High Country, High Costs, Part 7: Vail Valley Medical Center expanding, facing new competition
April 7, 2017
VAIL — Vail Valley Medical Center grew from a small town health clinic in the mid-1960s, and today depends greatly on its association with orthopedics clinics, primarily the Steadman Clinic and Vail-Summit Orthopedics, for its operating margins, CEO Doris Kirchner said.
Indeed, five of the center's 10 highest revenue producers are orthopedic specialists.
Dr. Richard Steadman's cutting-edge orthopedic techniques and his research institute attracted celebrities and athletes to travel to Vail for treatment of their sports injuries. Today, the Steadman Philippon Research Institute focuses on regenerative medicine and muscle-drive stem cell therapy in orthopedics, heart, bladder and cancer to use the body to heal itself.
Vail Valley Medical's Shaw Regional Cancer Center is one of the only comprehensive cancer centers in a ski community in the world, Doris Kirchner said. It allows locals to get both radiation and medical oncology without journeying to Denver. Its breast cancer and prostate cancer survival rates are 5 percent and 8 percent, respectively, above the national average.
“Making the wrong choice and going to an emergency room can be time-consuming, frightening and costly. These two-in-one centers eliminate the guesswork of whether you need emergency or urgent care.” Jennifer WillsCentura Health Director of Strategic Communications
Jack's Place, a cancer caring center, features 12 rooms, a gourmet kitchen, massage and meditation rooms and workout facilities. It is based on a donate-if-you-can philosophy.
Recommended Stories For You
Two years ago, Vail Valley Medical opened a cardiac catheterization and electrophysiology lab, keeping two full-time cardiologists busy.
Local skeptics point to large margins between revenues and expenses and wonder what Vail Valley Medical is doing with all that money, and why it can't use that cash to lower costs. In 2015, revenues totaled $231 million and expenses were $197 million — a $34 million margin, or 15 percent. In 2014, revenues were $52 million above expenses.
Altogether, Vail Valley Medical has enough money in reserve to fund the hospital for 539 days. Hospital executives counter that those hedges are necessary in order to convince investors to buy the bonds for hospital expansion— and that without them, the bonds would have to be paid back at a higher interest rate, increasing costs.
Doris Kirchner says Vail Valley Medical now has enough money in reserve to finish its $300 million expansion. The new west wing, which began construction in 2015, includes a new cardiac catheterization lab, a fourth floor for orthopaedics, additional research space for the Steadman Philippon Research Institute, expanded physical therapy at Howard Head Sports Medicine, new pre-op and post-op rooms, and an upgraded Patient Care Unit and Intensive Care Unit.
On the east wing
The east wing, scheduled for completion in 2020, will include:
• A new, state-of-the-art 24/7 emergency department.
• A relocated helipad on the medical center campus with direct access to the hospital.
• Medical space for physician groups.
• Increased parking capacity, including covered parking.
• A new main entrance off of South Frontage Road.
• A paramedic station.
• A new pharmacy, gift shop and coffee shop.
• A new imaging and radiology departments.
The expansions were needed because of the population growth in the area and because "over the past decade, the overall surgical numbers have climbed dramatically," Kirchner said. "Primarily related to orthopedics, but also in cancer, urology, ophthalmology, pain management, gastroenterology and general surgery."
Chris Neuswanger, a mortgage broker in Edwards, says Vail Valley Medical devotes too much of its money and energy to the orthopedics clinics, and that raises costs for everyone.
Vail Valley Medical has done what it can to stem costs, and has been a good neighbor, giving back about $11 million a year to the community, Kirchner said.
The hospital offers to pay up to 100 percent of the out-of-pocket costs of patients who are at or below 350 percent of the federal poverty level. The hospital has cut prices at its urgent care centers in Avon and Gypsum, and at its new affordable walk-in clinic in Edwards.
The facility has inaugurated a new medical discount program that offers 75 percent off urgent care bills for uninsured locals, and uses telemedicine video to save costs in psych evaluation, and monitoring of babies and stroke patients.
And the CEO stands behind Vail Valley Medical's quality scores. The hospital-acquired infection rate of 0.25 percent contrasts with the national average of about 3 percent.
