Taking the pulse of Cape Cod Healthcare
Cape Business has rarely published such a long interview verbatim. An editor’s job is to cull the wheat from the chaff and share news and information in a way that respects our readers’ time.
But when we completed an extensive interview with Stephen Abbott, CEO and president of Cape Cod Healthcare, we recognized the value of getting out of the way and letting you have direct access to Abbott’s comprehensive discussion of the Cape Cod Healthcare system.
This nonprofit enterprise is the Cape’s largest employer, and Abbott is responsible for more than a $100 million budget.
As businesses and residents, we depend in multiple ways on the resources, employees and associates of Cape Cod Healthcare. Its pulse reflects the rapidly changing demographics and economy that will touch us all.
How Cape Cod Healthcare forges its own strategy for tomorrow will surely play a role in our own futures.
What is your overall assessment of Cape Cod Healthcare’s economic situation?
Financially, the ship is in good order. But like every business, we are affected by our ability to predict demand for our services and at the same time be prepared 24/7 to meet the medical needs and emergencies of our community. We continue to see rising volumes in outpatient services and a leveling off in the demand for inpatient beds. Until two years ago, we were also experiencing flat growth in our emergency-room volume, but this has spiked in the last two years, most likely due to a shortage of primary care physicians. We are constantly trying to balance the demands of providing high-quality cost-efficient health care.
What are your expectations for the new Mugar Building at Cape Cod Hospital?
We are very excited about the new building. It features some of the largest private rooms anywhere – with fantastic views of Hyannis Harbor. It responds to a growing trend: Few people want to be housed in rooms with someone they don’t know. This can be as much about the patient as the patient’s family.
There were two primary reasons to build this facility – to address Cape Cod’s growing aging population and to replace older, outdated rooms.
These rooms are larger and private – with accommodations for at least one family member to stay overnight. The facility has artwork of Cape Cod artists displayed in rooms and hallways.
On the bottom floor, for the first time, there is a place for employees and the public to eat. A new dining area replaces an outdated, undersized cafeteria.
There is a large conference area that we are thrilled about. The Lorusso Foundation has given us a $2 million pledge to finish this much-needed conference area, which will be shared with the community. We now have sufficient space for all our clinical, management and educational needs.
Will it enhance the system’s revenue base?
It depends. Some of it is built on the anticipation of increased population growth. If we do things well, like recruit and retain doctors, we expect to see increased demand that will help carry the debt.
Hospital support staff are not the only health-care workers facing housing problems. Doctors, who could have $100,000 or more in student loans, are also wary of venturing into the Cape's high-priced market. Just how difficult is this problem and what is Cape Cod Healthcare doing to address it?
High housing costs have been a barrier for people moving to the Cape for a number of years. A physician will compare the cost of living on Cape Cod with areas in the Midwest and South and calculate what’s left over for his or her general quality of life.
Although we own several properties that provide housing, it is largely for students on temporary assignments to our hospitals and not for long-term, permanent housing. To deal with the high cost of housing on Cape Cod, we generally have to offer salaries that are extremely competitive with other parts of the country for both physicians and other hard to recruit staff members.
We try to connect physicians with bankers and Realtors who will work with them and provide other kinds of supportive services, but usually stay clear of tying up scarce capital in housing. Occasionally, developers will come to us and say they would like to build housing for some of our employees, and we always encourage them to do that. But, we have not been willing to guarantee their investment to do so. With almost 500 physicians and 4,700 full- and part-time employees, we are somewhat at the mercy of the whole economy, including housing availability.
Some physicians, especially family doctors, are leaving the Cape. If they can’t be replaced, what is the impact on individual Cape Codders who must rely on these physicians as the gatekeepers for the health-care system and access under most insurance policies to specialists?
We did have several physicians who left the Cape in 2005, mainly in primary care. We recruited 12 primary care physicians last year and expect several more early this year. We have addressed almost all of what happened in 2005.
What remains is the continuing challenge to retain those who have been recruited, and address the reasons they are leaving in the first place. For some, it is for family reasons. One fine physician moved to Colorado because he can get a job anywhere and he wanted to live there. Another moved to the North Shore for family reasons. In neither case was it to make more money.
Sometimes, it is the cost of doing business in Massachusetts. Some physicians can work less and earn more in other parts of the country.
There are still very successful primary care physicians on the Cape. They work hard and have a very loyal patient following. At some point, even some of these doctors get tired of having to work that many hours for a decent living.
We do face three issues: insurance programs that pay less in Massachusetts than other states; a relatively high Medicare population – which means lower payments than in other communities with more private insurance; and patients who require more time because they are older.
We are burdened also with significant paperwork requirements and fear of lawsuits, but those issues affect physicians everywhere.
These days, we do see more and more physicians who are willing to pass up the opportunity to operate their own practices to work directly for us. They are looking for structured lives and the security of steady income streams.
