August 22, 2019
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MaineHealth moves to centralize spending decisions for its $2B hospital network

BDN File | BDN
BDN File | BDN
Maine Medical Center, the state's largest hospital and a facility in the MaineHealth system, can be seen in Portland in this April 2013 file photo.

An emerging proposal by Maine’s largest health network is asking its hospitals in 10 Maine communities to consider relinquishing oversight of their budgets to the parent organization, a move that could affect health care for hundreds of thousands of Maine residents.

MaineHealth, based in Portland, seeks to combine its member hospitals into a single, $2 billion organization overseen by one governing board. Currently, member hospitals determine their spending priorities on the local level first, with a subsequent review by the network board.

MaineHealth calls its proposal part of a necessary evolution in the face of growing economic pressures. But the idea, although still in the early stages, is already fueling concern about how much control local communities would maintain over the hospitals that anchor their regions.

The proposal would affect patients throughout southern and western Maine at the flagship Maine Medical Center in Portland, Spring Harbor Hospital in Westbrook, Franklin Memorial Hospital in Farmington, LincolnHealth in Boothbay and Damariscotta, Pen Bay Medical Center in Rockport, Southern Maine Health Care in Biddeford and Sanford, Waldo County General Hospital in Belfast, and Stephens Memorial Hospital in Norway.

MaineHealth is a not-for-profit, but measured by revenue, this reorganization would create the largest business headquartered in Maine, exceeding L.L. Bean. MaineHealth is already Maine’s largest employer, with about 18,000 employees who work throughout the system.

“The rapidly changing industry landscape is forcing the conversation about governance and operating model unification across MaineHealth sooner than many of us had anticipated,” states a MaineHealth white paper about the proposal provided to the Bangor Daily News. “These trends are proving highly disruptive for our members and threaten to undermine our efforts to provide excellent, patient-centered care.”

Yet the proposal could prove a tough sell in some of MaineHealth’s communities, particularly where the system has already asked local boards to cut services or undergo difficult mergers with neighboring hospitals.

“The concern about loss of autonomy, which they acknowledge, is very real,” said Andy Coburn, a rural health expert at the University of Southern Maine’s Muskie School of Public Service. “People don’t want to give up their ability to govern themselves.”

New role for local boards

While MaineHealth’s hospitals are its most recognized members, the proposal also would affect a number of health organizations connected to them. The hospitals are run by legally separate corporations that oversee a broad range of related services, such as primary care practices, specialty physician groups, home health care providers, nursing homes and mental health care.

Those corporations fall under the MaineHealth umbrella, but they operate with some independence, choosing their own boards that weigh in on budgeting, which health services to offer, and how to improve the quality of care they provide, among other responsibilities.

The local residents who serve on those boards often help decide, for example, whether to invest in a new MRI scanner, hire a new CEO or undertake an expensive construction project.

That structure ensures a measure of local control, though MaineHealth still must approve their spending plans. The parent system also handles back-office functions such as billing, human resources and implementing a shared electronic medical records system.

But the configuration makes it hard for MaineHealth to channel its considerable financial and clinical resources toward struggling hospitals in more rural regions, according to officials. The burdens on hospitals, particularly smaller ones, are only increasing, including shrinking payments by government health insurers even as hospitals take on more responsibility for keeping their communities healthy.

As a result, some are forced to cut services that both the hospitals and MaineHealth agree their communities need, according to Bill Caron, president of MaineHealth.

“As our smaller hospitals get into financial difficulties, they’re making decisions that are inconsistent with those care models,” Caron said. “They can’t afford to fund the activities that we all believe are appropriate locally.”

Under the proposal, MaineHealth could more easily shift money, physicians and other resources to the hospitals that need them most, system officials say.

“You’ll have a rural health system that’s doing OK financially, then you’ll have another one that’s really struggling, having to cut essential services. You’ll have one that’s able to attract physicians and providers, and another one can’t. … Those legal separations make it very hard to take the resources and easily deliver them,” said Susannah Swihart, chair of MaineHealth’s board of trustees.

The proposal, which MaineHealth officials describe as a “unification,” would require its communities to think more broadly about their role in the system, Caron said. Pen Bay Medical Center would have to consider patients in Farmington, for example. Doctors in Biddeford would need to consider their counterparts in Norway, and so on.

“We’re saying to our local communities and our local boards, ‘We want you to play a different role than you’ve played in the past,’” Caron said.

How budgeting works now

Member hospitals already work with MaineHealth to set their operating budgets each year. Local CEOs work with the system on an outline, then hammer out details with their local boards. Once approved, the budgets go to MaineHealth’s board for approval. All of the member budgets then get added together to form an operating budget for the entire system, Caron said.

