The debate about whether western Waukesha County could sustain both Oconomowoc Memorial Hospital and a new Aurora Medical Center in the Town of Summit continues two years after Aurora opened its doors there. As the two hospitals battle for market share in the area, their rate increases add to the cost of health care in the region.
Despite an overall decline in the number of patient admissions, executives at ProHealth Care’s Oconomowoc Memorial Hospital say their facility is doing well and is thriving thanks to an overhaul of the management team and some key investments in technology.
“When they opened (Aurora Summit) we had a drop in activity, but to be honest, it wasn’t as much as we had anticipated,” said John Robertstad, president of ProHealth Care Hospital Division. “For four months into this fiscal year we’re seeing actual growth in both admissions and outpatient activity as well.”
According to data collected by the Wisconsin Hospital Association, Oconomowoc Memorial hospital has seen a decrease in inpatient admissions each year since Aurora Summit opened. Oconomowoc Memorial had 4,563 admissions in 2009. In 2010, when Aurora Summit opened, Oconomowoc Memorial had 3,141 admissions (a 31 percent decrease) and Aurora Summit had 1,814. In 2011, Oconomowoc Memorial had 3,002 admissions (down 4.4 percent from 2010) and Aurora Summit had 2,437 (up 34.3 percent from 2010).
However, trends in the health care industry have shifted a high number of what once were inpatient hospital admissions to outpatient procedures, and Oconomowoc Memorial’s admission numbers are still higher than Aurora Summit admissions, Robertstad said.
“The shift toward more outpatient procedures is something that has been happening for quite some time now,” said Richard Blomquist, president of Blomquist Benefits LLC and former owner of Associates for Health Care. “Today, hospitalization rates have dropped to around 200 days per 1,000 which is a dramatic drop.”
Blomquist expects that a gradual decline in hospital admission rates would start to occur as outpatient procedures increase and technology improves.
Aurora Medical Center at Summit has also seen an increase in outpatient procedures, servicing nearly 30,000 patients with outpatient procedures in December alone, according to Michael Brophy, chief communications officer at Aurora Health Care. Many of the patients served by the hospital previously traveled significant distances to other Aurora facilities, he said.
“Initial planning for Aurora Medical Center Summit was to design a high quality hospital for our existing patient base in the market,” Brophy said. “Prior to this health care campus, there were tens of thousands of Aurora patients who were traveling long distances for their health care and they wanted services closer to home. Our patients have been choosing our facility and providing us with positive feedback on their experiences.”
But Waukesha-based independent physician Dr. Victoria Mondloch says the western Waukesha County health care pie is now split in two between Oconomowoc Memorial and Aurora Summit.
“There was no need for a second hospital in that community,” she said. “(Aurora) created a false need and when the city of Oconomowoc blocked them from building it there, they went to the Town of Summit which needed the money. The Town of Summit was cash poor and when Aurora approached them with something like this, promising the sun the moon and the stars, they had to look at the fact that the money they’d get could provide busses to their kids to get to school for the next five years. They would have done whatever it took to give Aurora what they wanted.”
“It isn’t that there are more visits as a whole. I think the existing patients have to choose. I wouldn’t even say that the split (of existing patients) was 50/50. I think there is a lot of loyalty to Oconomowoc Memorial as a local entity, but the curiosity factor of (Aurora) Summit was able to draw some people away.”
“The opening of the Aurora hospital certainly causes some inevitable problems for ProHealth Care,” Blomquist said. “I didn’t have access to the data, but ProHealth provided some pretty convincing information that indicated there was no additional need for the Aurora facility. The same applied to the Aurora facility in Grafton. I believe Aurora, for the past 20 years has had a mission of providing comprehensive services to the eastern part of Wisconsin. They have always either bought or built to accomplish that regardless of what services have already been in place. In some cases, that results in redundant services being provided. To their credit, Aurora has built some spectacular, top-technology facilities for the region.”
Aurora Summit was opened in March of 2010. While the hospital struggled to turn a profit during its first year, it has been profitable since the summer of 2011.
“Hospitals are not opened with the intention of immediately reaching full capacity,” Brophy said. “Over time patients experience a hospital and then choose where they will receive their health care. Our projections were for AMC Summit to reach profitability in three years. We achieved that goal in fewer than 18 months.”
Oconomowoc Memorial has maintained annual net income of about $4 million since Aurora Summit opened.
Now that the western Waukesha County hospital patient pie has been split in two, the increased competition has driven up health care costs as hospitals need to charge more to maintain their previous revenue levels and cover costs, Blomquist said. According to rate increases reported to the Wisconsin Hospital Association, Oconomowoc Memorial Hospital declared a 6 percent increase in rates for both 2010 and 2011. Aurora Medical Center Summit also declared a 4.9 percent increase in rates in January 2012.
“Costs in the region have gone up,” Blomquist said. “I think ProHealth Care is strong enough and confident enough to deal with the competition. That being said, I don’t see having two systems in place accruing to the benefit of the community from a cost standpoint.”
The published rate increases are reported when a price increase causes a hospital’s gross patient revenue to increase faster than inflation for that year.
“This change is necessitated by the increased cost of providing health care to our patients,” Brophy said. “The published 4.9 percent increase is a gross amount. Once provider discounts and contractual arrangements are applied, we estimate the net impact to patients will be approximately 1 percent.”
“There are a range of pressures on health care today that contribute to a higher cost of providing care,” Robertstad said. “They include lower Medicare, Medicaid and health insurance reimbursement; a growing number of patients covered by government programs; and cost increases for staffing and supplies.”
Rate increases really only result in about 1 percent in revenue for the hospital, said ProHealth Care spokeswoman Sandra Petersen.
“The inevitability of the whole thing is that costs go up for the consumer,” Blomquist said.
If there isn’t a need then each facility is forced to divide costs for the nuts and bolts of their operation among fewer patients, he added.
“It’s nice to have a new facility, but it doesn’t accrue to the benefit of the community,” Blomquist said.
Meanwhile, ProHealth Care has looked to expand clinical capabilities and has invested in orthopedic technologies that have set them apart from the competition, both regionally and nationally, Robertstad said.
“We really wanted to go after the orthopedic market,” Robertstad said. “Our orthopedic physicians were really excited about this technology and were adamant about us being early adopters for the benefit of our patients.”
The new procedure, called MAKOplasty, is a minimally invasive surgical procedure that uses the precision of robotics to perform partial knee resurfacing surgery. The technology results in shorter hospital stays and faster healing than traditional knee surgeries, Robertstad said.
According to Robertstad, Oconomowoc Memorial was the first hospital in Wisconsin to adopt the technology and only the 12th in the nation to do so.
“As a result, we’re having patients not only from around the state of Wisconsin come to our facility for such procedures. We’re getting people from Chicago, northern Illinois, Minnesota and even as far away as California come to have it done,” Robertstad said
The number of procedures and patients taking advantage of the new technology at Oconomowoc Memorial continues to grow significantly.
“The last couple of years it has really been an emphasis of ours,” he added. “We continue to focus on our patient satisfaction,” Robertstad said.
In another key move to maintain profitability, CEO Susan Edwards completely restructured the ProHealth Care management team last year.
“We are managing as if we are one organization,” Robertstad said. “From a staff perspective we can work back and forth depending on where the need is and where there used to be multiple computer systems, now they are exactly the same. It has allowed us to deliver more consistent care across the continuum. It offers greater flexibility for our employees and it allows us as a provider system to have one vision and one focus so we aren’t competing against ourselves.”
