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They warned him: We don’t like monopolies, and if you create one, we’ll hold your feet to the fire. As if to make sure he got the message, the U.S. Department of Justice sent federal agents to search his computer hard drives. Bob Burgin was confident he was right, but he knew what was at stake. “Antitrust violations carry a mandatory prison sentence,” he says.
Ten years have passed. Burgin is 64. His gray hair is thinner, and his glasses are thicker. As president and CEO of Mission Hos- pitals in Asheville, he defied conventional wisdom but not the law. Merging a warmly regarded but struggling Catholic hospital with a coolly efficient community hospital set up a clash of cultures — nuns versus bean counters. And it focused attention on questions with broader implications: How can a large hospital — Mission has about 6,300 employees and its operating revenue this year will exceed $700 million — control costs in an age of escalating health-care expenditures but still deliver good medical care to an aging and changing population?
Many, including regulators and some doctors, expected Mission to fail. Or hoped it would. “Everybody was taking a shot at them, waiting for them to mess up,” says Scott Higgins, a professor of health sciences at Western Carolina University in Cullowhee. “Instead, they took it as an opportunity to move in the right direction.”
In 1994, Burgin, who had joined Mission 13 years earlier and ushered in sweeping changes, began talks with Belmont-based Sisters of Mercy, which ran St. Joseph’s Hospital across the street and a block down Biltmore Avenue. After a partnership faltered, Mission bought out the sisters in 1998 for about $90 million.
The result is a labyrinthine hospital complex, with more than 800 beds and bassinets, that sprawls over 90 acres. Surgeons perform about 40,000 operations a year, more than any other hospital in the state, often on patients whisked to one of 44 operating rooms by Mission’s two helicopters from the rugged terrain of the western Carolinas and eastern Tennessee.
To overcome regulators’ suspicions that Burgin and the hospital were plotting to strangle competition, the hospital promised it would charge no more than similar ones in competitive markets elsewhere and demonstrate that a merger would save money — a target of $75 million in the five years after the merger. Savings were to be returned to the public, either through lower charges or outreach programs.
Mission met those goals, paring $86.6 million in operating costs by 2001, despite having unusually high numbers of low-paying patients and charity cases. An independent auditor last year calculated that the average charge per patient stay — about $6,310 — was 7% less than at comparable Tar Heel hospitals.
Its record has been compiled under the tightest regulations of any hospital in the state. After the Sisters of Mercy and the Vatican approved the sale of St. Joseph’s, federal authorities cleared the merger but only if North Carolina regulators agreed to monitor it — the only hospital in the state under such an agreement. “We’re almost like a utility rather than a hospital,” says Joe Damore, who became president and CEO when Burgin retired in December.
Mission does business in a region where 19% of the population is over 65; the state average is 13%. Charity cases account for 10% of Mission’s revenue, compared with about 6% nationwide. Few patients pay full fare. Medicare or Medicaid usually reimburses hospitals at less than cost for older patients and those with low incomes. “ About 70% of our patients are sponsored by Medicare, Medicaid or are uninsured,” Damore says. At most hospitals, the figure is closer to 50%.
Part of Mission’s answer to how well it meets its challenges lies in awards. It has made the top 10 each of the three years Business North Carolina has had Health Grades Inc., a Lakewood, Colo.-based company that examines 35 million Medicare records a year to grade hospitals, to rate the best hospitals in the state. Mission also has appeared in national rankings by U.S. News & World Report, AARP and Money magazines and Solucient, an Evanston, Ill.-based health-care consulting firm. New York-based Commonwealth Fund, a nonprofit that relates hospital costs to outcomes, last year named Mission one of the four best hospitals in the nation on that basis.
But compelling answers also lie elsewhere. Some can be found on a bitter day as wind drives snowflakes against the windows of the hilltop hospital. Behind sealed doors is a sterile world of blinking monitors and machines that replicate hearts and lungs. Here, the way in which questions about quality and cost are answered can spell the difference between life and death.
A naked man lies on his back. He is about 50 and heavyset, his stomach a dome that rises and falls with each breath. Nurses daub him with Betadine, an iodine-based antiseptic that trickles down his shaved chest and sides, drying in copper-hued streaks. David Bagby, a registered nurse who supervises the operating rooms used by Mission for open-heart surgery, glances at a clock. It’s nearly 11 a.m. “We’ve just put him to sleep.”
Another nurse gently tilts the man’s head back and inserts a tube that will keep his trachea open. Few words are spoken. The lights dim. Like an animated X-ray, a three-dimensional echocardiogram image of the man’s pulsing heart blinks on a screen, beating in a jerky rhythm.
The door opens, and surgeon Oliver Binns walks in. It’s a slow day, Bagby says. “We haven’t got but three going right now. Lots of times, we’ll have five or six simultaneously.” This year, doctors at Mission will perform more than 1,200 open-heart surgeries. In this one, Binns is using arteries from the man’s right calf and chest to graft bypasses around blockages in his heart.
