love to get
15:57
a little bit more insight there as well.
15:59
Yeah. Yeah. That's again, it's a good point
16:02
because it's not just health care at the
16:04
end of the day. Right? So first of
16:05
all,
16:06
we need to note that, again, these hospitals
16:08
that close,
16:10
not always, but often tend to be in
16:12
smaller
16:13
towns, rural areas,
16:15
where in many cases, it is the major
16:17
employer.
16:18
And we've predicted hundreds of millions up to
16:21
900 millions of wages lost if these hospitals
16:24
indeed closed,
16:26
based on kind of the the the wages
16:28
that hospitals provide, generally speaking. And in these
16:33
communities, the hospital is the main employer,
16:36
really supports the economy. And there's ripple effects,
16:39
secondary and tertiary ripple effect of what happens
16:41
when these wages go away and people can't
16:44
afford to support their local communities.
16:47
There's also other implications, of course, to health
16:49
care. While the local hospital
16:52
closes,
16:53
the surrounding communities and the surrounding hospitals
16:56
feel that. So the local residents need to
16:59
drive longer to EDs or to deliver
17:02
babies, and the surrounding hospitals feel the the
17:04
pressure because the the need is still there
17:07
typically. Right? The fact that the the financial
17:10
situation
17:12
is not supporting a hospital doesn't mean that
17:14
the people that live in the community don't
17:16
need health care. So they need to drive
17:18
further away, and the surrounding hospitals become fuller.
17:22
The experience at the emergency department or elsewhere
17:25
deteriorates,
17:26
and
17:27
their surrounding communities
17:29
bear the brunt of a hospital that closed
17:32
in in a in a neighboring community.
17:35
So there are
17:36
essentially implications both on the economy, on the
17:39
wages, on the development of the local town
17:42
or community,
17:43
and in the surrounding communities in their own
17:46
access to care as well.
17:48
I'm wondering, I'm curious how does Pennsylvania's
17:51
hospital financial profile compare with other large states
17:54
with similar demographics, similar Medicaid populations?
17:58
Are there other states facing challenges as acute
18:01
as Pennsylvania is, or is Pennsylvania
18:05
more at risk considering the variety of challenges
18:07
we just talked about talked about and then
18:08
Nicole identified at the start of the conversation
18:10
and in this report? Igor, maybe anything to
18:13
add from you there?
18:14
Absolutely.
18:15
So
18:16
hospitals all across the country are in distress.
18:18
There are, as Nicole said, some factors that
18:21
are unique to Pennsylvania.
18:23
One is just across the board, both public
18:26
and private payers.
18:27
Pennsylvania's
18:28
hospitals get paid less for
18:31
their,
18:33
care that they provide, the very the excellent
18:35
care that they provide
18:37
than,
18:38
the average for the country. So
18:41
excellent care, below average reimbursement,
18:44
and also Pennsylvania's
18:45
hospitals end up with
18:47
lower bond ratings than
18:49
hospitals across the country. So, again, that makes
18:52
it more expensive to borrow,
18:54
harder to invest in the necessary people and
18:57
facilities
18:58
and capabilities.
19:00
So you have this reimbursement
19:02
issue.
19:03
You have,
19:04
some additional costs that Pennsylvania hospitals bear in
19:08
particular. The mal medical malpractice
19:11
environment
19:12
in Pennsylvania
19:13
is particularly complex
19:15
and ends up being very costly for the
19:17
hospitals.
19:18
And then as you project it forward,
19:20
the situation becomes even more complex
19:23
When you look, for example, at the impacts
19:25
of HR one
19:27
for Pennsylvania,
19:29
it hurts in two ways. One is it
19:32
further reduces
19:33
the reimbursement,
19:35
and two,
19:36
it will really shrink the pool of people
19:39
who are eligible for Medicaid.
19:41
And so as many as 300,000
19:43
Pennsylvanians
19:44
could lose their Medicaid
19:46
coverage, they still need health care. They just
19:48
won't have a program to pay for it
19:51
anymore. So you have this combination of
19:54
reimbursements
19:55
that are below
19:57
and the costs that are rising that are
19:59
creating the structural deficit that Nicole talked about.
