Bacon's Rebellion

Democracy Thrives in Sunlight

Big Questions For Roanoke’s Carilion

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by

James A. Bacon
in

If you’ve ever wondered about runaway health care costs, maybe you shouldn’t blame the government. Blame non-profit, monopolistic health care organizations.

Such as Carilion Health System in Roanoke.

In a scathing Wall Street Journal story on the front page this morning, Carilion, the only name in the game in Roanoke, was taken apart for excessive power, abusing its pricing, throttling the local news media and harrassing patients for non-payment.

Here are a few choice items from that story:

  • Carilion’s monop0oly in Roanoke means that the area has the highest medical costs in Virginia.
  • Colonoscopies at Carilion cost four to 10 times what other area centers charge.
  • Neck CTs are nearly three times what area centers charge.
  • The compensation of its chief executive, Dr. Edward Murphy, has tripled in recent years to $2.07 million.
  • After consolidating two hospitals in Roanoke a few years ago, Carilion forced local doctors to sell their private practices to them. If they did not, they got no referrals from Carilion.
  • When Jeff Sturgeon, a reporter for the Roanoke Times, covered the controversy aggressively, Carilion complained and Sturgeon was shifted to another beat.
  • Carilion is so pushy in going after non-paying patients that the General District Court in Roanoke devotes one day each week to dealing with liens and lawsuits filed by the health system.
  • A massive construction project now underway is the object of accusations of self-dealing.

The odd thing about all of this is that non-profit hospitals were originally established to help indigent patients. But Carilion morphed into something else. Just as the federal government warned in 1989, an unhealthy monopoloy was formed when Carilion merged with another hospital.

Issues such as these are huge for Virginia and the rest of the nation. Hopefully cries for universal health care will get some traction because obviously, in this case, the free market is not working. Life, death and health should not be business decisions affected by sharks who run monopolies.

It is especially disheartening the see the local media intimidated. But I can believe it. A few years ago I edited a magazine in Richmond. We ran a legitimate story about doctors in Virginia Beach forming their own boutique practices because they were unhappy with the business-as-usual approaches to health care.

A few months later I was called into a darkened room by the publisher and a representative from human resources. There, I was rebuked and told that the doctor story was “a pencil in the eye of managed care.”

Peter Galuszka

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10 responses to “Big Questions For Roanoke’s Carilion”

  1. Anonymous Avatar
    Anonymous

    Oh please Peter!

    How can you say “the free market is not working” with all the certificate of need regulations in Virginia that make real free market competition impossible?

  2. Anonymous Avatar
    Anonymous

    Anonymous,
    You got me there. I completely forgot about the certificates when I wrote this item early this morning.
    You raise an excellent point that badly needs addressing.

    Peter Galuszka

  3. rsqmb Avatar
    rsqmb

    Increasing numbers of Republicans and Democrats are coming around to the conclusion that we need a National Health Service.

    Not only would a NHS put the middlemen of the parasitic insurance industry out of business, along with them would go millions of lawyers and other paper pushers who do nothing but add overhead to the cost of heath care.

    We have heard all of the worn out (and invalid) arguments that government is too stupid to run heath care; that we should rely on the “private sector” (aka: organized crime). To those who still suffer under that former delusion that these “insurance” criminals are our only salvation, you should look at other national infrastructure as examples of what we can do if we unite our National will behind an idea.

    Our core infrastructure, although aged in some areas provides reliable roads, water, sewer, communications, to everyone. There are some who are beginning to push for “public private partnerships” so the international mafia can get their hands on our roads, but we have mostly resisted that temptation.

    Bottom line: It is time for a National Heath Service and to have our health care to be incorporated into our core infrastructure. Health care for all legal Americans must be a right, not just a privilege for the wealthy.

    If we unite behind this National Health Service, it will become the best in the world, just as our military. We mustn’t fear the propaganda from the insurance parasites who will tell us that we are creating “big government.” We will be exchanging a corrupt system for a shared system that will truly have the welfare of our citizens as its chief priority.

  4. Larry Gross Avatar
    Larry Gross

    I’d like to know how the WSJ found out the pricing info.

    Do you think if the good folks of Roanoke (or many other places) knew of such a pricing disparity that they’d not be pursuing any/all avenues politic and economic to deal with such outrageous behavior for a “non-profit”?

    what this points out is that certificate of need – apparently has absolutely nothing with ripping off citizens…

    and what this also points out is why our medical system is broke and we pay much more in this country for medical procedures than many other countries… and in the process.. we end up with a national policy that ensures that insurance companies will do whatever they can to evade costs – including not covering people on the flimsiest of excuses…

    our system is basically set up to enrich the medical care establishment – at the expense of those it purports to serve…

    this is why we need to require every health care provider to post their fees online…. for all to see and for sites that wish to aggregate the data – to be able to do so.

    and for our folks in the GA who claim fiscal conservative status – and who say that “big” ideas don’t mean higher taxes – where are their bills to deal with this?

    oh mygosh, here they are:

    VPAP – top donors:

    $809,006 Health Care

    looks like citizens will have to ante up about 800K in donations to get equitable treatment in the GA.

