Mark Belling Column: Healthy associations

Deals with doctors, sheer size help Aurora steamroll the competition

Waukesha Freeman, August 8, 2007

No, Ozaukee County doesnt "need" another hospital but its going to get one anyway. Oconomowoc didnt "need" one either, but Aurora is building one. The acrimonious battle over the Oconomowoc facility will seem like a minor spat compared to the war brewing over Auroras proposed Grafton hospital. But hospital companies dont build facilities based on need. They build them for growth and survival. Theyre like every other business. We may not "need" any more Home Depots or Best Buys, but were going to get them for the same reason Aurora keeps building hospitals.

In American health care, bigger is not only better but is essential. Aurora Health Care has figured this out. The companys visionary former leader, Ed Howe, recognized that hospitals attract patients by making deals with doctors. People go to the hospital their doctor tells them to go to. Aurora has spent two decades buying up physician practices and acquiring the hospitals at which they work. Auroras competitors, with one exception, have been spinning their wheels as time, and Aurora, pass them by.

The only hospital firm in a position to survive the Aurora onslaught is the new combination of Columbia-St. Marys and Froedtert & Community Health. They are negotiating a merger that is almost certain to be finalized. They are building a massive new hospital on Milwaukees east side while attempting to acquire Froedtert and, in the process, all of those whiz doctors at the Medical College of Wisconsin who practice at Froedtert.

Even with these moves, Columbia/St.Marys/Froedtert is in jeopardy of being eaten up by the Aurora behemoth. Aurora recently succeeded in buying the huge Advanced Healthcare doctors practice. Most of those doctors currently send patients to Columbia, St. Marys or Ozaukee Countys St. Marys. All of those doctors will now abandon those hospitals (which is why Aurora is building its new facility in Grafton). It seems inevitable Aurora will build a hospital on Milwaukees east side, too.

The Columbia operation will have to start buying more doctors practices and merging with other hospitals. Here are my predictions:

1) ProHealth Care, which runs hospitals in Oconomowoc and Waukesha, will merge into Columbia/St.Marys/Froedtert. ProHealths recent alignment with the Medical Associates clinic makes it attractive.

3) Health care costs wont be affected one way or another. While the building boom (Aurora in Grafton and Oconomowoc, ProHealth expanding in Waukesha, Columbia-St. Marys new Milwaukee edifice) obviously drives up health care costs, the next round will be one of consolidation where the weak players are gobbled up. This will push them down.

4) Wheaton Franciscan will try to stay independent but will become increasingly irrelevant and be forced to close another hospital.

5) There wont be any other hospital operators in the region.

All of these hospital companies are "nonprofit." But theres a lot of profit to be made in nonprofit businesses. Aurora has written the book on how to run a hospital company in the 2000s. In the process, they manage to offer very good health care. Those hospitals that have only focused on the care part of the equation are the ones that arent surviving.

* * *

Ive gotten grief in the past for my criticism of ProHealth but its undeniable the company has been mismanaged. Waukesha County is Wisconsins mother lode. ProHealth was in position to be what Aurora has become. But since its board and managers were unable to see the trends in health care, they have allowed their hospital to be overwhelmed. I doubt they can save their current Oconomowoc hospital and it is highly unlikely their Waukesha facility wont have to be merged with another firm.

* * *

With all of this merging and buying going on, its easy to lose track of the fact that the quality of health care in the Milwaukee region is pretty good. Itd be better if we had a more prestigious research medical college, but Medical College of Wisconsin isnt bad. The giants, Aurora and Columbia/St.Marys/Froedtert, are both highly regarded.

* * *

The one thing that could make costs soar even more AND lower the quality of service is if the state Legislature approves that insane plan to impose a 15 percent payroll tax and have the state oversee health care costs. The result would be the mandating of all sorts of ludicrous services while attempting to control costs by rationing the remaining available budget for care. So far, the Democrats are still insisting on keeping it in the state budget but I dont see the Republicans dropping their opposition.

(Mark Belling is the host of a daily WISN radio talk show. His column runs Wednesdays in The Freeman.)