Reprinted courtesy of the Corvallis Gazette-Times
Sept. 23, 2012 -- This ain’t your father’s Good Sam.
In fact, Dad might not even recognize today’s Samaritan Health Services. The Corvallis-based nonprofit health system that grew out of Good Samaritan Hospital now presides over a three-county network with more than 5,000 employees in five hospitals, dozens of clinics and a senior care facility.
It operates its own Medicare Advantage insurance plan and has emerged as the coordinated care organization for Linn, Benton and Lincoln counties under Oregon’s version of federal health care reform.
Today’s Samaritan is also branching out into a host of new enterprises — building a medical school campus, opening fitness centers and even tearing down the building that housed the original Corvallis hospital to build apartments for Oregon State University students.
At the same time, it’s streamlining medical services and restructuring its work force in sometimes wrenching ways that have eliminated hundreds of jobs, strained relations with labor unions and sparked an outcry from nurses and support workers.
All these things are necessary, CEO Larry Mullins says, if Samaritan Health Services is to survive in a rapidly changing industry and continue to accomplish its core mission: providing medical care for the 250,000 Oregonians in its service area.
“Part of what we’re going through is no different than any other business that’s trying to figure out how to do things more efficiently and deliver better services,” Mullins said.
“I hear some people say, ‘Well, it’s not the same old Samaritan.’ Well, no, it’s not, but nothing is the same old whatever-it-was.”
The new economics
A number of economic forces are conspiring to push hospital operators, including Samaritan, to slash costs and look for new revenue streams.
According to a 2012 report compiled by Apprise Health Insights, Oregon hospitals saw a 3.1 percent decrease in inpatient days from 2007 through 2011. In that same five-year period, emergency room visits rose 5 percent and outpatient visits jumped 14.5 percent.
Medicare and Medicaid (which pay much less than private insurance) went from 50 percent to 57 percent of patient revenue while commercial insurance dropped from 44 percent to 37 percent. Even as government health plans become a larger part of the mix, both state and federal payments are expected to shrink in the coming years.
And as the recession dragged on, Oregon hospitals doled out more than $746 million in charity care last year while swallowing $409 million in bad debt.
At the same time, hospitals must adjust to the new global budgeting system that went into effect Aug. 1 for patients on the Oregon Health Plan, the state’s version of Medicaid.
Under the new system, regional coordinated care organizations get a fixed amount of money to treat the medical, mental health and, starting in 2014, dental needs of OHP patients.
The Intercommunity Health Network, a Samaritan subsidiary, fills that role for Linn, Benton and Lincoln counties, with just over 30,000 members. In its first month of operation, the new CCO got about $9.8 million, or $325 per member, to provide comprehensive services — no matter how much care those members might need.
The system stands the more traditional fee-for-service compensation model on its head, said Andy Van Pelt, chief operating officer of the Oregon Association of Hospitals and Health Systems.
“The incentive has shifted to OK, how can we work together to keep people out of the system,” Van Pelt said. “If there’s money left over, we all share in the reward.”
If there’s no money left over, providers go unpaid — and the state could lose federal Medicaid funding if cost containment goals are not met.
Oregon Health Plan membership is set to grow in 2014 from 600,000 to more than 1 million, and Gov. John Kitzhaber wants to expand the system further to cover public employees and, ultimately, all Oregonians.
But it’s not yet clear just what mix of preventive measures and treatment services will be needed to meet the lofty aim of improving population health while holding the line on costs.
“That whole design is left up to the communities and their CCOs,” Van Pelt said.
“This is a great experiment — which we all hope works.”
Adapt or die
From Samaritan’s perspective, the need is clear: The system must evolve to meet all these emerging economic challenges, and it must do so quickly.
“Health care reform is for real now,” Mullins said. “It’s happening, and we have to begin taking actions now, not only to address the current reality but the future as well.”
One part of Samaritan’s changing business strategy involves finding new ways to bring in money.
In Lebanon, for example, it’s developing a new medical school campus across the street from the hospital, with classroom buildings, a conference center, hotel, shops and restaurants, all of which will generate lease income (and some of which, because they fall outside the nonprofit’s core medical mission, will pay property taxes).
The campus is also home to the first SamFit fitness center. A second recently opened in Corvallis, and more are planned for other communities where Samaritan has hospitals.
In addition to selling memberships, the hope is that SamFit will improve the health of Samaritan patients, lowering treatment costs and helping meet population health goals.
The Harrison Apartments may be Samaritan’s biggest departure to date.
The $10 million project, a joint venture with a Portland development firm, will bring 221 bedrooms of student housing to the site of the old Corvallis General Hospital (later renamed Good Samaritan) and will pump a steady infusion of cash into Samaritan’s coffers.
Mullins views that outside revenue as a form of life support for health care services that sometimes cost more to deliver than they bring in.
“We can make money from these other things, and there’s nothing that says these nonmedical revenues can’t be used for medical purposes,” he said.
“Revenues from all that are becoming more and more important in sustaining the operating mission.”
Cutting till it hurts
On the cost side of the equation, Samaritan is consolidating some services at individual hospitals and holding off on some construction projects that may be too costly or no longer make sense under changing reimbursement models.
Other changes are more painful, most notably a massive restructuring of the work force.
In May, Samaritan went through a bruising contest of wills with unionized nurses and support workers at Good Samaritan Regional Medical center, its flagship Corvallis hospital, over a plan to consolidate part-time positions and move to 12-hour shifts. It also pushed to do away with overtime pay for nurses working less than 40 hours a week, a holdover from the nursing shortages of a decade earlier.
The unions fought back, but in the end Samaritan got most of what it wanted. Similar changes have played out at other hospitals in the network.
Systemwide, Mullins estimates, Samaritan has eliminated between 200 and 300 jobs. While many of those cuts were made through attrition and reassignment, he anticipates the need for additional staff reductions next year.
“We have to redesign the work force,” Mullins said.
“To do that is going to require change, and when you have change you’re going to have pushback.”
Give and take
Some of that pushback could come in the next round of labor negotiations.
“Our contract expires at the end of June 2013, so we’re starting to gear up for it,” said Pat Cirello, who heads the bargaining unit at Good Sam for the Oregon Nurses Association.
“One thing we’d like is to have more say when major decisions are made like this one.”
Susan King, the ONA’s executive director, said nurses understand the financial pressures hospital systems such as Samaritan face, but forcing them to work 12-hour shifts can lead to medical mistakes, while eliminating part-time positions takes much-needed flexibility out of the staff and penalizes full-time nurses.
“When beds fill up, hospitals are slow to flex up” by adding more nurses, she said. “But when there are empty beds — nurses call it low census — hospitals are very quick to call nurses and say, ‘Stay home.’”
King is also skeptical of what she calls Samaritan’s “empire building” in the quest to bring in more cash, especially from nonmedical ventures.
“We are well aware of Samaritan Health Services’ efforts to diversify their revenues. We get it — as a business, that’s what you do,” she said.
“But we also believe that Samaritan’s mission and central focus ought to be on patient care. ... You don’t have to build a health club to have changes in population health.”
For his part, Mullins hopes that the communities Samaritan serves will bear with the organization as it continues to adapt to a changing health care landscape. And as that landscape continues to morph around him, he hopes the decisions being made today will turn out to be the right ones.
“What I don’t want to do is I don’t want to turn the community against us. I’m very sensitive to that,” Mullins said.
“If I could keep everything the way it is now, at least until my retirement, I’d be a happy camper because it’s a lot of work and a lot of peril to go in that direction. You don’t know how it’s going to turn out.”