His chances for survival are good, according to Health Grades data. More than 95% of Mission’s bypass patients live at least six months after surgery, more than at Duke University Medical Center in Durham, probably the best-known hospital in the state.
Volume is one reason. In 1981, the year Burgin arrived, Mission performed 228 open-heart surgeries. The number now, reflecting an increase in patients after the merger and an increase in bypasses in general, is five times greater. A 2001 study published in the New England Journal of Medicine concluded that for complex surgical procedures, the odds of dying are four times greater at low-volume hospitals.
High patient volumes allow doctors and administrators to pinpoint best practices. Then the hospital standardizes as many steps as possible — from preoperative preparation of Binns’ patient to, hours later, rousing him from anesthesia. “We want it so that a doctor, nurse or whoever, anywhere they go in our 800 beds, can expect to find the same process,” Burgin says. One reason Mission tries to avoid complications is because that keeps costs down, he says. At Mission, top-rated by Health Grades for knee replacements, only about 4% of those operations result in complications. At some Tar Heel hospitals, the rate exceeds 20%.
Mission also has taken steps to address another major concern of hospitals — accidents and errors. Hospitals were shaken in 1999 when the Institute of Medicine, which advises the National Academy of Sciences, estimated 98,000 patients nationwide die each year because of their mistakes. Health Grades researchers say the number may be larger — as high as 195,000. However, Samantha Collier, a physician and Health Grades’ medical director, says for each 1,000 hospitalizations, Mission and similar hospitals that have strict error-prevention programs save about $740,000, compared with the lowest 10% of the 5,000 hospitals that Health Grades examines each year.
At the simplest level, Mission and other hospitals spend pennies to save thousands of dollars. A recent Medicare study shows that by immediately giving heart patients aspirin when they arrive with a heart attack, hospitals cut their chances of dying nearly 25%. By starting them on a regimen of common heart drugs such as beta blockers, which slow the heart, they will reduce by a third their chances of another attack during the next year.
The clock moves toward noon. The round man is covered by blue sheets, except for an expanse of his chest and abdomen the size of a pizza box. Before Binns makes his first incision, an assistant has removed a 6-inch vein from the patient’s leg. Binns splits his sternum with a small reciprocating saw. Nurses help Binns wedge expanders into it to jack open the rib cage. After slicing into the sac that encases the heart, Binns stitches in shunts and attaches tubes that will carry blood to a cardiopulmonary pump.
About 45 minutes into the surgery, Binns stops the patient’s heart, and the pump takes over, perfusing his blood with oxygen. There is no drama. “Like working on widgets,” Bagby says with a soft laugh. Intravenous tubes drip anticoagulant and other drugs into the patient.
Even the process of getting those drugs here from the hospital pharmacy reflects steps Mission and other hospitals take to prevent mistakes — by spending upfront to reduce costs on the back end. Three years after merging with St. Joseph’s, Mission began phasing in a $40 million clinical information system that reduces the risk of miscommunication. Nearly all prescriptions and medical records are computerized. “We want to make certain that physicians issue orders and do all their charting electronically,” Burgin says. “Doctors complain about cookbook medicine, but there are a lot of checks and balances you can build into the system.”
Mission is taking other steps, including linking with the 16 other hospitals in the region by computer so that when a patient is referred there, his medical records immediately follow, speeding treatment, reducing errors and constraining costs. Under the lights of the operating room, though, such measures function in the background, unseen, unspoken. By noon, Binns is less than an hour into the round man’s bypass.
Next door, surgeon Mark Groh is finishing one he started about 7 a.m. Groh, who completed his residency in cardiothoracic surgery at the University of Virginia in 1994 — the year Burgin and the Sisters of Mercy began discussing a merger — is like many surgeons who have moved here since. “The best doctors go where other doctors are,” Higgins says. “The aesthetics of the region are a recruiting tool, but critical mass makes a big difference.”
Groh bends over the patient. As nurses suction the chest cavity, more blood weeps like red dew from the sawed edges of his sternum. “Bone is living material,” Bagby says. “It bleeds like everything else.” Groh packs the bone with a hemostatic powder to stop the bleeding. Then he steps back.
In little more than five hours, he has rigged three arteries around blocked ones. They should be good for at least 10 years. As Groh leaves, another surgeon begins cinching the edges of the patient’s sternum together with titanium wire. “Inelegant, but it works,” Bagby says. In some ways, that’s how Mission got where it is today.
The end was near. Sister Antonette Schmidt knew it in late 1997 as she walked the halls of St. Joseph’s, lined with statues of saints. “Ours has always been a very specific mission of faith,” says Schmidt, now an executive in a Catholic hospital in Pennsylvania. “We exist to exhibit the healing love of Jesus Christ.”
