Should MCP Hospital close?

MCP Medical Staff President Philip Mead, M.D.

By Christopher Guadagnino, Ph.D.

An historic Philadelphia institution will probably cease to exist. The Medical College of Pennsylvania, a 153-year-old pioneer for women’s medical education, has struggled financially years before being purchased by the Allegheny health system, which in turn went bankrupt six years ago. The medical school later merged with Hahnemann, creating the Drexel University College of Medicine. MCP Hospital’s latest owner, Tenet Healthsystem, has marked it number four on the divestment list, following the closure of City Avenue Hospital in 2000 and last year’s closure of Parkview Hospital and sale of Elkins Park Hospital.

The question of MCP’s fate, still not answered, has spawned a flurry of activities over the past few months by physicians, nurses, legislators and regulators. Tenet’s announcement in late December that it intends to close MCP has provoked recriminations, protests and lawsuits, culminating in state intervention to oversee negotiations that will dictate what will become of MCP.

Originally slated by Tenet to close by the end of March because of financial hemorrhaging, the hospital’s closure has been opposed by a coalition of physicians, nurses and hospital workers – the Association to Save MCP – who had won a temporary injunction by Philadelphia Common Pleas Court to prevent that from happening, and sought to fine Tenet $1 million per day for allegedly hastening the hospital’s demise in violation of court orders not to.

Gov. Ed Rendell had pledged to help find alternatives to MCP’s closure. In late February, Pa. officials succeeded in striking an agreement with Tenet not to close MCP until June 30, and to cooperate with the state in finding potential buyers to keep the hospital – or some of its services – open for the East Falls community. Also allied with MCP is Pa. Senator Arlen Specter (R-Pa.), who pledged to find federal support in an attempt to keep the hospital open.

While three potential bail-out entities have emerged as of late February, some MCP physicians have already begun to leave for other institutions and many have begun to refer patients elsewhere, potentially eroding the institution’s salability as time passes.

Perhaps a more sensitive question is whether MCP Hospital should be closed. There would clearly be some negative impacts: jobs would be lost; local businesses would close; and physicians would be dislocated, their referral patterns would be disrupted and patients would have to travel further for medical care. In the face of Tenet’s pronouncements of the institution’s unprofitability, many have argued that profits should not trump patients, and that a closure would harm patients in the East Falls community, particularly with the loss of a Level 1 trauma center and an emergency room, and they have couched the issue as a shirking by Tenet of its responsibilities to that community.

Some analysts counter that MCP had been a weak institution – financially, academically and clinically – for many years, that Philadelphia has an abundance and/or maldistribution of medical services, and that MCP’s closure would cause little long-term disruption to most physicians, patients or remaining hospitals.

Tenet’s Announcement Provokes Response

Having lost over $30 million last year, $5 million in December alone, and projected to lose $25 million in 2004, “MCP couldn’t be sustained further without jeopardizing Tenet’s other five hospitals in the area,” according to Tenet spokesperson Jeff Jubelirer. Tenet maintains that it did not intentionally cause MCP’s financial demise, and notes that it has spent $40 million on MCP since 1998, including making significant upgrades to emergency room suites and bringing a high-tech gamma knife to the neurosurgery department within the past few months, says Jubelirer.

Tenet’s national performance has made it less capable of expending resources than it has been in the past. The company lost more than $300 million for the fiscal quarter ended Sept. 30, while it paid a $54 million settlement to the U.S. Justice Dept. for allegedly performing unnecessary procedures at a facility in California. It has also been under federal scrutiniy for inflating charges for outlier payments.

Tenet expects that its recently-announced plan to sell 27 of its hospitals nationwide will allow the company to rebound financially. When asked whether Graduate Hospital could be next on the divestment list, Jubelirer says that Tenet wants to remain in Philadelphia, that it believes its five other Philadelphia-area hospitals are doing fairly well financially, that closure of MCP will put an end to costly losses, and that Tenet does not anticipate changes in the status of its other institutions here.

Various factors have created a “survival of the fittest” environment for all Philadelphia academic medical centers and have prevented Tenet from being able to make MCP profitable, including a tough private payor market, declining state and federal Medicare and Medicaid reimbursement, and spiraling malpractice insurance costs. Independence Blue Cross, the region’s dominant private payor, reimburses 101 percent of the hospital’s actual medical costs, while insurers in other states pay closer to 112 percent, says Jubelirer. Pennsylvania is among the lowest-paying states for Medicaid reimbursement, paying 75 percent of actual costs, while more than 43 percent of MCP’s patients have either Medicaid or no insurance, he notes. MCP’s malpractice premiums increased by $13 million in 2004 over the previous year, Jubelirer adds.

