February 21, 2002-Vol33n18: Q&A

VOLUME 33, NUMBER 18

THURSDAY, February 21, 2002


	PEGELS

Carl Pegels, professor of management science and systems, is an expert in health systems management.

How has Buffalo handled hospital planning over the past 20 years or so?
About 20 years ago, I spent well over a year on a task force whose mandate was to decide which hospitals to recommend for closing because there were too many hospitals in the Buffalo area. At that time, there were several other small hospitals that have since closed. The task force, part of a state-mandated health-planning activity, was made up largely of people with direct or indirect interest and concerns for health care in the Buffalo region. The task force consisted of about 20 members and met about once a month. It was unable to come up with a recommendation for which hospitals should be closed, even though it met and debated incessantly. There always was someone who had an objection to closing any targeted hospital. Needless to say, the task force had little or no authority. But it could not even arrive at a recommendation. Meanwhile, there was a major change in New York State law in terms of regional health planning, and also in the support of weak hospitals by the state. Under the new regulations, support essentially was withheld from the three or four weak hospitals in the area, and they all closed. Buffalo at one time had a Columbus Hospital, a Sheridan Park Hospital and a Lafayette Hospital, and possibly one or two others—they all disappeared as soon as funding stopped. The moral of that historic story is that as long as any institution keeps getting financial support, it will survive because there always are parties that benefit by continuing the status quo.

Is that what's happening with Children's Hospital?
It appears so. As long as Kaleida keeps putting money into Children's, it will keep going because there are quite a few people who benefit from the present situation. As you may know, all but one Kaleida hospital is losing money at present. Only Millard Fillmore Suburban Hospital in Amherst is profitable. But Kaleida has reached the end of the proverbial financial rope. It is financially bleeding to death. And the state is not going to bail the system out. Hence, the people of Buffalo have to decide which hospitals to close. With only 57 percent hospital occupancy in the Buffalo area, Children's may not be the only one closing. The newest physical structure is Kaleida's High Street location (Buffalo General)—all the other locations are old or older. I suspect that in the long run, all of Kaleida's patients will end up in the High Street location and in Amherst. It probably will take an expansion at the High Street location to do it, but having all tertiary patients at one location will generate considerable potential savings for Kaleida.

So does that mean the end of Children's Hospital?
There will continue to be a Children's, but it will be somewhere other than in the Bryant Street facility. The sooner Children's supporters accept that, the quicker this community will be able to make some progress on solving its hospital problems.

Why is Kaleida in such a financial mess?
Largely because third-party payers, the government and the HMOs essentially dictate to Kaleida what they will pay. So within the resulting budget, Kaleida has to function. There also are issues of medical education funding and Kaleida probably will get some relief in the future through supplemental state funding. But the fact that one of its hospitals is profitable raises the issue of why the other units cannot also be made profitable. It is not quite that simple. And Kaleida's proposal to close Children's is one of the managerial decisions it has to make.

Where does the Catholic Health System fit into the picture?
The Catholic hospitals have similar problems. But they apparently recently addressed their problems and made some difficult decisions. I don't think they have solved all of their problems, but they appear to be on the right track. They also do not have the medical training problems that Kaleida is responsible for and needs additional funding to do. But as I stated above, the state will probably help out there.

The physicians associated with Children's want to split from Kaleida and run Children's themselves. Is there any way they could make a go of it as an independent hospital?
The physicians at Children's should contact their accountants about running Children's themselves. I suspect they will be surprised at how difficult it is to do that unless they have deep pockets and want to support it with their own financial assets.