Capping costs: hospitals strive to maintain specialties in an atmosphere of reform.

Author:Martel, Judy

Health-care reform is dead for the year, but hospitals already are feeling the first flush of a fever. A new concept has been initiated by insurance companies and propelled by increased competition that would put a cap on how much money can be spend treating a patient--the proposal is known as "capitation" or "capping."

Meanwhile, hospitals that spent the past decade building specialized areas of service are now adding primary-care physicians and private practices to their rosters. Diversity seems to be the new watchword.

"There's a new saying, 'Nobody wants to be the CEO of a hospital, they all want to be the CEO a health system,'" says Michael Schatzlein, executive director and CEO of Lutheran Heart Alliance at Lutheran Hospital in Fort Wayne.

"Society isn't willing to pay what it used to pay for services. We can cut out the expensive, high-tech stuff, or we can do our core business efficiently," he says.

The Heart Alliance is a full-service heart center, and includes everything from preventive educational programs to transplants. It is owned by physicians and the hospital, and was launched a little more than a year ago by Schatzlein, who brought the heart-transplant business to Lutheran in 1985.

"Health care is being reformed as we speak, by private payers, not by the federal government," says Mitch Roob, president of the Marion County Health and Hospital Corp., which oversees Wishard Memorial Hospital in Indianapolis.

It made sense for hospitals to specialize in the 1980s, Roob notes, because that's where the money was. Insurers were willing to pay on a fee-for-service basis. With managed care and capped health-care costs, "specialties will become increasingly meaningless," he says.

Under the proposed capped, managed-care concept, health-care systems will receive a monthly fee to keep people well. If a specialist is needed, then the health-care provider will have to pay the specialist out of the monthly stipend. "That means all these traditional profit centers for hospitals will become essentially cost centers," Roob says.

The state already is moving Medicare patients toward this kind of managed care, he adds. Wishard is the county hospital in Marion County, which means it accepts Medicare patients and cares for the indigent. As all hospitals move toward capped managed care, Roob says, they will see a 50 percent drop in the number of filled beds.

"I can't overestimate the degree of change" health-care reform is bringing to the state and...

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