Tenet’s announcement on Dec. 18 that it planned to close MCP by March 31 – an announcement that came on the last day of a month-long nursing strike – sparked an organized effort by hospital supporters to prevent that from happening. The Association to Save MCP, a grassroots coalition of physicians, nurses and hospital workers, filed a lawsuit in Philadelphia’s Common Pleas Court and succeeded in getting a temporary injunction to delay the closure until a full hearing could be held. The court order instructed Tenet not to speed the hospital’s closure by restricting admissions or access to its emergency room, by transferring patients to other facilities except for medical reasons, or by removing equipment.

The coalition later sought to fine Tenet $1 million a day for allegedly violating that court order. According to the coalition’s president, MCP cardiologist Nancy Pickering, M.D., Tenet had continued to divert emergency patients to other facilities and to hold patients in the ER who should have been admitted – failing to call available per diem nurses into work in order to engineer a staff “shortage” to restrict admissions and artificially cap census at 70 patients.

Pickering does not accept Tenet’s claims that MCP is losing money and says the coalition has failed to get Tenet to disclose corporate finance statements, despite subpoenas. She notes that Temple University Hospital has an even larger proportion of Medicaid and uninsured patients than MCP, and is not going out of business.

Pickering believes that Tenet wants to be rid of MCP and prevent another entity from making it a viable competitor with nearby Roxborough Memorial Hospital, also owned by Tenet, which she says has added 50 beds, enlarged its ER and is sending its tertiary cases to Hahnemann.

Impacts of a Closure

MCP’s limbo status has already impacted other hospitals in the region. Emergency rooms at Temple and Jefferson have been overwhelmed, mostly with trauma cases, when MCP has been put on divert status, according to Philip Mead, M.D., director of MCP’s emergency department and president of its medical staff. Temple already had ER waiting times of six to eight hours, he says, while other ERs in the city also have long wait times. The situation has called attention to “a two-tiered health system that has been allowed to develop in the Philadelphia area,” says Mead, in which those with private health insurance in more affluent neighborhoods receive fast treatment in their ERs, while the urban poor have to endure long hours of waiting in ERs.

Losing MCP would aggravate an existing scarcity in medical resources, Mead argues, as long emergency room wait times are indicative of hospitals’ inability to make staffed beds available to admit patients.

Patient referral patterns have been disrupted since MCP’s diminshed operational status. Physicians who used to refer large numbers of patients to MCP are sending their patients elsewhere after being told by Tenet that there is no room for them at MCP, says Mead, who notes that MCP’s typical patient census is now between 70 and 75, compared to between 140 and 160 before the nursing strike.

The closure of MCP would strip vital health care services from its community, according to Mead, who says it has one of the busiest neurosurgery departments in the city, treating hundreds of patients each year. He says that the closure of MCP’s Level 1 Trauma Center has already resulted in cases in which gunshot victims have been transported to Temple, which is 10 to 20 minutes away from MCP, and died. MCP performed 1,500 trauma cases per year and had a catchment area of 70,000 people, from as far away as King of Prussia. The hospital had 25,000 ER patients per year and a 21 percent admission rate from the ER, which Mead regards as substantial.

Unlike most Center City hospitals, he adds, MCP has a lot of parking and is easy for patients to get to.

Others believe that MCP’s services could be absorbed by other hospitals in the city. “MCP did not provide a single service that was not provided by at least one other institution in the area,” says Andrew Wigglesworth, president of the Delaware Valley Hospital Council (DVHC). The Council is more concerned with ensuring that community residents have access to primary care, and would like to see more District Health Centers and Federally Qualified Health Center sites in MCP’s area.

Neighboring hospitals have been busy taking on additional patients during MCP’s diminished capacity and have initiatives underway that will address the capacity problem, says Wigglesworth. Einstein recently doubled the capacity of its ER and Temple broke ground on a new, $70 million outpatient ambulatory facility, he notes. Wigglesworth asks rhetorically, “If you had to increase the bed capacity, would it be better to increase it at a combination of other institutions, rather than maintaining one institution that has been struggling for a number of years?”