We are employing more primary-care physicians who are gatekeepers to the entire system. They look to us, which means we have to be good at running practices. That’s not been our core business, but it has to become a very strong core competency.
This, however, means increasing costs to provide primary care because the system depends on it.
Like many hospital systems, Cape Cod Healthcare is seeing specialists setting up their own practices to include same-day and ambulatory surgical services. How significant a trend is this? Is it hurting the system’s bottom line?
In an effort to bolster individual incomes, physicians who do procedures – from colonoscopies to outpatient surgeries to urological procedures – are taking these cases from hospitals and investing in their own privately operated centers. Those are revenues that historically have produced the margins that allow us to pay for inpatient cases; for education; for other services community hospitals provide.
Just this year, there has been an expanded urological center and a new gastroenterology facility in Independence Park [in Hyannis] and a new surgery center in Falmouth. Our projections are that those three activities could remove $7.2 million of net revenue from us.
But these specialized centers don’t come close to carrying the costs we are expected to carry as a community servant. We are being asked to compete with medical entrepreneurs who don’t have any of the requirements we do.
In the future there is going to be a breaking point. Physicians are trying to improve their incomes and individual efficiencies. But as a growing trend, it poses very serious questions.
One area that is severely under attack is radiological services, with private companies such as Shields taking up market share. What is Cape Cod Healthcare’s position here and how is it going about winning the market share battle?
We are working on a partnership with Shields on providing PET (Positron Emission Tomography) scanning. PET scanning is an expensive undertaking, and most hospitals don’t have the volume to go it alone. However, it is a dynamic area of imaging and shows great promise – with growing clinical applications. So, it is important to have it available on the Cape. PET has proven useful in determining the extent and distribution of cancerous tumors. This technology was formerly available only in academic research centers.
Recently, Cape Cod Healthcare has seen a dramatic rise in use of the hospital’s services by seasonal workers, including H-2B workers. How severe is this problem?
Seasonal workers coming to Cape Cod without health insurance is certainly an issue – especially for hospitals, which are challenged by the surge in free-care costs incurred when we uphold our obligation to care for all, regardless of ability to pay. A new, low-cost insurance program held promise, but apparently very few workers have purchased it themselves. We understand that some enlightened employers are purchasing it for their employees.
Will the proposed health care legislation calling for mandatory health insurance coverage prove a boon to Cape Cod Healthcare?
We don’t see it as a “boon” to Cape Cod Healthcare, but it is laudable that the commonwealth has brought this forward. Hospitals throughout the state support the promises of the law – expanded coverage, accountability on quality, and fairer payments to providers. That being said, the devil is in the details. We won’t have a good handle on the financial impact until after a year or more.
How is the current situation regarding reimbursement rates associated with both Medicare and Medicaid impacting the hospital system and individual physicians?
We must be constantly vigilant in protecting ourselves from repeated attempts to cut Medicare and Medicaid rates at the federal level. President Bush has recently announced billions of dollars in cuts, which will require significant efforts on our part to make sure this plan is unsuccessful. For the last several years, there were attempts to cut physician reimbursement by as much as 5 percent, but fortunately those were also not successful. Since 55 percent to 60 percent of our revenues come from Medicare, we are always watching what happens in Washington, D.C., and at the state level. We are joining others to be politically active and ensure that we receive reasonable and appropriate reimbursements for the work that’s done.
How is the reimbursement situation impacting patients?
Potentially reduced reimbursements can affect the amount of services we offer and negatively impact our ability to offer competitive wages, benefits and support first-class medical care. While we try to operate as efficiently as possible, getting paid less when all our other costs continually rise is not a positive situation.
Has competition for patients on the Cape intensified, especially with expansion from hospitals like Tobey and Jordan?
Our competition is not so much with other hospitals, particularly Jordan and Tobey, but more with the private for-profit entities I mentioned earlier. These companies have the ability to focus on the more profitable procedures such as outpatient surgery and imaging services, leaving the hospitals with less ability to fund those services that traditionally lose money. As long as not-for-profit hospitals continue to serve all regardless of ability to pay, it’s hard to imagine that we can compete with those who can choose whom they care for.
What is the current status of the Cape Cod Hospital expansion?
The new Marian G. and Stephen P. Mugar Building was completed in December 2006, at least the first two floors of the building. The remaining two floors are shelled in and will hopefully be completed within a year and a half when we will have successfully matched David Mugar’s second $5 million challenge gift. Those monies have been instrumental in allowing us to add such a beautiful facility to the hospital, but we also have to raise additional capital through the debt markets.
The first 30-room patient floor opened in early January, and the second 30-room floor opened in early February. There will be 120 new private rooms when the project is complete. It was a much-needed expansion project, which offers the very finest inpatient experience with private rooms, artwork by Cape Cod artists, spacious bathrooms and staff working areas, and couches that open into beds that can accommodate family members who choose to stay overnight. The patient rooms feature flat screen televisions with interactive online services.
