Empty beds drive Lovelace proposal

Lovelace Health System, in a letter to a Bernalillo County commissioner and in an op-ed in Sunday’s Journal, has come out against plans by the University of New Mexico to spend $146 million on a new hospital.

Lovelace CEO Ron Stern wrote that “health systems ought to do their best to create the most efficient network of facilities, to minimize the cost to taxpayers.” He said that “a new big hospital in the downtown area is not what is needed at this point.” Instead, Stern said, UNMH should work out a bed-sharing arrangement with Lovelace Medical Center in Downtown Albuquerque.

A Lovelace official, responding to an e-mail query, said the medical center has a 61 percent occupancy rate. UNMH claims its occupancy rate is north of 90 percent.

UNMH offers one more challenge in what has been for Lovelace a very challenging time. Lovelace’s letter isn’t altruism in action; it is a response to a business concern, namely that it has empty hospital beds it would like to fill with paying customers. But the bed-sharing proposal presents the community with an intriguing opportunity to ponder what an efficient health system might be and how it might be attained.

“We have offered UNMH a bed-sharing agreement that would help alleviate the overcrowding and excessive delays in UNMH’s emergency department and save the taxpayers $146 million,” Stern said in an e-mailed statement to the Journal on Monday. “We look forward to conversations with university officials.”

Officials with UNMH, which has been frustrated by its inability to get state Board of Finance approval of the project, contend the problem is bigger than just a lack of beds. It’s a problem of having the right medical staff at the bedside. So even if Lovelace could offer beds, that wouldn’t solve the problem of providing proper care, they say.

By anyone’s standard, it has been a tough six months for Lovelace Health System. First, the company got into an ugly, public brawl with ABQ Health Partners, an independent physicians group Lovelace relied upon to help it fill its hospitals. Then Lovelace’s insurance arm lost its bid for a share of the state’s multibillion-dollar Medicaid managed care business starting in 2014. Lovelace has been providing managed care to Medicaid beneficiaries since Gov. Gary Johnson’s administration and plans to appeal the state’s decision.

There is only so much anyone outside the company can know about Lovelace’s business. It is owned by a closely held company based in Nashville, Ardent Health Services. Ardent also owns a health system in Tulsa, Okla., and is buying a system in Amarillo.

A New York-based private equity firm, Welsh, Carson, Anderson & Stowe, owns a substantial portion of Ardent. None of these entities is required to disclose very much publicly.

Here is what we do know about the business.

Lovelace reported to the state Insurance Division that in the third quarter of 2012, the last period for which reports are available, it wrote $624.1 million in health insurance premiums. Of this, $73.9 million was in the group insurance market (the insurance employers buy for employees), $249 million came from Medicare customers, and $243.1 million in premiums were written for Medicaid beneficiaries. The rest came from smaller lines of business.

In less than a year, unless Lovelace can get the state to reverse its decision, the company’s health plan loses more than a third of its premium revenue.

Lovelace also loses the power to guide Medicaid managed care members into its own hospitals, clinics and pharmacies. It now becomes dependent on the companies that will have the contracts next year to buy medical services from Lovelace. Moody’s, which rates corporate and government debt, warned last month that Ardent can expect reduced earnings because of the Medicaid contract’s loss.

Both Moody’s and Standard & Poor’s rate Ardent Health Services debt as speculative and risky. In a research note last November, S&P said that more than half of Ardent’s total revenue comes from Albuquerque, which it said is a “very competitive” market because “competitors are organized as integrated delivery systems that closely align physicians and health plans.”

S&P is speaking of UNM Health Sciences Center and Presbyterian Healthcare Services, which also operates a hospital Downtown.

S&P means that UNM and Presbyterian are better able to control how many patients they can put into hospital beds because they employ many of the physicians who do the admitting to hospitals.

UNM says it has 900 clinical care providers, and Presbyterian Medical Group employs 400 physicians. ABQ Health Partners has 184 physicians. There are 2,513 physicians licensed in Bernalillo County, not all of whom practice here. That means a substantial portion of the physicians in the area who are licensed to put people into hospitals are employed by systems that have very little incentive to admit patients to Lovelace.

Lovelace lost most of its employed physicians when ABQ Health Partners was formed as an independent practice out of the old Lovelace physicians group. The Lovelace hospitals operate the way all hospitals once did and many hospitals in other states still do: They try to create a great place to practice medicine in hope physicians will be more inclined to admit patients to Lovelace than to Presbyterian or UNMH. That’s why Lovelace has invested more than $300 million over the past 10 years improving its properties.

By turning to politicians (and since UNMH is a public institution, there really isn’t anyone else to ask), Lovelace has put itself in the position of having to prove that its bed-sharing scheme, and not a UNMH expansion, really would create the most efficient network of facilities and serve the public better.

Assuming Lovelace is serious about this, that is a discussion worth having.

UpFront is a daily front-page news and opinion column. Comment directly to Winthrop Quigley at 823-3896 or wquigley@abqjournal.com. Go to www.abqjournal.com/letters/new to submit a letter to the editor.
— This article appeared on page A1 of the Albuquerque Journal