Focusing on MCP’s unique history and role as a community asset, rather than acknowledging the factors that have made it financially unsustainable, has caused much frustration at the prospect of its closure, says Wigglesworth. “From a public policy standpoint, we need to focus on systemic challenges facing the entire delivery system or it is quite likely that there will be additional MCPs in the future,” he says.

While DVHC believes there is a significant demand for employees with clinical skills, other types of jobs will be harder to find, and the Council would like to see a coordinated effort to bring private, public and federal workforce funding into the East Falls area to assess workers’ skills for outplacement to other employers, Wigglesworth says.

The loss of a struggling hospital may be the sign of a healthy market. “From a system perspective, if it’s true that we’ve had too many beds, too many academic medical centers and too much duplication of services – all of which is probably true – then [MCP’s closure] may not be a bad thing, although the local population bears the pain of that,” says Lawton R. Burns, Ph.D., MBA, a senior fellow of the Leonard Davis Institute of Health Economics and director of the Wharton Center for Health Management and Economics.

“Tenet, with all of its financial resources behind it and perhaps more disciplined management, couldn’t make a go of it,” Burns says. “We’ve had a series of hospitals that have had trouble making it for a long time and, instead of closing them down, we’ve let them go bankrupt or we’ve let them shift ownership, and then the next group has trouble keeping them open. Over the last 20 to 25 years, Philadelphia has been propping up very troubled hospitals. It may just be a matter of time before some of them finally close down.”

Based on his reading of the history of MCP, Burns says it has always been the weakest of the five academic medical centers in the city in terms of clinical departments – lacking pediatrics altogether, in terms of endowments and contributed capital reserves, and in terms of prestige – ranking near the bottom in published, peer reviewed ratings of medical schools.

Prior to its acquisition by Allegheny, notes Burns, MCP had been in potential jeopardy of losing part of its accreditation from the Accreditation Council for Graduate Medical Education.

The disparity in wait times between urban and suburban ERs, “like a bald man with a beard, does not demonstrate a problem of production, but one of distribution,” in which there may be a geographic misallocation of beds in the region, but still more than can be filled, says Burns. “Could patients in MCP’s ER be waiting somewhere else? A better alternative is to have more primary care clinics rather than ERs,” he adds.

The prospect of an MCP closure is already impacting physicians. Several of MCP’s full-time faculty are either actively departing, signing contracts or looking for other jobs, says Pickering.

A major group of psychiatrists at MCP’s Eastern Pennsylvania Psychiatric Institute has negotiated a move to Friends Hospital, says Mead.

According to Mead, since MCP’s census has fallen below the break-even point and management has thinned MCP’s supply of MRI, X-ray and lab technicians, many physicians have become disgusted with Tenet management and most do not want to continue working at Tenet hospitals. Many have declined jobs at Hahnemann, he adds. “We’re not getting the sharpest tools in the shed running the hospital,” Mead quips.

The announced closure of MCP could also make some physicians reevaluate whether they want to stay in Philadelphia, with its five percent wage tax, and higher malpractice lawsuit risk and insurance cost, notes Mead, who says he and some MCP radiologists are likely going to leave the area. “I was inundated with phone calls as soon as news came out of a potential MCP closure,” he says.

Mead guesses that five to ten percent of MCP’s physicians will move out of state, and believes that others who choose to remain should be able to find jobs in the region, except for high-level positions, like director of emergency medicine.

Local transitions will not be painless. Private physicians who move to other hospitals bear a burden of getting on the list for unassigned ER patients, which can run up against political obstacles at the new hospital, says Mead.

Pa. Steps In

Total closure of MCP Hospital seemed less likely in late Feb. after the state had secured an agreement with Tenet to keep MCP Hospital open until June 30, 2004, while the parties continue efforts to find a health system or other entity to operate the facility.

To help leverage the agreement with Tenet, the state had threatened to join a lawsuit filed by the Association to Save MCP seeking an injunction to delay MCP’s closure long enough to produce a transition of the hospital to another entity, according to Susan Anderson, deputy director of Pa.’s Office of Health Care Reform, who will spearhead the state’s involvement in the negotiations over MCP.

According the agreement signed Feb. 19 by Tenet, the Commonwealth of Pennsylvania and the Pennsylvania Department of Health (DOH), Tenet will continue to operate MCP Hospital until the closure date of June 30, 2004 and will abide by an number of conditions, including the following:

· Drug Coverage Expands as Costs Rise Tenet will not restrict the hospital’s patient census or emergency room care, or hold patients in the hospital’s emergency room when appropriate staff and beds are available, subject to applicable hospital policies and procedures.