But with every new technological advance, expectations rise and so do overall health costs. "New technologies and expensive drugs that extend lives are being demanded and expected by patients," Kirchner said.
Lowering the burden
Vail Valley Medical is trying to lower the burden on working class and middle class residents in a variety of ways, Kirchner said.
First, while overall health care costs are climbing at about 6 percent annually, Vail Valley Medical's annual price hikes have been about half of that.
In addition, the hospital contributed:
• $100,000 to place 50 defibrillators across Eagle County.
• $200,000 to help fund the Castle Peak Senior Care Community.
• $34,000 annually for HomeCare and Hospice of the Valley.
To the charges that Vail Valley Medical is getting too big and that translates to higher costs, Kirchner says all the expansion is necessary — to serve the populace and to avoid getting taken over by a hospital chain.
"Our vision is to remain independent, and having a strong balance sheet is a necessity to retain that vision."
Centura Health and Kaiser Permanente have moved into the Vail Valley — Centura with an emergency room and urgent care facility in Avon, and Kaiser with a clinic in Avon as well as its facility in Frisco.
Not everyone in the valley is convinced that the greater competition will bring lower prices and many question the need for another trauma center so close to Vail Valley Medical's.
Centura's new center will provide 24-hour-a-day access to emergency and urgent care services for people in the Avon area, Jeff Brickman, Centura Health's past president of the mountain and north Denver operating group, said last year. He said his company is committed to keeping costs low.
In an email, Centura Health Director of Strategic Communications Jennifer Wills wrote that the company's entry into the Vail Valley aims to provide access to health services while lowering the costs of care. Patients are billed based on the level of care provided, Wills wrote, adding that Avon is one of only a few communities in the U.S. where that type of billing is available.
"We know it is confusing for most consumers to know when to go to an emergency room and when they can go to a less expensive urgent care center," Wills wrote. "Making the wrong choice and going to an emergency room can be time-consuming, frightening and costly. These two-in-one centers eliminate the guesswork of whether you need emergency or urgent care."
Since the Avon center opened, more than 70 percent of patients have been treated at lower-cost urgent care rates, Wills added.
Locals worry about Centura's interest in acquiring Vail Valley Medical Center, which would change its ownership from a small community organization to a regional behemoth. Centura operates Summit Medical Center in Frisco and another dozen hospitals in Colorado.
Kaiser Permanente entered the mountain market early last year and now has 4,000 customers, mostly in the individual market. But it wasn't able to negotiate contracts with Vail Valley Medical Center or Summit Medical Center in Frisco.
"We really do want to partner with the hospitals, but we're not going to compromise our values," Brent Bowman, K-P vice-president for the Colorado mountain area, said. "We believe in affordability. If we can't meet in the middle on affordable options, we are going to have to keep having that conversation."
So, K-P's Eagle County and Summit County customers have to pay a stiff co-pay if they go to one of those hospitals, and K-P has to pay the remainder — adding up to 100 percent of the hospital bill charges. And that is a whole lot more than the bills charged to Medicaid, Medicare, or employer-covered patients. Bowman said the customers are showing a strong willingness to go to the Front Range for more affordable hospital care.
Bowman said his company made the move into the Colorado high country as part of its corporate mission to identify areas where "there is inequity with respect to affordable, high-quality care."
Four thousand customers isn't enough leverage to negotiate stiff discounts, and the dollars aren't favorable yet. But K-P is actually a bit ahead of its forecast in its 10-year plan to make inroads into the mountain resort regions, Bowman said.
"We want to be at 6,000 by the end of this year," Bowman said "We're totally committed to these communities. We plan for 10 years worth of growth," he said. Already, K-P Colorado has given $200,000 to local non-profits in Eagle and Summit counties.
He noted that K-P Colorado entered the northern Colorado market five years ago, and rates have since dropped by double digits. The mountains are tougher, he said, listing familiar challenges — the high cost of living, the cyclical nature of the seasons, the lack of competition.
Still, Kaiser is committed to its 10-year financial horizon, and believes "we can make an impact on costs over that period of time," Bowman said.