By Dick Miller
WE.CONNECT.DOTS: Sharon Regional Health System began a war for control of health care in Mercer County some six decades ago when it refused to grant privileges to Osteopathic doctors. Like many other counties in Western Pennsylvania with similar circumstances, rival hospitals ushered in an era of duplicate services and more beds while population declined.
Unlike elsewhere, at least in populous areas of Mercer County, the war will taper, and competition will focus more on reigning in health care costs. The new climate could provide Mercer County with an edge for business development.
Employees of Mercer County companies that provide health insurance could be less susceptible to fallout from the battle between health care titans – Highmark and UPMC.
Three weeks ago, Sharon signed a tentative agreement to be acquired by Community Health Systems (CHS), Nashville TN. The process could take a year or longer to get regulatory approval.
Final okay could coincide with a drop-dead date looming in the Highmark-UPMC mêlée. Highmark, Western PA’s largest insurer has gotten into the medical business with the acquisition of Allegheny Health Network, a five-hospital system around Pittsburgh that competes with UPMC’s hospitals. Allegheny is second to UPMC in hospital beds and UPMC is second to Highmark in lives insured.
UPMC, pointing to the Allegheny acquisition, wants to allow its hospital and doctor contracts with Highmark to expire at the end of 2014. Highmark currently is the near-universal health insurance of choice in Western PA, allowing wide latitude in choices of doctors, hospitals and other medical services. If UPMC has its way, that wide choice would end on the last day of next year.
For tens of thousands of Western Pennsylvanians that could mean they must change doctors to keep their health insurance. At least in Mercer County, CHS changes turf rules.
If Highmark and UPMC represent 500-pound gorillas then CHS is an 800-pound beast. Literally growing daily, CHS in July said it would enter a merger agreement to acquire Health Management Associates for $7.6 billion. When completed CHS will control 206 hospitals with a bed count of 31,000.
CHS, in a busy summer, also formed a strategic alliance with Cleveland Clinic. Initially they will take over Akron General Hospital where CHS handles the business end and
Cleveland is responsible for medical and surgical services. CHS claims that arrangement with Cleveland will be in place for the Sharon acquisition.
This puts UPMC more in a bind than Highmark. Will UPMC really write insurance contracts that would deny access to Cleveland Clinic? Highmark includes Cleveland in its network now.
Sharon continues to boast on its website about continuing “local direction and governance by managers and a board of directors who live” here. The real question always was “would Sharon cede local control while it still had a hospital to turn over?”
If Sharon had accepted osteopathic doctors, then some of the rejects, aided by organized labor, would not have built Shenango Valley Osteopathic Hospital, later named Shenango Valley Medical Center. SVOH, in Farrell, and Sharon Regional are only about a mile apart. Competing facilities are common in more urban settings such as Pittsburgh and Erie.
Greenville Hospital decided to accept osteopathics, eliminating serious competition in northwest Mercer County. Greenville and Shenango Valley merged in 1992 into Horizon Health System. Community leaders from both labor and business pleaded with local hospital boards to merge and eliminate duplication of facilities.
Instead, Horizon merged with UPMC in 1998, escalating the competition.
The merger announcement was coupled with assurances of job security and continued local control. UPMC kept top management around for a year or so to complete the sell job to the community.
The significant difference between the Horizon-UPMC merger and Sharon’s acquisition by CHS is money. UPMC maintains a non-profit status, challenged but never overturned. This allows the Pittsburgh behemoth to create mergers and pick up these local hospitals for no cash. CHS is a for-profit and will pay fair market value for Sharon’s facilities and pay property taxes.
Examples of local oversight that will end at Sharon when CHS takes over include the following.
Only a month before the CHS announcement, Sharon said it would spend $600,000 to purchase a vacant school next door to its main building.
Sharon demanded over the years that major board decisions be “unanimous” to create the appearance of solidarity. Apparently, minimizing board dissension trumped diversity.
Six weeks before announcement of the CHS buy, Sharon insisted, “we are not seeking a buyer.” The proper response was “In this era of difficulty for independent hospitals, everything is on the table for the benefit of our patients and employees.” One survey shows that one-third of independent hospitals will lose that status in the next few years.
During one stint, Sharon board members apparently did not trust each other. Three-ring binders of minutes, financial reports, correspondence, etc. were passed out at the beginning of each board meeting. Board members surrendered them at the end of the meeting.
The board has been through three CEOs in less than two years. Three weeks before the middle CEO was sent packing. one board member on the hiring committee said “she is doing well.”
Sharon Regional’s Board of Directors number 18. Counting the CEO, three have experience in the medical business. Only four are women. Five are retired and two are ex-politicians. The two lawyers are versed in criminal law.
BOTTOM LINE: For 20 years, this writer – as the person in the middle as executive director of Mercer County Labor Management – was a participant in the frustrating attempts to end this foolish health care war. I also helped manage a Taft-Hartley health care trust where we collected about $100 million in employer contributions to pay medical bills for as many as 2,500 families.
The Sharon takeover will improve health care in Mercer County. Even UPMC will have to raise its services a notch or two to compete with Cleveland Clinic. Health care going forward may entice more business investment.
