Is another hospital needed in the county?

Aurora says new facility in Grafton would lower cost of care, but others refute claim

Ozaukee Press, August 8, 2007

By RISTYN HALBIG ZIEHM
Ozaukee Press Staff

The purchase of Advanced Healthcare by Aurora Health Care will create a large medical system and result in the construction of a second county hospital in Grafton, but whether that’s good for area residents has yet to be seen.

Although the merging of the two entities will decrease competition between physician groups in the area, it will increase competition between hospitals. And while competition generally is viewed as the key to decreasing the cost of a product or service, experts say that doesn’t always hold true in health care.

What is certain is that the merger and proposed hospital will compete head-to-head with Columbia St. Mary’s, which operates not only clinics but the county’s only existing hospital in Mequon, just a few miles from the area where Aurora plans to build its hospital.

Columbia St. Mary’s and Aurora are becoming duopolies in Ozaukee County — two large providers who are dominating the market with little other significant competition, said John Torinus, a West Bend businessman active in health care reform issues.

“One could argue more competition is better than less,” he said. “In the sense that Aurora is buying up Advanced, that takes another player out of business, and that’s probably not a good thing.

“On the other hand, it’s offset by another hospital adding competition.”

Officials from both health-care providers will argue that they offer a full range of quality services at a competitive cost, Torinus said.

But people have to look at more than just the efficiencies of a large health-care provider, he said.

“Do you want a great big integrated system or do you want more competition?” he asked. “These integrated systems aren’t cheap. They can be very, very good, but they can be very, very expensive.

“I don’t like the trend toward great big systems.”

The impact of a new hospital on health-care costs is difficult to gauge, Torinus said.

“Some people will say when you add physical facilities, it automatically drives up costs. That may or may not be true,” he said.

That’s because even though hospitals cost millions of dollars to construct, the building costs are only a small percentage of the cost of health care, he said.

“On the other hand, there are studies showing the more doctors you have in an area, the higher the cost,” he said.

But Nick Turkal, chief executive officer for Aurora Health Care, said his organization has been working diligently to decrease costs. The new hospital, which will have 80 to 90 beds and be built near the intersection of I-43 and Highway 60 in the Village of Grafton, will help in those efforts.

The purchase will help both Advanced Healthcare and Aurora reach their goal of creating an integrated health-care system spanning the breadth of medical services, Turkal said. That integration of services increases efficiency and makes the system easier for patients to access.

“That’s what helps to drive costs down,” he said.

Leo Brideau, chief executive officer of Columbia St. Mary’s, has criticized Aurora’s plans for the new hospital, saying it is unnecessary and will result in the county being home to two underutilized hospitals.

He cited not only the high cost of constructing a new hospital and the impact of adding so many new physicians to the area, but also “Roemer’s law,” which says that the supply of health care creates its own demand.

“In health care, there’s a direct correlation between the supply of health-care services and the cost of health-care services,” he said. “The higher the number of hospital beds per 1,000 patients, the higher the cost. If you’ve got the beds, you’re going to use them.”

Columbia St. Mary’s Ozaukee Hospital is completing a $72 million building project that will bring the number of beds at the Mequon facility to 176, with space for another 64 beds to be added in the future.

The addition not only allows the hospital to meet the current needs of the community but the needs of county residents for at least a decade to come, Brideau said.

Advanced Healthcare and Aurora physicians account for about 14%of the hospital’s current patients, or roughly 16 beds a day, Brideau said.

“Even if they were able to move 100% of the patients they send here, that won’t fill the (new) hospital,” he said. “How do the other beds get filled?”

Turkal said physicians will not be required to send their patients to the new hospital.

The new hospital will be sized to meet the demands of the community, he said, and it will give patients a choice.

“We right-size our hospital to fit the community’s needs,” he said.

Brideau said, Advanced Healthcare physicians will likely try to move many of their patients to the new hospital when it is built. “It’s not a huge number, but it’s not trivial,” he said.

Patient loyalty is likely to come into play, he said, noting Columbia St. Mary’s has had a presence in the community for decades, having bought the former St. Alphonsus Hospital in Port Washington before opening the Mequon hospital in 1994.

Both Turkal and Brideau said they are confident in their ability to compete with each other in terms of quality and patient safety, services and cost.

“In the end, it’s all about patient choice,” Turkal said. “That’s what we believe we can compete on.”