Hospital scrambles to slash costs, compete in age of 'managed care'


May 15, 1994|By Patricia Meisol | Patricia Meisol,Sun Staff Writer

For more than a century, doctors referred their patients to specialists at Johns Hopkins Hospital because it was the best. Today, the best is no longer enough.

As insurance companies weigh care against service and cost, they are knocking the top -- and most expensive -- academic research institutions off their lists of preferred providers. In response, Hopkins is scrambling to make itself both affordable and user friendly.

In the past several months, prodded by Dr. James A. Block, president of the Hopkins Hospital and umbrella Johns Hopkins Health System, senior officers of the hospital and medical school have drawn up a multi-faceted strategy to keep the patients coming while preserving Hopkins' role as one of the world's premier medical institutions.

It includes major cost-cutting, the restructuring of medical school departments; a single billing, referral and service center; and a campaign to prove that, for certain procedures, Hopkins is both better and cheaper.

And in what could prove to be the most significant change in decades, the medical faculty and the hospital are about to recruit primary care doctors -- family practitioners, internists, obstetricians -- to work with Hopkins specialists and send them patients. The goal is to create a group practice with satellite clinical offices reaching into five states.

Primary care doctors are crucial to the broader plan on the Hopkins drawing board to organize its own "integrated health network" -- the buzz word for a system that offers a complete array of medical options for a prepaid fee per member.

"Specialists don't drive managed care. They are at the mercy of primary care doctors," said Dr. John D. Stobo, head of the department of medicine and a key player in Hopkins' transition. "The whole trick is to figure out how to be competitive without discombobulating ourselves," he said.

An expanded array of nonhospital clinical services is a necessity for academic medical centers such as Hopkins. In the future, perhaps only 20 percent of all health care will take place in hospitals, compared with 75 percent today, Dr. Stobo notes. It could take 1.5 million people in a network to provide enough sick patients to support one specialist.

In July, Dr. Stobo becomes the first medical school official to join the hospital and finance side of Hopkins when he becomes vice president of the Johns Hopkins Health System and president of its new company of doctors and managed care.

As Hopkins restructures its medical and business departments,

he said, "We are asking questions now such as 'How big should the faculty be? How many hospital beds should we have? Should it be 1,100 or 700? What are we trying to do here?'"

Pointing the Ivory Tower in a new direction is a huge undertaking.

What Hopkins wants to do -- has to do to stay in the game -- requires a cultural shift at an institution where research is the first allegiance and doctors have had little reason to change. For years the medical faculty remained aloof to the managed care revolution -- hardly noticing when patients and their doctors, tiring of waiting for operating room time and returned phone calls, began to turn elsewhere. When Hopkins entered the managed care arena by expanding its community clinics into a health maintenance organization a decade ago, it was largely staffed by personnel recruited from outside the faculty.

Sheer size

And then there's its sheer size. The health system includes Johns Hopkins and Bayview, formerly Francis Scott Key, hospitals and The Johns Hopkins Medical Services Corp., a nonfaculty group of doctors that provides care under contract to members of Prudential Health Care -- which bought the insurance and administrative parts of Hopkins' HMO in 1991.

All told, more than 13,600 employees work at these sites, including 1,400 research faculty and doctors employed by the School of Medicine. The two hospitals have 1,500 beds between them, and the health system has annual revenues of $701 million. Hopkins Hospital alone last year accounted for more than 9 percent of all hospital admissions statewide -- 53,400 -- and the system collectively reported more than 1.25 million visits to its clinical facilities.

For most of the 1980s, the system made lots of money. Then, between 1991 and 1992, largely as a result of its first foray into managed care and the sale of its former Homewood Hospital, the health system ended up in the hole. The medical services corporation, limited to providing medical care to Prudential members, suffered tremendous losses -- $6 million in fiscal 1992 and $8.1 million last year, an amount that virtually wiped out the combined earnings of Hopkins and Bayview hospitals. Hopkins blames the losses on the terms of the Prudential deal and has filed suit against the insurer, claiming it was misled.

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