Community hospitals struggling, study finds

Community hospitals in Massachusetts are struggling financially and unable to modernize and build new facilities because the balance of power in the healthcare market is shifting strongly to big teaching hospitals, according to a new report.

The study, to be released today by the Massachusetts Council of Community Hospitals, says teaching hospitals were eating up nearly 50 percent of all patient admissions in the state in 2003, up from 35 percent 12 years ago and more than double the national average market share for teaching hospitals.

If the balance were closer to the national average, savings to the state's healthcare system through treating patients in less expensive community settings could be as much as $3.8 billion a year, the study estimated.

In addition to losing patients, the community hospitals are losing market clout. As a result, their compensation from private health plans is falling short, according to the report. They also are underpaid by the state Medicaid program for low-income residents.

''Community hospitals are providing quality care at low cost, but their ability to invest in their future is virtually nonexistent," said Dale Lodge, chief executive of Winchester Hospital and president of the Massachusetts Council of Community Hospitals.

Without better financial resources, community hospitals will be unable to meet expected heavy demand as the state's aging baby boomers place greater demands on the system. The study predicts demand for 5,000 new beds over the next 25 years.

The analysis is expected to add to the State House debate over healthcare reform. Hospitals are lobbying intensely for increases in state Medicaid funding as lawmakers consider Governor Mitt Romney's plan to expand healthcare access for uninsured Massachusetts residents.

In the most visible initiative, Partners HealthCare, which operates Massachusetts General Hospital and Brigham and Women's Hospital (two large Harvard Medical School affiliates), as well as three community hospitals, has teamed up with Blue Cross and Blue Shield of Massachusetts to seek more money for all hospitals.

In response to the community hospitals report, the Conference of Boston Teaching Hospitals, a nonprofit lobbying organization, said the teaching hospitals may be large and advanced, but they serve community needs in Boston.

''Many of the patients from these communities are poor, have multiple medical problems requiring additional support, and depend on government assistance for survival," said John Erwin, the group's executive director. ''Teaching hospitals consistently step up to the plate to care for these patients as part of their missions, and frequently lose significant money in the process."

The community hospitals study adds a fresh point of view from the smaller suburban players, some of them with cash reserves running dry.

''They pinch a lot of pennies, and they don't have any extra," said state Senator Richard T. Moore, chairman of the Legislature's Joint Committee on Health Care Financing and a supporter of increasing Medicaid reimbursements for community and teaching hospitals.

As outlined in the report, authored by healthcare economist Edward Moscovitch, president of Cape Ann Economics, the problems for community hospitals bode ill for the future of Massachusetts healthcare.

He said a shift is needed in consumer attitudes as larger numbers of patients vote with their feet in a market with one of the highest concentrations of world-class, high-profile teaching hospitals.

''We want our community hospital, but we just don't always want to use it," Moscovitch said.

The Boston market is unique in the rate at which people opt to go to academic medical centers, said Paul Ginsburg, director of the nonprofit Center for Studying Health System Change, a Washington research group, who has closely studied the Boston healthcare market.

''That's something the community hospitals can't fight. It's what the patients are voting for," he said. ''They may well be right that this leads to higher costs in Massachusetts, because academic medical centers are more expensive."

Health insurers yesterday said they recognize the value of community hospitals and want to educate consumers to use them.

Charles Baker, chief executive of Harvard Pilgrim Health Care, said the community hospitals report illustrates the need for transparent quality and cost data, so patients can make better choices. Among community hospitals, according to the health plan's own data, the average patient cost varied by 300 percent.

''It's hard to draw any blanket conclusions when you have a variance that big," he said.

Tufts Health Plan spokeswoman Catherine Grant said it has sought to steer consumers to community hospitals through the use of plans that set patient copayments lower at community hospitals that have both low costs and high quality.

Without more education about costs and quality, things are unlikely to change, added Marylou Buyse, chief executive of the Massachusetts Association of Health Plans. ''Patients will go to a brand name, all other things being equal," she said.

Christopher Rowland can be reached at crowland@globe.com.