  5. Larry Gross Avatar
    Larry Gross

    I would submit that if we had a rule requiring health care providers to post their prices online – along with their performance history – that we’d not need a Certificate of Need nor the Government bureaucracy behind it.. nor the money in politics…

    so the best government is “small” government.

    Pass the law.. require full disclosure of costs and ratings and stand back out of the way.

    where are those “marketplace of idea” folks anyhow?

    oops.. they’re gonna all be at the Hospitality suites at the political conventions…

  6. Jim Bacon Avatar
    Jim Bacon

    Peter, You beat me to the Carilion story. You did a good job of highlighting the major points of the story. I’ll just weigh in here with my observations rather than creating a new post.

    Here’s the data point that I focused on. According to Alan Bayse, a benefits consultant in Roanoke:

    “Health-insurance rates in the Roanoke Valley used to be 20% lower than in Richmond, Virginia’s capital, and the lowest in the state. Today, he says, they are the highest in the state and 25% higher than in Richmond, citing rate information from insurer Cigna Corp.”

    Carilion is a health care “system” comprised of multiple hospitals and ancillary services. It has absorbed virtually all of its competitors in Northern Virginia (as the WSJ noted, the HCA-owned Lewis-Gale hospital is about the only hold-out). The logic of a health care system is that a comprehensive system can provide health care services more rationally and efficiently than a bunch of competing hospitals. Gee, I guess we can safely conclude now that theory doesn’t hold water.

    It’s interesting that the WSJ contrasted the Roanoke market with the Richmond market. There is no monopoly in Richmond. HCA is the dominant player, but it has strong competitors in Bon Secours and MCV. (One could describe Richmond as an oligopoly rather than a truly competitive market, but at least the oligopolists compete to some degree.)

    A similar system has evolved in Hampton Roads, where the Sentara Helath Care System dominates, and Northern Virginia, where Inova dominates — although neither one controls their market to the same extent as Roanoke.

    How have these monopolies been created? Well, the Justice Department has never (to my knowledge) blocked a hospital merger in Virginia. Further, as Anonymous 8:35 a.m. noted, the state’s Certificates of Public Need process keeps out competitors — not just other hospitals, but players such as specialty surgical centers that would compete. Health care monopolies in Virginia are largely state created and sanctioned — and, as Larry Gross notes, greased by nearly $1 million a year in contributions from the health care industry.

    In a free market, other health care providers would sniff out the big profits to be made in Roanoke and move in to compete. But they can’t. COPN blocks them.

  7. Anonymous Avatar
    Anonymous

    What has been ignored in all of this is the fact that Carilion gives a tremendous amount back to the community. The WSJ article does note that Carilion dispensed $30 million in 2006 and $42 million in 2007.

    It should also be noted that charity care in the Richmond area is provided in large part by that large hospital you have over there on Broad Street. That is funded in great part by state appropriations–a luxury that has been denied to us poor souls down here….So it appears that we have to make it up in higher charges for a CT Scan. Of course that means that the neonatal unit at Carilion–another financial drain–continues to function for the benefit of our children.

    WSJ does not mention that the hospital maintains a fully staffed emergency system which is also tremendous financial drain. In addition, it provides helicoptr emergency services over a wide area–incidentally a service that is provided in some other areas by state police and in others at considerable state subsidy.

    There is no question that there are problems with the health care sustem and how services are delivered. Unfortunately those problems and the solutions have not been (and, sadly, apparently will not be) addressed by the reporters and editors of the WSJ.

  8. Jim Bacon Avatar
    Jim Bacon

    Larry, you want data? Here’s one source: VHHA Price Point.

    VHHA PricePoint provides:

    – Aggregate discount information for each hospital for the three major kinds of health care coverage – private insurance, Medicare and Medicaid. This information allows users to understand how hospitals’ charges compare to the amount of revenue they actually collect for services provided to the three patient categories.

    – Hospital charge information for all Virginia hospitals, all services, and the average length of stay.

  9. Anonymous Avatar
    Anonymous

    When Jim Bacon noted the health insurance cost disparity between Roanoke and Richmond he quoted the Cigna figures at 25% but ignored the Anthem figures which are 6%. I would believe that Anthem has a much larger share of the market.

    Of course, I would imagine that a large portion of the health care insurance premiums in Richmond are negotiated by governmental employers which might have a lot more leverage that the small employers you find in the area served by Carilion.

  10. Larry Gross Avatar
    Larry Gross

    Jim – thanks.

    this is the kind of thing I’d be talking about – but perhaps a little easier to use.

    but I’m heartened because it appears that price data is collected by some entity…. so slicing and dicing it is a doeable thing…

    just FYI, in Fredericksburg, we had one hospital but of recent, the State has approved two compeitors – one a full up HCA hospital and the other a Rehabilitation Hospital.

    I note also – that HCA spent a huge amount of time working with the local community to get their ducks in a row to..generate support at the State Level – for the Certificate.

    and one other thought…

    given the number of local “emergi” store fronts and Laser eye centers that have popped up in the area – I wonder how the certificate process applies (or not) to them….

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