All of these elements are designed to create a true healing environment that advances the patient recovery process. We believe that such superb facilities will further encourage Cape Codders to obtain their health care right here on Cape Cod. Currently, 75 percent of Cape Cod residents choose to have their hospital experience at Falmouth Hospital or Cape Cod Hospital.
The demographics of the Cape are changing. To what degree is the growing cadre of retirees a benefit or a challenge to the system?
Twenty-three percent of the year-round population of Barnstable County is 65 and older, compared with 14 percent in the rest of the state. Older people require more health care, and it is our mission to provide it. For most retirees, Medicare is the primary insurer. It covers inpatient cases, but outpatient is poorly reimbursed. So it’s a mixed blessing and a challenge. Having the additional beds at Cape Cod Hospital will surely help. Despite the Cape’s growing population, Cape Cod Hospital had not added rooms since 1976 until the Mugar Building was built.
Increasingly, there are examples of how Cape Cod Healthcare is getting more entrepreneurial. How do you determine when and why to enter a particularly new venture?
We are an organization that is driven both by the need to provide health care services to the community and by the need to do so in a financially responsible manner. Opening the rehabilitation center at Willy’s Gym in Eastham, for example, met both of those criteria, and it has helped our rehab program establish a strong foothold in the Outer Cape community.
As a community hospital, what are the specific obligations and responsibilities that make managing more challenging?
As a community hospital system, we are obligated by our not-for-profit status and a board-approved mission statement to provide the highest quality health care to all regardless of ability to pay. The challenge is that it means we must be the community’s ultimate safety net and take care of all those who show up at our emergency rooms for diagnosis and treatment. We turn no one away because they don’t have an insurance card. It is this mission-driven community responsibility that separates us from the for-profit world of medicine, where patients can be chosen based on their ability to pay or by their specific diagnosis. Again, we take everyone.
Integration with the Cape Cod community at large is a joy and a blessing and we are continually uplifted by the extraordinary generosity of the residents of Cape Cod who have helped to establish all-time high levels of giving. Without this kind of support, we would not be able to have grown as much as we have or have been able to stay in the forefront of medical care.
Cape Business explored one type of medical technology last year – radiological equipment. Beyond that, what are the opportunities and challenges associated with the seemingly never-ending need to acquire the most advanced and often most expensive technologies?
Investment in technology is always a balance between providing enhanced quality for patients and better tools for physicians and a reasonable return on the investments for the system. We have to weigh all of these factors when deciding to invest in the latest health-care technology.
What are the newest and most promising revenue sources for Cape Cod Healthcare?
The outpatient diagnostic and procedural parts of the health-care business continue to be among the most profitable. It is for this reason that many of our competitors are pulling these very same procedures out of the hospital into freestanding imaging, surgery and procedural centers. That means we absolutely need to stay on top of technological developments and make sure that we are doing everything we can to enhance our service.
We are looking at the introduction this spring of a 64-slice CT imaging as being a giant leap forward in technology allowing the visualization of coronary arteries without invasive technology. We also believe that the new bed tower representing state-of-the-art facilities will help keep even more patients on the Cape rather than going to Boston.
What are your plans for physical expansion of the system, and where does the capital come from for future growth?
Our plans for further capital expansion include finishing the top two floors of the Mugar Building. David Mugar has established a second $5 million challenge gift that should secure $10 million of the $16 million needed to finish these additional two floors. At this time, we have already raised $2.6 million against that challenge gift and hope to complete further philanthropic commitments by this summer.
The next major capital project will be the hoped-for beginning development of our 42 acres of land off Attucks Road in Hyannis. It is our hope that we will be able to include much-needed medical office space, an imaging and women’s center and urgent care services that would represent the first phase of development. This project will probably be financed with a combination of philanthropy, developers’ money and leveraging our land.
There is growing concern about the degree of regulation imposed by the Cape Cod Commission. Does this extraordinary scrutiny because of the fragile nature of the Cape play a role in Cape Cod Healthcare’s future development?
We’ve had extensive dealings with the Cape Cod Commission over the past several years both for our major building expansion at Cape Cod Hospital and the 42-acre development plan for Attucks Road. Our experiences have been generally positive; and with the help of our fine attorney, Pat Butler, we have managed to work constructively with the commission and have achieved the accomplishment of our goals as well as answering all of their questions and concerns having to do with environment, traffic and other issues.
If you could wave a magic wand and implement three steps to assure the future financial viability of Cape Cod Healthcare, what would those three steps be?
First, fair and adequate reimbursement for services we have rendered from all payors – Medicare, Medicaid and private insurance companies.
Second, greater recognition that health care functions more like a public utility than free-market competition.
Third, making sure government sufficiently funds all of its entitlement programs.
Failure of any one of these three can negatively and/or severely impact the system at any time.
Published in Cape Business May/June 2007
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