Holy Spirit bleeding cash, triggering talk of layoffs Geisinger Holy Spirit Hospital -

Central Pa. hospital bleeds money, triggering talk of a sale

Posted May 11, 2018   Geisinger Holy Spirit Hospital, Holy Spirit Hospital, Geisinger, Holy Spirit Hospital Camp Hill Pa, Dr. Ryu, Jaewon Ryu, Harvard, Walmart, 

File photo of Geisinger Holy Spirit Hospital near Camp Hill in Cumberland County. (PennLive archives)

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By David Wenner | dwenner@pennlive.com

Fierce competition among central Pennsylvania hospitals has Geisinger Holy Spirit in Cumberland County bleeding red ink.

In 2017, the hospital near Camp Hill had an operating margin of minus 6 percent, meaning it lost $6 for every $100 worth of medical care. Its malady seems long term: Both income and patient volume are down from a few years ago, with that drop coinciding with the opening of a competing hospital just five miles away.

Holy Spirit's downturn is all the more alarming since most hospitals are enjoying a financial golden age. That's due to more people having health insurance because of the Affordable Care Act, and the surge of baby-boomers getting things like heart bypasses and joint replacements. All of Holy Spirit's hospital neighbors -- or rather competitors in today's aggressive health care landscape -- are enjoying much better health.

UPMC Carlisle, known as Carlisle Regional Medical Center until last year, posted a 10.77 percent operating margin in 2017. That means it had $10.77 left over for every $100 it was paid for caring for patients. UPMC Pinnacle, centered just across the river in Harrisburg and owner of the recently-built hospital near Holy Spirit, had a 10 percent operating margin. Penn State Health Milton S. Hershey Medical Center had an 11 percent margin.

How healthy are central Pa. hospitals? Here are their vital signs

The cause of Holy Spirit's condition seems obvious: the opening of UPMC Pinnacle West Shore in 2014. The newer hospital cost $120 million and has all private rooms and an emergency room built to handle 36,000 visits per year. Moreover, it has a prime location just off Interstate 81 and Route 944, providing easy access for vast sections of Cumberland and Perry counties and substantial populations to the east and north.

In 2013, the last full year before the opening of West Shore, Holy Spirit had a 62 percent occupancy rate, matching the state average, according to data from the Pennsylvania Department of Health. In 2016, the most recent year available, Holy Spirit had a 52 percent occupancy rate, more than ten percent less than the state average. Holy Spirit cared for 10,404 patients in 2016, down from 13,136 the year before West Shore opened.

The health department data lumps all the UPMC Pinnacle hospitals together, and doesn't break out the occupancy rate for West Shore. However, UPMC Pinnacle's overall occupancy rate was 69 percent in 2016, well above the state average.

Emergency room visits at Holy Spirit fell from nearly 47,000 in 2013 to 40,790 in 2016. Meanwhile, combined ER admissions at UPMC Pinnacle rose from 115,361 in 2013 to 141,184 in 2016.

As most people know, health care keeps getting more expensive and America's health care bill keeps growing. As a result, virtually all hospitals see their revenues rise from one year to the next.

But Holy Spirit's revenues have fallen, from $304 million in the fiscal year that ended shortly after the opening of West Shore, to $287 million in 2017.

"These losses are quite serious," said Stephen Foreman, an associate professor of economics and health administration at Robert Morris University. Still, he noted that, averaged over the past three years, Holy Spirit loss is only minus 0.57 percent, which he called "Not great but not a disaster."

David Sarcone, an associate professor at Dickinson College and a health care expert, agrees West Shore hospital has had a major negative impact on Holy Spirit, and one that will be hard to reverse. He points out that hospitals costs are largely fixed -- they need to be staffed at a certain level regardless of whether they are busy, for example.

The opening of PinnacleHealth West Shore Hospital in 2014 appears to have drained revenues from Geisinger Holy Spirit near Camp Hill. .Joe Hermitt, PennLive

"Once the volume of services drops below a financial break even, things can get very ugly very quickly from a financial perspective," he said.

Now, there's talk in Harrisburg-region health care circles that Geisinger is looking to unload Holy Spirit, and rumors of discussions with Penn State Health and others.

Geisinger Holy Spirit declined to answer specific questions about the revenue and volume drop offs, or whether Geisinger is looking to sell Holy Spirit.

Kyle Snyder, Geisinger Holy Spirit's chief administrative officer, said in a written statement, "With all the moves in the Harrisburg region, it is not surprising that there is speculation about what may be next for Geisinger Holy Spirit."

He also said "we talk regularly with other organizations to explore ways in which we can work together to better serve our patients and community." Also, Snyder said while the quality of care is good at Holy Spirit, "we must continue to focus on making improvements to our financial position."

Penn State Health declined to specifically address whether it has an interest in buying or joining with Geisinger Holy Spirit.  "Cumberland County remains an important focus," wrote spokesman Scott Gilbert, who also added "we are exploring a range of options to enhance patient access to Penn State Health Services and providers close to home."

