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As Western Pa. hospitals expand, fears grow over higher health care costs

Tribune-Review - 11/27/2022

Nov. 27—Western Pennsylvania's two health care giants have jumped into a controversial nationwide hospital building boom, spending billions on glitzy, state-of-the-art facilities that critics say patients ultimately will pay for through higher medical bills.

Officials from UPMC and Allegheny Health Network say the end result of their race to build these facilities will be a much-needed array of more efficient, sophisticated, convenient health care complexes delivering world-class medicine.

The systems are among those in Chicago, Boston, Cleveland, Philadelphia and elsewhere to unveil pricey construction programs in the days prior to the pandemic.

In each area, the projects have been met with concerns that:

—Excessive costs will be passed on to patients in the form of higher prices for everything from hospital stays to medical insurance, a financial burden some will be unable to bear.

—The nation's rapidly expanding senior population — the over-65 group — that grew by 38% from 2010 to 2021, according to U.S. Census figures, will be hardest hit by these cost increases.

—A lack of government oversight will result in a domino effect where no limits on how much is spent on these projects will result in no restrictions on how much patients will be asked to pay for services.

—The expansion of large medical systems into suburban areas steers patients into these larger systems, eliminating competition with smaller health care organizations. Without that competition, costs will increase, critics maintain.

Stephen Foreman, a health care economist at Robert Morris University, is among those who question claims that these billion-dollar expenditures are the best for all involved.

"The easiest cliché," Foreman said, "is there is no free lunch."

The plans

Officials from UPMC and AHN say the expansions are necessary to keep pace with market needs, to provide quality specialized care in Western Pennsylvania and to offer a range of care when and where patients need it.

UPMC is building three specialty facilities: a vision hospital, a heart and transplant hospital, and a cancer hospital. The cost of the vision and heart and transplant hospitals is expected to be about $2 billion, while the price of the cancer center is yet to be determined, system officials said.

Four new AHN hospitals in Brentwood, Harmar, Hempfield and McCandless, as well as a 160-bed hospital in Pine and six cancer centers featuring the latest in hospital technology and architecture, have been opened at a cost of almost $1 billion, officials said.

UPMC's new cancer hospital, slated to be built near UPMC Shadyside, still is on the drawing board, pending work on the vision hospital in the city's Uptown section. That facility is expected to be completed in spring 2023. The heart and transplant hospital, adjacent to UPMC Presbyterian in Oakland, is set for completion in 2026.

All told, the new UPMC and AHN facilities and renovations to existing hospitals — some with soaring glass atriums, healing gardens, private patient rooms, plantscapes and stonescapes — are expected to carry a price tag of nearly $4 billion, according to the health systems.

UPMC, the largest private- sector employer in Pennsylvania, built a reputation as an international transplant center starting four decades ago.

Today, its strategy has been to focus on "world class" specialty care, drawing patients locally, nationally and internationally to what soon will be a total of six specialty hospitals, said President of Hospitals Mark Sevco.

UPMC is targeting patients such as Amelie Colletti, 36, of Bethel Park, one of 29.6 million Americans with low vision, a condition in which patients have trouble seeing even with glasses. Considered legally blind, she has vision in one eye and uses glasses or contact lenses to see.

Colletti, who works Uptown not far from where the vision hospital will stand, said she will take advantage of the facility for her and her 5-year-old son, who has the same genetic mutation that has been diagnosed in only a handful of people in the world.

She finds comfort in knowing that if her condition worsens, she is in a city where cutting-edge medical care is available.

"I'm really hoping with this new vision tower that Dr. Sahel (Jose-Alain Sahel, the internationally renowned ophthalmologist UPMC recruited to head the new effort) is going to get some more research pumped out to see if there is anything more that can be done or improvements that can be made," Colletti said.

AHN's strategy is twofold, said Cynthia Hundorfean, who recently transitioned from CEO to chief living health development officer.

"We have been all about pushing care out into the community, as close to the patients as we can get. ... We don't want to, whenever possible, have them have to come to the tertiary hospitals (the larger primary hospitals) unless it is absolutely necessary," she said. "We believe in well-care as opposed to sick-care."

AHN is targeting people such as retired pastor and registered nurse Bob Marks.

Marks, 79, has been in nearly every hospital in the region but chose AHN's Hempfield neighborhood hospital, less than a mile from his home, when his wife, Sharon, fell on the golf course and fractured her elbow.

He could have gone to Excela Westmoreland, about 3 miles away with 375 beds, but headed to the smaller AHN facility instead. He cited the promise of quick service in the emergency room among the reasons.

On a recent sunny day, an electronic billboard on Route 30 near the hospital advertised that day's emergency room wait time as 30 seconds.

Though the facility is a departure from traditional hospitals that are "like small cities," Marks said, "they were quick, and she got good care."

The critics

Pennsylvania is one of many states that does not oversee large health care projects or the potential trickle-down effect on the price of health care, said Maureen Hensley-Quinn of the National Academy for State Health Policy, which represents state health agency leaders across the country.

This lack of oversight, she said, extends to the huge numbers of health system consolidations and mergers that have occurred natiowide, eliminating competition in some markets and driving up prices.

"Pennsylvania is not unique in that there is no existing infrastructure or agency that has responsibility for reviewing and regulating this kind of consolidation and growth," Quinn said.

At one time, building plans like those of UPMC and AHN — and Penn Health and Children's Hospital of Philadelphia in Eastern Pennsylvania — would have been subject to review by a state Certificate of Need Board. More than two dozen states still maintain such controls, but Pennsylvania allowed its regulatory apparatus to expire 24 years ago.

Quinn said there have been questions about how effective those existing boards have been in this new health care landscape.