20:04
Granted,
20:05
no crystal ball. We know the level of
20:08
work that's being done behind the scenes and
20:10
on the front lines or from fantastic leaders
20:12
like Nicole, like Hap, from an advocacy standpoint.
20:15
Does this report look beyond 2030
20:18
if no policy changes are made or no
20:20
significant policy changes, should we say? What does
20:23
that financial trajectory of Pennsylvania hospitals look like
20:26
beyond 2030?
20:29
So we as Ron mentioned, we defined a
20:31
range of scenarios.
20:32
There is a scenario in which, as you
20:35
say, no helpful changes are made,
20:38
and then things continue to deteriorate
20:40
because
20:42
it's not just about health care. It's about
20:44
the state's economy.
20:45
It's about jobs.
20:46
And as,
20:49
you know, if we fail to protect access
20:51
to great health care, that means employers are
20:54
less interested in locating in the state and
20:56
creating jobs,
20:58
and that just continues sort of this vicious
21:00
cycles where there's less money to pay for
21:03
great health care,
21:05
fewer jobs,
21:06
and it's our it continues.
21:09
So we projected
21:10
this sort of a vicious cycle,
21:13
of economic decline that accompanies a decline in
21:16
access to health care. We also look at
21:18
a happier scenario where there are necessary steps
21:22
taken by
21:23
the various stakeholders
21:24
by the state.
21:26
The hospitals are able to take full advantage
21:28
of the promise of technology
21:30
and get to a more sustainable financial footing.
21:33
And then, of course, as you start going
21:35
from kind of a five year time horizon
21:37
to more of a ten year time horizon,
21:39
you start
21:41
seeing
21:42
much bigger swings potentially from things like clinical
21:45
innovation,
21:47
technology,
21:49
demographics,
21:50
policy
21:51
becomes a lot harder to predict, but the
21:53
overall direction,
21:54
again, we hope that
21:56
sanity prevails and we make good choices,
22:00
and set the the state itself and the
22:03
hospitals
22:05
on a path towards sustainability
22:07
rather than this vicious cycle of
22:10
imbalance
22:11
and structural deficit.
22:13
Mhmm. Yeah. Let's hope. I think, hopefully, that
22:15
the happier scenario when the Sanity prevails ideally
22:18
is the is the best path forward and
22:20
hopefully we move somewhat towards it over the
22:21
next couple of months. No doubt with a
22:23
lot of the great work that that you
22:24
two are doing with this report, the HAP
22:26
and our leadership with Nicole.
22:28
Nicole, maybe a last question before we wrap
22:30
up. Just technology has popped up time and
22:33
time again in in Rand's comments and Igor's
22:35
comments and your comments.
22:37
No doubt such an opportunity
22:40
when we think about
22:42
AI revenue cycle, helping with some of the
22:44
staffing shortage maybe that some of these acute
22:46
community rural hospitals are experiencing.
22:49
I guess, kind of where do you see
22:51
for the the biggest impact for technology to
22:53
play in offsetting some of these costs, really
22:56
helping to preserve access to care, in the
22:58
in the near term for some of these
23:00
struggling hospitals?
23:01
Yeah. We we don't, envision it as an
23:04
option. It really is a mandate, we believe,
23:06
for hospitals to be able to optimize technology
23:09
and in particular,
23:11
AI. We were certainly pleased to see some
23:13
action taken at the federal level to, enable
23:16
more around telehealth, for example, that's that's critically
23:19
important,
23:20
but there's so much opportunity with
23:22
AI. And so that's certainly gonna be a
23:24
focus for our organization and partnering again with
23:27
these leaders that we have in Pennsylvania and
23:29
elsewhere,
23:30
for for our hospitals as we move forward.
23:33
Mhmm.
23:34
Yeah. I think Nicole,
23:36
Ron, Igor, it's a real pleasure speaking with
23:38
the three of you today, shining a light
23:40
on on some of the very real challenges
23:42
facing Pennsylvania hospitals and access to care, but
23:44
also some of the great work that's being
23:46
done by the likes of Hap, Nicole, and
23:48
hopefully moving towards somewhat
23:50
of a sanity prevailing and some some better
23:52
scenarios and an investment and where it needs
23:55
to belong for hospitals.
23:56
Thank you so much for your time. Really,
23:58
really appreciate it. Look forward to catching up
23:59
with you again down the line. Thank you.