Larger Mission Hospital — 472 beds to St. Joseph’s 331 — rambling and mostly built of institutional red brick, looked down from its hilltop. From his first day there in 1981, Burgin had been fighting the perception that Mission’s staff was aloof. “I had gotten sick of people saying, ‘Mission is a good hospital, but if I had my choice … ’” He pushed for change. “All of a sudden, you walked in and people smiled and said, ‘How do you do,’” says Irby Stephens, a retired doctor and author of a history of medicine in Asheville from 1800 to 2000. He was medical chief of staff at Mission in 1958. “The sisters were loving, warm people, and people got the idea they took better care of you. But if you were really, really sick, you’d go to Mission.”
Love was no longer enough. A new age of medicine, driven by cost control and managed care, was colliding with the old. Part of the task before Burgin and other administrators was to blend them. “The two hospitals generally competed, but they weren’t altogether competitive,” says Robert Fitzgerald, director of the division of facility services of the N.C. Department of Human Services. His division, which vets the hospital industry to prevent overlap, was chosen by the Department of Justice to oversee Mission’s merger. “Because it was Catholic, St. Joseph’s couldn’t provide the breadth of care that Mission did.”
St. Joseph’s was founded in 1900 as a tuberculosis sanitarium. It excelled at many procedures, including knee replacement, but it was forbidden by the church to provide some reproductive services, including genetic testing, tubal ligations and birth control. Surgery is usually a hospital’s most lucrative service. “We had a 40% better price on average than they did because with our surgical volume we were able to subsidize our obstetrics program, pediatrics and others,” Burgin says.
The state had issued the two hospitals what it called a certificate of public advantage, which allowed them to form a monopoly, under a law passed in 1993. That had let them call a truce in their construction arms race — Mission, for example, was poised to plunk $5 million into a network of six outpatient clinics to combat St. Joseph’s four clinics — but divisions remained.
“The board wasn’t unified,” Burgin says. “It had factions. Doctors had factions. The community’s business leaders had factions. I call it my personal purgatory.” Plus, the Sisters of Mercy in Belmont had already sold Mercy Hospital in Charlotte to Carolinas HealthCare system for $115 million and seemed ready to get out of health care.
Many Asheville doctors opposed the merger. “Some were afraid they’d lose their clout,” Stephens says. “They had always been able to say, ‘We’ll just go across the street,’ when a dispute arose.” Burgin recalls a doctor poking a finger in his chest and vowing, “I’ll never work for you.”
Dissident doctors formed Mountain Health Care, an association of independent practices that allowed them to bargain collectively with the hospital and health-care insurers. Intended to combat Mission’s monopoly, it came to an ironic end in 2002 when the Justice Department shut it down for price fixing.
But Mission couldn’t just give up. Carolinas HealthCare System and others were rumored to be looking at St. Joseph’s. “To allow somebody like Carolinas or a for-profit company to come in would have been absolutely foolish strategically,” Burgin says. But there were other obstacles, including small community hospitals that dot the mountains. They worried that Mission would use its size to undercut them with predatory pricing.
That hasn’t happened, and some regional health-care officials say Mission has become a model of balance between health-care competitiveness and cooperation. It absorbed two small, financially weak hospitals — Spruce Pine Community Hospital in Spruce Pine and McDowell Hospital in Marion — at their request. “It wasn’t like Mission swooped in and took them over,” says Gary Bowers, executive director of the 16-hospital Western North Carolina Health Network.
With others, Mission competes but allows them to take part in group purchasing and other services to curb costs throughout the region. Says Bowers: “Mission has got tremendous volume and can get great deals, so they’ve agreed to extend that so everybody gets those kinds of discounts — things like capital equipment, blood supplies, medical service supplies.”
Mission is also what government regulators call a Safety Net Hospital, accepting all patients, including those needing less-lucrative services such as psychiatry. It provides free testing and, if necessary, free hospitalization for patients under Project Access, in which the poor receive cards similar to those of managed-care patients and are treated without charge by Asheville doctors and clinics. It’s not altogether altruism, though. The hospital cut total charity care by 23% because patients seek care before illness become crisis.
On a winter day, Burgin, with a scarf still looped around his neck, sits at a conference table detailing Mission’s sometimes rocky transition from old medicine to new. Some ideas he advocates are catching on. “Hospitals need incentives to take care of patients in a more efficient and effective way. Now, if you do more, you get more.” Medicare recently began a pilot program to do that, paying selected hospitals 2% bonuses for improving indices of quality such as mortality rates and limiting rates of repeat orthopedic surgery.
Damore has similar ideas. He wants to increase training of geriatric specialists at Mission and possibly open a center dedicated to treatment of the aged. He expects to create so-called Code Blue Teams, which will dash to rescue a patient in crisis but also identify high-risk patients in advance. He sees such moves as ways to combat competitive threats from other Carolinas health-care systems and for-profit specialty hospitals that cherry-pick patients needing lucrative procedures such as orthopedic surgery.
Mission executives say such upfront investments will pay off in more cost-effective care — and in operating rooms such as Binns’. There, on a snowy day in Asheville, Bagby watches as the surgeon repairs the round man’s heart. “You know,” he says, “we rarely ever lose one of these anymore.”