Elsewhere, in states like Massachusetts and Oregon, lawmakers are trying new approaches to reviewing hospital consolidation and expansions, Quinn said.

She cited Massachusetts' 11-member Health Policy Commission review of Mass General Brigham's multibillion-dollar expansion program as the kind of action state officials say is necessary to rein in rising hospitals costs.

The commission concluded that Mass Brigham's proposed $2.3 billion expansion, which ignited a raucous public debate, would increase health insurance premiums and overall costs for commercially insured residents by as much as $90 million. The board ordered the health system to develop an 18-month plan to control costs.

The Wolf proposal

In Pennsylvania, Acting Secretary of Health Dr. Denise Johnson said a multi­agency panel, assembled at the request of Gov. Tom Wolf in 2020, took a deep dive into hospital costs.

The panel concluded Wolf's proposal for a Health Value Commission to review system expansions and mergers had merit. But Pennsylvania lawmakers, who have yet to address the proposal two years later, appear hesitant to add more regulation to the health care giants, relying instead on market controls to rein in costs.

The issue was part of the governor's budget negotiations with the Legislature, said Wolf spokeswoman Elizabeth Rementer.

"Unfortunately, it did not get approved in the final 2021-22 and 2022-23 budgets," she said. "However, it's important to note that the Health Values Commission would not have had a direct impact on facility construction, though it would have provided for further reviews of mergers, acquisitions and other major purchases and expansions."

Although Pennsylvania was among the first states to collect hospital cost and utilization data through its Health Care Cost Containment Council, beginning in 1986, that agency has no review or regulatory power.

Acting Pennsylvania Insurance Commissioner Michael Humphreys said federal efforts to make hospital procedure rates transparent and readily available to consumers could help slow rising costs as that data becomes increasingly user friendly and consumers take note of it.

"But you need a commission to have teeth," he said.

Complications remain

Locally, the picture is complicated by the longstanding strife between UPMC and AHN.

Although AHN is dwarfed by UPMC, both maintain tertiary academic medical centers and insurance divisions. They compete fiercely in the region.

UPMC, the dominant player in the market, threatened to cut off access to its facilities to patients with AHN's Highmark health insurance. That battle ended in 2019 when state Attorney General Josh Shapiro brokered a 10-year deal in which UPMC agreed to keep its facilities accessible to those with Highmark insurance.

The health systems remain in the Pennsylvania Supreme Court with Jefferson Hills residents opposed to UPMC's plan to build a hospital less than a mile from AHN's Jefferson Hospital.

Sevco said UPMC has shifted its focus from the long-stalled hospital proposal to an existing outpatient center in nearby West Mifflin that he says has been popular with UPMC patients.

AHN officials acknowledged the 160-bed Wexford Hospital that opened last year was in response to the threat of seeing Highmark insurance clients lose access to a hospital in that area had UPMC not agreed to Shapiro's deal. Hundorfean said it has proved a good investment. Officials there celebrated its first anniversary in September, noting that more than 1,000 babies were delivered there last year.

Addressing needs?

Duke University health care economist Frank Sloan said that kind of competition has few brakes, provided insurers allow hospitals to post good profit margins. He said services such as heart and cancer care — two areas both systems like to highlight — offer decent returns on investment.

Other areas, such as geriatric care and behavioral health, both of which have been cited as pressing needs in the region, get less attention.

Hundorfean and Sevco said AHN and UPMC have been quietly addressing such needs.

Dr. Don Whiting, AHN's chief medical officer, said his system is aware of the need to maximize mental health treatment and considers it a priority.

Sevco said UPMC likewise is addressing mental health needs at the community level by embedding therapists in its primary care offices.

"Pediatric and adolescent behavioral health is a primary area for us," Sevco said. "We're completing a study on that now and will be enhancing our investments in that."

Officials at both systems predicted telehealth, which has gone from less than 1% of physician visits prepandemic to about 10% today, will continue to play a major role in the future, especially in providing patients in remote areas with access to care.

Keeping costs down, and access broad, are major goals at the health systems, they said. They must keep costs in line for the public as well as the many commercial and government entities that rely on their insurance divisions, they said.

Staffing shortages

Marsha Levish, 65, of New Kensington, a registered nurse at AHN's Allegheny Valley Hospital in Harrison, can't remember a time when hospitals have been so shorthanded.

"The first thing I thought when I heard about all their building plans is, 'Where are they going to get the nurses?' " she said.

Levish said she has friends at hospitals throughout the region. They all tell the same story.

Officials at UPMC and AHN acknowledged they are facing nursing shortages, forcing them to look to temporary services and pay premiums to hire traveling nurses.

It's a shortage that is predicted to last for some time, according to the U.S. Bureau of Labor Statistics.

In 2022, more than 500,000 experienced registered nurses are expected to retire. At the same time, more than 1.1 million registered nurses will be needed to fill the void, according to bureau numbers.

Claire Zangerle, chief nursing officer at AHN, said effective change must come from within. Better hours, bonuses, career ladders that allow nurses to advance and offer input into health system operations and even perks such as child care are gaining traction.

AHN and UPMC operate hospital nursing schools: AHN has two, UPMC seven. Sevco said UPMC recently opened a nursing school in Harrisburg and is weighing further expansions of its programs. As it is, he said, the schools will graduate 700 new nurses a year.

Officials say they are taking their efforts to local high schools and hope to increase the pipeline of nurses entering the field through hospital schools as well as partnerships with community colleges and universities that offer degree programs.

Zangerle said health system leaders know they need to bump up their game.

"What's worse than opening a new facility and not having people to staff it?" she said.

Deb Erdley is a Tribune-Review staff writer. You can contact Deb by email at or via Twitter .


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