Under the proposal, those corporate boards would consolidate into one entity. The unified board would then decide how best to spend the unified pool of money across the system, rather than each of the 10 members making decisions for their local community.

“The bottom line here is we’re trying to take $2.2 billion of assets and operating revenues each year and say that we need to protect the care that we believe belongs in each one of our communities with that full asset base,” Caron said.

That arrangement could potentially benefit its member hospitals, say MaineHealth officials. The consolidation would give the system a way to offset disadvantages that smaller hospitals suffer from the way Maine, and the rest of the country, pays for health care.

Hospitals make the most money on the types of services that have become concentrated at bigger hospitals such as Maine Medical Center, such as hip and knee replacements, and heart and brain surgeries.

Smaller hospitals that used to perform those services now send those patients to Maine Medical Center and lose out on potential profits. They’re left providing more basic, but important, primary and preventive care for which health insurers often don’t fully reimburse.

“We don’t want a hospital to feel like they’re going to hurt their bottom line by doing the right thing for the patient,” said Bill Burke, chair of Maine Medical Center’s board of trustees and a member of the MaineHealth board.

Maine Medical Center, with all those patients flowing to its operating rooms from elsewhere in the system, is profitable, while at least three other hospitals in the system — Franklin, Pen Bay and Southern Maine Health Care — are losing money. The proposal would give MaineHealth a way to more fairly allocate that money throughout the system, officials say.

The proposal aims to also make it easier for medical staff to work throughout the system and allow the rural hospitals to benefit from Maine Medical Center programs, such as clinical trials and recruiting medical students through Maine Medical Center’s partnership with the Tufts University School of Medicine.

MaineHealth is discussing the proposal with its members and plans to do so for the next six months, Caron said. In the spring, the organization will decide whether to move forward, and estimates unification would take another year to 18 months.

MaineHealth officials do not believe they need state or federal antitrust approval, but will meet with the Maine attorney general’s office this week about regulatory requirements, Caron said.

“Most people believe we’ll be unified at some point,” he said. “The question is, is now the right time, or is it five years from now, 10 years from now?”

Early concerns

Some members are already voicing concern about a corporate board in Portland making health care decisions for their communities. The medical staff at Waldo County General Hospital in Belfast has said it doesn’t support the plan as currently known.

“We fear that further loss of the independence of our hospital will lead to decisions by others who are not a part of, nor equally concerned about our community as those of us
who live and work here,” the staff wrote in a Nov. 22 letter to their board.

The medical staff went on to raise questions about how the proposal would affect staffing, health care services, finances and community involvement, among other areas.

“There are many other very important questions, about which we don’t even know enough to ask, for we have so little knowledge of the details of the proposed agreement,” they wrote.

The Belfast hospital’s board merged with Pen Bay’s board in 2015 at MaineHealth’s urging, a challenging process that led to more sharing of physicians and services. This proposal would bring even more change.

Greg Dufour, who sits on both the board that oversees Waldo and Pen Bay, and the MaineHealth board, said, “We want the med staff to weigh in. There has to be more information coming out, because while we have the concept of unification, we have a lot of details to work out.”

MaineHealth officials acknowledge those questions need answers. They’re just beginning to reach out to local boards, and plan to seek out community feedback after their local boards and medical staffs weigh in, Caron said.

“We don’t know if this is the right answer yet. … If it doesn’t make sense for the majority of our communities, we’re not going to do something,” he said.

Under the proposal, member hospitals would still offer advice and make recommendations to the larger board, Caron said. But, he said, no decisions have been made about what kind of representation member hospitals would have on a unified corporate board.

He also declined to speculate about how the proposal might proceed if some MaineHealth members oppose any final plan, if one is reached.

But he did say that officials envision some specific areas remaining in local hands, such as ensuring the quality of the health care that’s delivered in each region and the process to credential and issue privileges to medical staff.

Whether a local board makes those decision is secondary to a larger question — whether the voices of the communities and physicians will be heard, said Gordon Smith, executive vice president of the Maine Medical Association.

“The issue is are people listening?” he told the Sun Journal. “Are the people that are actually providing the care, do they feel they’re being respected and their opinions valued and that they have a voice? And if you have all those things, I don’t think it matters if you have an advisory committee or a board or no board. Those are the things that, day-to-day, physicians tell me make a difference.”

MaineHealth also must overcome lingering resentments in certain communities, such as Boothbay, where its handling of the closure of the only emergency room on the peninsula in 2013 spurred backlash. Caron said MaineHealth relationship with the community has since improved, and officials learned important lessons about community involvement in such decisions.

“They understand that these are difficult community processes,” said Coburn of the University of Southern Maine. “They also know that they can’t just dictate anything.”

Sun Journal staff writer Lindsay Tice contributed to this report.


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