· Tenet will continue to operate all hospital medical departments and outpatient services and make elective admissions through those departments.

· Tenet will not transfer MCP patients to any other facility except for legitimate medical reasons.

· Tenet will not remove equipment or medical records from MCP or transfer equipment to other facilities except for legitimate medical reasons.

· Tenet will use available and appropriate full-time, part-time and per diem physicians, nurses and staff to fulfill the above obligations, but will not be obliged to hire contract labor to staff the hospital.

The agreement also calls for the three parties to enter into good faith negotiations with each other and with “credible partners” to find “an alternative to closure that may result in the provision of substantial health care services on the MCP Hospital campus responsive to the health care needs of the community previously served by MCP Hospital.” Among the services the state hopes to see preserved at the MCP site, based on a DOH assessment of the minimum health care needs of the community served by MCP Hospital, are a fully functioning emergency room and support services such as radiology, a blood bank and laboratories; as well as a dialysis unit and other clinical and ambulatory services, according Anderson.

The agreement does not require that MCP remain an acute care facility and could result in various entities – including federal, city, state or private – taking over different services, says Anderson. “If it were possible to find an acute care operator, we would love that. But we have to be realistic. No one has yet expressed interest in taking it over as an acute care facility. It also must be financially sustainable,” she adds.

“I would think that the state has concluded that the people who are being serviced by that hospital could be adequately absorbed by the other health systems. Otherwise, I think the Secretary of Health would have said to the Governor that we have to have an acute care hospital there, and he did not say that,” Anderson notes.

Anderson would like to see MCP’s recently renovated operating rooms put to use, perhaps for ambulatory surgery, and she said the state plans to talk with Sen. Specter regarding how to preserve MCP’s bioterrorism decontamination unit, the most sophisticated one of its kind in the region, as a regional facility.

Specter held a meeting on Jan. 19 with Gov. Rendell, the Centers for Medicare and Medicaid Services (CMS) regional representatives, and hospital administrators from Temple, Penn, Albert Einstein, Drexel, Chestnut Hill and Thomas Jefferson University to encourage the CMS to look into the possibility of establishing a Federally Qualified Health Center at the MCP site, and hospital administrators to look into the feasibility of taking MCP on in its current status or as a scaled back version that would provide emergency care for the region.

Anderson says the CMS, at Specter’s request, has also offered to help expedite the process of transitioning MCP into another entity or entities.

As of late Feb., three entities have emerged as candidates to acquire some or all of MCP. According to the Philadelphia Inquirer, the Drexel University College of Medicine has hired a consulting firm to investigate the possibility of taking over MCP Hospital, while Temple University Health System has assigned a team of executives to see if MCP can work as a stripped-down institution with an emergency room, surgical suites, doctors offices and a small number of beds. The state has also asked the Albert Einstein Healthcare Network to consider taking over MCP.

“We cannot keep this hospital open until June 30 and maintain high quality if staff leaves,” says Anderson, who has asked other health systems to try to defer holding job fairs until July 1. She doesn’t think that physician departures from MCP are as serious a concern as the loss of support staff.

Pickering also believes that MCP’s physicians are more willing to stick together now, after the initial shock and anger has subsided and the June 30 date has been set.

While Pa.’s agreement with Tenet echoes the language of the Common Pleas Court order for Tenet not to hasten the closure of MCP, the court felt that there was a chance that Tenet would abuse the agreement, and has retained judicial jurisdiction over the case by leaving open the lawsuit filed by the Association to Save MCP, according to Pickering.

The Commonwealth and DOH, as part of the agreement with Tenet, cannot join any currently pending or future litigation or administrative proceeding relating to the closure of MCP Hospital. The state does have the authority to bring a separate legal action to enforce the agreement, or to pursue other causes of action against Tenet, and the DOH will monitor Tenet’s compliance with the conditions of the agreement, says Anderson.

While the Association to Save MCP is pleased the state has stepped in to try to prevent Tenet from gutting MCP or “selling it from under the feet of physicians and staff,” Pickering believes that it will be difficult for the DOH to adequately monitor Tenet’s compliance with the agreement. She says the Association will continue to do so and, if Tenet commits a major violation of the order, is prepared to go back to the court to compel sanctions against Tenet.

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