It makes sense that Penn State Health, the parent of Penn State Hershey Medical Center, would be among those willing to talk to Geisinger Holy Spirit. It too is feeling pressure from UPMC Pinnacle, which last year bought Carlisle Regional Medical Center as well as three hospitals in York and Lancaster counties. That was right before Pinnacle merged with UPMC, Pennsylvania's largest health care system.

The moves gave the former PinnacleHealth scale and reach hospitals systems say has become necessary to their survival.

Penn State Health also needs more scale -- that's why it planned to merge with Pinnacle a few years ago, until government regulators objected. Since then, it's been in major growth mode, although much of its expansion has been concentrated in the Berks and Lancaster counties.

With a stronger foothold in Cumberland County, Penn State Health could use its reputation as an academic medical center and offerings, including a broad range of organ transplants, to draw more patients from Cumberland and Perry counties. In fact, the aging populations of Cumberland and Perry were a major factor in Pinnacle's decision to build West Shore Hospital even when, based on occupancy rates at Holy Spirit and Carlisle Regional, there was no glaring need for the hospital.

Further, the surge of Cumberland and Perry residents entering their Medicare years played a role in attracting Geisinger to Holy Spirit in the transaction that became final in late 2014. At the time Geisinger decided to acquire Holy Spirit, Penn State Hershey and Pinnacle had yet to announce their merger plans. UPMC was nowhere to be seen in the Harrisburg region.

Penn State Health, parent of Penn State Hershey Medical Center, wouldn't say whether it has any interest in acquiring or joining with Geisinger Holy Spirit Dan Gleiter | dgleiter@pennlive.com

Holy Spirit, a Catholic hospital that opened in 1963, has plenty of people who feel an attachment, especially in the immediate Camp Hill area. But it also has factors working against it that are hard to overcome. It's landlocked and much of the structure dates back to the original construction. It's also not ideally located, with people having to make their way through congested Camp Hill to reach it.

Those factors are likely a likely a turnoff for older people, especially given the ease of reaching West Shore Hospital via I-81 or Route 944, also known as Wertzville Road.

Holy Spirit's financial situation has changed dramatically since becoming part of Geisinger. Still another attraction for Geisinger was the prospect of using Holy Spirit and its network of doctors to grow its health insurance company, Geisinger Health Plan, in the Harrisburg region. But that hasn't materialized to any great extent, with the plan having about 582,000 members, up from 467,000 in late 2014.

Geisinger, true to its initial promises, has made improvements at Holy Spirit, including adding 100 doctors and spending $32 million to expand the ER and add a Level II trauma center. But the market has changed dramatically with the entry of an aggressive giant such as UPMC, and the urgency on the part of Penn State Health to expand.

Foreman, the Robert Morris University expert, believes it's possible for Geisinger Holy Spirit to turn the situation around. However, he said it would take major steps such as dropping money-losing services, mounting a multi-year campaign to convince patients it's the area's best hospital, and recruiting popular doctors from UPMC Pinnacle.

Asked about the plausibility of selling Holy Spirit, Foreman said, "Who would buy it? Who would pay money to compete with UPMC Pinnacle?"

Still, Foreman believes it's possible Penn State Health would have an interest, mainly because of the patient referrals that would come from owning the system. And while the Federal Trade Commission shot down a merger with Pinnacle, Foreman suggested the FTC might react differently if the hospital being acquired is viewed as "failing."

Dickinson College's Sarcone said, "It appears that [UPMC Pinnacle] through aggressive marketing and the investment in new facilities basically took market share away. Reestablishing patient preference revealed in physician referral patterns will be expensive and time consuming."

Sarcone doubts an aging hospital with a declining patient volume would attract many potential buyers. Still, he believes Penn State Health might be the exception. Holy Spirit has a heart center, an urgent care center, a network of doctors and an inpatient mental health unit. "Holy Spirit has valuable assets that would fit nicely with Hershey's needs ... that's something to think about," he said.

Whatever the future of Geisinger Holy Spirit, it could have significant consequences for health care consumers in central Pennsylvania. When Penn State Hershey and Pinnacle tried to merge, the government objected on grounds the merged entity could raise prices and reduce quality, with many consumers having no alternative.

The subsequent fallout seemed ideal, resulting in three major health systems, Geisinger, UPMC Pinnacle and Penn State Health, competing to be the top choice for Harrisburg region residents. That's an unusual level of competition for a region the size of the Harrisburg region. In that light, the loss or diminishment of a major player would surely be felt.

