This is what is wrong with healthcare

[derf]

http://www.philly.com/philly/health_...in_luxury.html

Cliff notes:

Virtua hospital corp is building a luxury hospital in a rich neighborhood that has massage spas and shit. The hospitals are only located in well to do areas, not near areas where there are poor people without medical insurance. The company makes more profit than the industry average. They hope to maximize profits by charging more money and attracting more patients who are willing to pay higher healthcare costs to get worked on in a luxury environment.

Hospital breaks new ground in luxury

By Chelsea Conaboy
Inquirer Staff Writer

A salon for couples' massages with private shower. Life-coaching sessions in low-lit rooms with cushy chairs. A lineup of services to make clients' skin appear younger and their bodies thinner.

This isn't a retreat resort. It's the new face of luxury at the nonprofit Virtua Health system's recently opened Health and Wellness Center, on Hurffville-Cross Keys Road in Washington Township.

Designers of the center's $3.5 million spa, called vir tú, "spared nothing," said Ralph Cioffi, general manager of the spa, a joint venture of the hospital system and the Star Group marketing firm.

"We have a very big toolbox, especially with Virtua behind us," Cioffi said.

While many New Jersey hospitals grapple with barely-there operating margins and a national slowdown in construction, Virtua is growing.

It expects to break ground this spring on a second wellness center, on Centerton Road in Moorestown - another step in its plan to reach deeper into the suburbs surrounding Virtua's Voorhees, Marlton, Mount Holly, and Berlin hospitals.

The ultimate grab? Those South Jersey residents who now use Philadelphia doctors and hospitals.

The 225,000-square-foot Washington Township facility, which opened in January, includes a same-day surgery center co-owned by the doctors, an express-care center, and a fitness center with indoor track, trainers, and heated pools. The assortment of services is targeted to the region's baby boomers - and the well-insured, health analysts say - whose patronage has enhanced Virtua's bottom line.

The center, a $31 million investment by Virtua built in partnership with health-care real estate developer Frauenshuh, is the hospital's first campus in Gloucester County. It allows Virtua to stake a claim there while it completes construction on a $463 million project that will replace Voorhees' current hospital next spring.

Virtua hospitals serve more patients than any of their Burlington, Camden or Gloucester Counties' competition. But about 13 percent of patients in Virtua's service area - which includes a portion of Atlantic County - sought care in Pennsylvania in 2007, according to hospital financial documents.

"The goal is to eat at [that market] a bit," said chief financial officer Bob Segin.

A third wellness center - less spa and more doctors' offices - will be built next to the Voorhees hospital.

Virtua also is in the midst of a $152 million, five-year systemwide technology upgrade and a $7 million enlargement of its Mount Holly maternity unit. It is drawing up plans for another Mount Holly expansion to accommodate an obstetrics practice that has grown as others in the region have closed.

"What they're doing is very unusual," said Jerry Katz, a health-care specialist with Kurt Salmon Associates, a management consulting firm. "They're expanding at a time when places are contracting."

In 2008, the average New Jersey hospital was barely breaking even, with an operating margin of two-tenths of 1 percent, according to the New Jersey Hospital Association.

Virtua's margin that year: 9 percent.

As of September, the hospital system had a 9.2 percent operating margin in 2009, according to an association report made available by Virtua.

The path to financial success has come in measured steps, Virtua executives said.

After Memorial Health and West Jersey Health - both profitable systems - merged in 1998 to form Virtua, chief executive Richard Miller said he wanted to take the new system out of the "middle of the pack" in quality and patient satisfaction.

He turned to General Electric, which was developing a strategic consulting business with hospitals, to implement statistical tools to improve operations.

The result is a culture that Miller said was now founded on "rigor and accountability": weekly financial reviews, quarterly reviews of patient satisfaction, a ranking of all managers to determine those "in need of improvement," and goals for new programs and technologies.

"We're a $1 billion company, and we can adjust in a heartbeat," Segin said.

To an outsider, the GE "Six Sigma" practices Virtua has adopted may seem jargon-heavy and bordering on silly - managers are called black belts and master black belts - but industry experts say they work.

The management tools become "like a religion," said Uwe Reinhardt, a Princeton University health economist. But "there's something to it because it means, 'Let's focus on quality and actually do it.' "

The numbers tell the story, Segin says: With GE's guidance, Virtua has saved $27 million since about 2002, he said.

Six Sigma tools helped Virtua turn around its breast-care program. Patients with abnormal mammograms had waited about a month to see specialists, leading half to seek treatment elsewhere.

In 2008, Virtua began to assign each patient a "nurse navigator" to set up appointments, explain treatment, and follow her through recovery. The system cut wait times and has helped Virtua retain 97 percent of its breast-care clients, a hospital spokeswoman said.

Such program and financial improvements have given Virtua the financial footing to secure top ratings on $565 million in bonds issued last spring to finance the construction and debt service on the new Voorhees hospital.

In its bond rating, Standard & Poor's also cited this factor: The Virtua system serves few people who are poor or uninsured.

In 2008, about half of patient revenue came from those with private insurance, according to Virtua financial documents. A further 37 percent came from Medicare. Only 8 percent was from Medicaid and uninsured patients.

In Camden - where Virtua closed its inpatient hospital in 2001, then opened an outpatient family care and emergency services center - Cooper University Hospital sees a far different mix. Nearly a third of Cooper's patient revenue comes from the uninsured or those served by Medicaid or state Charity Care, according to chief executive John Sheridan.

Cooper last year filed a complaint with the state alleging that Virtua's "systematic and intentional failure" to serve low-income patients was a financial burden on Cooper and other hospitals. Hospitals are paid less by Medicaid than they are by Medicare or private insurance.

The number of poor people Virtua sees is disproportionate to its market share, according to a consultant's report submitted by Cooper. The report cited three cases in which Virtua staff allegedly directed patients to seek follow-up care from Cooper.

The state substantiated one case and in November accepted a corrective plan from Virtua that included the hospital's removing a Cooper clinic from its referral system. It did not address the broader market-share issue, which a Department of Health spokeswoman said was outside the jurisdiction of hospital licensing rules.

With a reported operating margin of 1.5 percent, Cooper has a much smaller financial cushion, according to the September association report. But it, too, has plans.

Cooper opened the $220 million patient Pavilion in Camden in 2008, but two of its 10 floors remain empty. It is seeking financing to build a cancer center and a four-year medical school in the city.

Virtua's patient base is an undeniable asset. But Miller - who earned $2.15 million in compensation, bonus and benefits in 2008, according to the most recent available IRS filing - downplays that factor.

"If you build a great health system programmatically from a quality and safety perspective, I don't care where you're based, you're going to be successful," he said.

The fitness centers, where paying members mingle with those seeking prescribed treatment, cater to an older clientele and those who have never belonged to a gym. At the Washington Township center, for example, cardiac rehab is done in the fitness center to facilitate the transition to regular workouts.

Virtua did not make membership rates available to The Inquirer. They would vary depending on the client's needs, a spokeswoman said.

You would not find Virtua building such centers in Camden, said Alan Zuckerman, president of Health Strategies & Solutions in Philadelphia.

A hospital system's finances hinge largely on its locations, and Virtua is smart to establish itself in "well-heeled" areas, he said.

"It's just the reality of the business," Zuckerman said.

Another move that Virtua hopes will prove smart is its partnership with Fox Chase Cancer Center, a national leader in cancer research.

An office at the Washington Township center will give Virtua patients access to specialists and clinical trials from the Northeast Philadelphia hospital right in Gloucester County - no travel necessary, Segin said.