Vail Health CEO responds to Denver Post story (column)
Editor’s note: The following column from Vail Health was submitted in response to an article titled “Why are health care costs rising in Colorado?” published in the Thursday, Oct. 11, edition of the Vail Daily. Vail Health declined to provide citations for some of the numbers herein because they came from either the company’s private internal data or external data that is not publicly published by the Colorado Hospital Association. Find the partially cited version of this column at http://www.vaildaily.com.
A recent Denver Post story, which also ran in the Vail Daily, painted a picture that Colorado’s rural mountain hospitals are overcharging locals for health care services and are to blame for high health insurance premiums in our community. For Vail Health, this notion is misleading, oversimplified and incorrect. Every day, our team of nearly 1,000 local health care professionals is working to provide exceptional care, contain costs and figure out solutions to use our resources to further benefit the local community.
Vail Health has limited price increases to an average of 2.35 percent each year for the past seven years. That’s reassuring, considering the average increase for Colorado hospitals is nearly 11 percent annually for that same time period. This reality makes it very frustrating to see our region’s insurance products on the ACA exchange go up by averages of 26 percent in 2016, 28 percent in 2017 and 30 percent in 2018. Hospital pricing is obviously not the only factor in setting insurance rates. In fact, hospitals only make up about 32 percent of health care spending in our country. Insurance company shareholder profit, prescription drug prices and increased care for our aging baby boomer population are also major factors.
It’s important to note the recent Colorado Hospital Price Report shows the average prices for Vail Health’s top procedures are competitive, and even lower than our peers a majority of the time. For example, Vail Health’s price for a total knee replacement is $28,000 to $36,000 (38-44 percent) less than mountain and Denver hospital peers. Cost for some services, such as imaging, are more difficult for rural providers to control and will usually be higher in rural areas due to economies of scale required to staff state-of-the-art imaging equipment 24/7. Nevertheless, we are continuing to take a closer look at all prices to make Vail Health even more competitive. Keeping prices reasonable is the right thing to do, and it’s also good for business — we want to keep our locals here for care. If you’ve ever left the community for care or have considered it, it’s our job to find solutions to make it worth your while to stay.
If Vail Health prices are reasonable, why are we being called out for western Colorado’s high health insurance prices? There is a misperception that because Vail Health is replacing a 50-year-old hospital that our patients are paying more. The reality is the new Vail hospital is a once-in-a-generation project that we’ve been planning for 10 years. A little history — when Vail Health finished 2008 in the red (we spent more than we made that year), some management adjustments were made and our organization turned the ship around and invested future earnings conservatively with discipline and patience. While nearly every other mountain hospital spent large chunks of their cash reserves to build new hospitals or expand their facilities during this period of time, Vail Health was able to see investments compound and grow. Vail Health doesn’t get taxpayer dollars to offset operating costs every year like many rural hospitals, so we must be totally self-sufficient in saving to build this hospital without fear of financially collapsing the organization. In 2017, about 33 percent of our margin was investment returns directly related to 10 years of saving. What about the other 67 percent?
Approximately 49 percent of our margin came from investment in outpatient surgery centers. This area of health care has taken off in the past decade because it can save people (and the government) money by keeping patients in outpatient health care facilities for shorter stays. Fewer inpatients are staying in hospitals overnight and a greater number of people are having their surgery in an outpatient facility where they are able to go home within 23 hours.
That leaves 18 percent as Vail Health’s margin from inpatient and other hospital services for the year. This includes valuable community services like a 24/7 Level III Emergency Department, family birth center, Shaw Cancer Center, Sonnenalp Breast Center, cardiology, general surgery, urgent care clinics, Howard Head Sports Medicine and more. That means 82 percent of Vail Health’s margin in 2017 was unrelated to hospital charges.
Another common misperception is that being a nonprofit should mean the goal is to break even every year without experiencing a profit. In reality, hospitals that break even go out of business or are purchased by larger systems because they can’t grow, keep employees or invest in capital improvements to keep up with advancements in care. When rural hospitals get purchased by larger systems, the system will typically eliminate local services that don’t make money and adopt a patient “stabilize and transport” strategy, which we don’t believe provides the best care for our locals or visitors. Vail Health is proud to be a nonprofit that is also independent and locally governed. This matters because our dollars are reinvested locally and don’t go back to a corporate office in Denver or another state.
In 2017, Vail Health gave back $20 million into our mountain communities. That $20 million covers a long list of valuable services and through the years has included things such as charity care (free care for people who can’t afford to pay); underwriting life-saving services like the cardiac catheterization lab; placing public AEDs (Automated External Defibrillators) in partnership with Starting Hearts; giving out helmets through ThinkFirst; hosting free doctor talks and health fairs; providing athletic trainers for our high school sports teams; supporting Eagle County Schools and the Education Foundation of Eagle County; as well as funding research and helping financially support worthwhile organizations such as Mountain Family Health, Mind Springs, Castle Peak Senior Care, Homecare and Hospice, Roundup River Ranch and others.
While Vail Health works to lower health insurance premiums, we’ve simultaneously lowered prices at our urgent care clinics in Avon and Gypsum. We also extended a 75 percent discount off urgent care visits for the uninsured and expanded our financial assistance to households making up to 350 percent of the federal poverty level. We’ve been able to save money for locals working at our larger employers through direct contracts with self-funded plans. Working with the Vail Valley Partnership, we would like to extend this option to sole proprietors and small businesses, which make up a majority of our community, through something called a MEWA (Multiple Employer Welfare Arrangement). Unfortunately, the Vail Valley Partnership’s effort to form a MEWA, which would allow small businesses to pool together and act like a larger employer, has so far been denied by the state. We continue working with them on other creative solutions.
The current system in our part of Colorado is not working, and something has to change. Blaming the hospitals has become the easy excuse, but it lets everyone else off the hook. If we are going to roll out realistic rural solutions, the hospitals, engaging with our local business communities and providers must work together with our legislators, state government and insurance companies and have the courage to be innovative.
Health care is complex and there will always be people who want to point fingers and assign blame, but that leads to a divided community and zero solutions. We have had many meetings with community members, elected officials, legislators, employers, our lieutenant governor, state insurance commissioner, health care providers and engaged groups like the Vail Valley Partnership. Everyone involved wants meaningful change and we will get there. Colorado laws are different from other states and limit our menu of potential solutions to lower health insurance rates. Rural communities in Colorado are working hard to figure out a solution to the high premiums and it’s going to take more meetings and more collaboration to get there. Know that Vail Health is committed to providing superior health services with compassion and exceptional outcomes while we partner with those working to solve this problem.
Doris Kirchner is the president and CEO of Vail Health.
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