Why do non-profit hospitals compete with each other?

While we are talking about things that drive health care costs up, this one has bothered me since I was in practice years ago. I am a believer in competition, I think it forces us to be creative and provide better, cheaper, more efficient products and services.

But there is the mindset of leadership at play as well. Are we competing to provide better patient services to improve patient care, or are we doing anything we can to take as many patients away from one health system and get them into ours? Would we be happiest if we just flat put the other guys out of business and ruled? Do we cooperate with other systems on things that are non-competitive?

When I was in practice as a neurosurgeon, every hospital I went to was non-profit. Each one wanted to be a Level 2 Trauma Center. Note that in Kansas City we had two Level 1 Trauma Centers, and pretty much every other hospital in town was Level 2. That’s not how the trauma system was intended to work. Since neurosurgery is critical for trauma, they all wanted a commitment from one group or another to provide coverage. Problem is, there were not enough neurosurgeons to go around. On top of that, none of these second-tier facilities even had an actual trauma team. They just felt that to be competitive, they had to have the label.

So, if we are here to provide care to those who need it, and they are getting it just dandy somewhere else, what is the motivation to get that patient to come see us instead? Do homeless shelters compete to see who can get the most people lined up out front? Do soup kitchens come up with better recipes to get people to stop going to their “competitor”? What’s the difference?

In the case of trauma centers, there is expensive duplication of services and lower quality of care since none of the hospitals sees a steady enough volume to be really good at the care processes required for major trauma. And the specialists are stretched thin trying to cover them all. So I’m not sure this was positive competition.

Recently I worked with a health system in a large metro area. There’s another hospital about 8 miles up the highway from them, who has positioned a large billboard advertising their services at the exit ramp to the first hospital. Now, that’s not competing on quality, cost or services. That’s one non-profit (a religious order I might add) targeting another non-profit.

It happens that both systems are installing the same Electronic Medical Record, and a fair number of physicians practice at both hospitals. I suggested that I have seen other similar circumstances where the two project teams coordinate their implementation so that things like units of measure, frequencies and even some workflows are common. This is done so that physicians who work at both hospitals don’t see two EMRs that look similar but work differently. That just seems like an invitation for error and patient harm. However, I was informed that the hospital does not do anything cooperatively with “that other hospital”. And the billboard was specifically mentioned.

Non-profit hospitals are coming under scrutiny in many parts of the country as their behaviors begin to look more like a for-profit. The California Healthcare Foundation noted on their California Healthline that several hospitals in Alameda and Contra Costa Counties are under scrutiny for the low amount of charity care they provide.

New regulations in the Affordable Care Act increase the reporting requirements and may challenge the tax-exempt status of many systems. Illinois denied tax-exempt status to 3 hospitals in August and has 15 more reviews in the pipeline. Much of this considers the amount of charity care provided.

What drives this behavior? Is it ego on the part of leadership? Is it part of human nature to try to win at anything we do, even when the bigger outcome hurts? Do you get a bigger salary when your health system gets bigger? Is the animosity part of the tribal us-versus-them mentality that seems to crop up so often?

I worked in a church-owned health system a few years ago. I pointed out to one of the leaders that the information systems we were implementing could be used to help create a market advantage for the health system. Not in any untoward way – we discussed things like offering support for private physicians to use our EMR and thus make it easier to keep their patients in the system. There are some significant patient-care advantages in this model, and the small practices were pleading for help with new technologies. But her response was quick – she did not believe we should compete based on data systems or “locking people in”. We would compete by providing higher levels of patient satisfaction, higher quality in our programs, better access for underserved populations and other care-related criteria. We would execute our mission to the best of our abilities and the highest standards. We would provide services where we saw unmet needs. If we grew as a result of that, then good for us.

I think there is a deeper question here, and I am not sure how to balance the healthy aspects of competition that drive us to deliver better care against the unhealthy aspects that result in one non-profit targeting another over financial and market-share concerns. But I do fear that this is another of the contributors to higher cost and lower quality if we don’t get it right.

Joe Ketcherside is a former neurosurgeon and President and CEO of Cognovant.

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