Geisinger Holy Spirit Hospital Health Care Failure Jobs Bankrupt Ideas Lost Patients Lost Jobs Holy Spirit Hospital Camp Hill Pa Cumberland County

Which of the three West Shore hospitals will be better? It might be hard for patients to figure out

Posted Jun 29, 2018   Geisinger Holy Spirit Hospital, Holy Spirit Hospital, Geisinger, Holy Spirit Hospital Camp Hill Pa, Dr. Ryu, Jaewon Ryu, Harvard, Walmart, 

An overhead view of part of a 44-acre site in Hampden Township, Cumberland County, where Penn State Health plans to build a full-service hospital. The site is to the west of Interstate 81 and to the north of Wertzville Road. In the upper left is UPMC Pinnacle's West Shore Hospital. Penn State Health plans to begin construction in early 2019. (Penn State Health)

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By David Wenner | dwenner@pennlive.com

Hospital executives talk constantly about lowering health care costs and improving quality. Yet they build ever-more and ever-more expensive facilities. And someone else has to pay for it, typically area residents and businesses by way of higher health insurance premiums. Everyone's health care bill keeps going up as a result.

An example is playing out in Hampden Township in Cumberland County, where Penn State Health announced this week it will build a new hospital. The hospital will be across the street from UPMC Pinnacle West Shore Hospital, which opened four years ago. And those two sites sit practically in the backyard of Geisinger Holy Spirit Hospital.

The Penn State Health hospital is part of a partnership with health insurer Highmark, in which the two have pledged to spend $1 billion on new and upgraded facilities. In announcing the partnership last year, Highmark executives talked about lowering cost. When pressed, however, it seemed they were referring more to lowering the rate of increase, and giving more "value," than to lowering the actual price.

Health care executives commonly say this can be accomplished by making sure people get the right care at the right time in the right setting, for reasons including keeping them as healthy as possible and thereby lowering their overall health care expense.

Hence, all the new health care facilities, including doctor offices and outpatient clincics, popping up around the region, typically under the banners of Penn State Health, Geisinger Holy Spirit or UPMC Pinnacle.

The executives further contend that competition will lead to lower cost and higher quality.

So should residents living within easy reach of the three hospitals expect those things?

Stephen Foreman, an associate professor of healthcare and economics at Robert Morris University, doubts it. "I could be persuaded that the competition will improve the quality of the services offered. I don't buy the argument that it will lower costs," he said.

Rather, Foreman agrees with the argument that when health systems build competing, side-by-side facilities, costs only go up.

David Sarcone, a health care expert and associate professor at Dickinson College, has a similar view.

He points out that research over the past decade focusing on whether health care competition lowers costs has produced "at best ambiguous" results rather than clear-cut savings. The research found that costs sometimes go up.

Others, meanwhile, have long made a case that free market forces which work in consumers' favor for many kinds of goods don't work in healthcare. Free markets, they explain, work well only when consumers can clearly see the price and quality of goods, and have multiple sellers to choose from.

But as Nobel Prize winning economist Kenneth Arrow famously argued, health care is different. That's because with health care, the consumer typically depends on the seller to tell them what they need and how much. In other words, health care consumers often lack the ability to know what they need, and rely on the seller to tell them. Thus it's a lob-sided transaction in favor of the seller. Given the complexity of medical care, it's a hard obstacle to get around. And the fact that the need for health care is often unexpected, urgent and incapacitating further restricts consumers' ability to make the decisions needed for a well-functioning market.

For a long time, there have been efforts to allow patients to better-see the price of health care services, and to judge the quality. But it's a work in progress, hindered by things including health care industry resistance to revealing pricing information, and a disinclination on the parts of consumers to use quality information when available.

"It is clear we are not there yet," Sarcone said. "Despite choices in the market, we are not at a point where consumers can compare providers in an unbiased manner and make a choice necessarily in their best interest."

Still, it would be unfair to suggest the local hospital executives are merely proposing to spend money to save money. Each of the three systems is closely associated with a health insurer.

Executives of Highmark have suggested their partnership with Penn State Health creates opportunities for health care payer and the health care provider to work together to lower costs, with the savings passed along as Highmark competes to sell health insurance to local businesses and individuals. Highmark could, for example, offer health insurance plans where, if a business or individual accepts a narrow network comprised solely of certain Penn State Health providers, their premiums would be lower.

UPMC Pinnacle, with its UPMC Health Plan, could do the same.

On other levels, there are complicated factors that put Penn State Health and Highmark next door to UPMC Pinnacle. In the Pittsburgh area, UPMC no longer accepts Highmark coverage, meaning people who want access to UPMC hospitals and doctors need non-Highmark health insurance.

In the Harrisburg area, UPMC and Highmark have a contract that lasts well into the next decade. Still, it seems natural Highmark would worry UPMC might stop accepting its coverage as it did in Pittsburgh. With a strong relationship with a Penn State Health hospital in Cumberland County, Highmark would be assured of always being able to provide members access to a hospital there.

Beyond that, Cumberland County is growing fast, and it's population tends to be older and well-insured. Those kinds of demographics will attract the most health care facilities an area can support.

In fairness to the hospital executives, they say they're not ignoring the outlying ares, and promise to put facilities such as urgent care centers in those areas.

Still, Foreman, the Robert Morris economist, said recent developments in Cumberland County and elsewhere might point to a need for policy makers to evaluate whether we're seeing a kind of competition that's detrimental to the public's best interest.