How Many Hospitals and Why?
23 November 2024
David J. Usher, M.D.
In a recent local news article, it was announced that Aspirus had plans to open a brand new hospital in Chippewa Falls, Wisconsin. This inspired me to put down a few high-level thoughts about the situation.
In the aftermath of HSHS closing two hospitals in the Chippewa Valley, less than a year later two different entities have come forward with plans to fill the vacancy left by HSHS. One, Aspirus, is an established health system from outside the region, the other a “start-up” health cooperative which will be “locally” owned and operated, the Chippewa Valley Health Cooperative.
The stated intent of the CVHC is to provide care in a facility that is owned locally by the community, to avoid the influence of health systems not headquartered here in the Chippewa Valley. Currently, Mayo Clinic and Marshfield Clinic are operating the only two full-service acute care hospitals in the area. Mayo owns hospitals 20 miles to the east, west and north, but have been curtailing services in each location presumably due to insufficient demand to sustain those locations as full service hospitals. Marshfield Clinic has not done well with its model, though it went all in in Eau Claire Wisconsin in the past 10 years. Marshfield built a brand new acute care hospital in Eau Claire literally a few hundred yards from its previous strategic partner, the Hospital Sisters Health System Sacred Heart Hospital. SHH which had been in operation in Eau Claire for over 125 years, and its sister hospital, St. Joseph’s in Chippewa Falls, were deemed insolvent and closed by HSHS in 2024.
Health “systems” tend to employ their physicians directly rather than granting “privileges” to physicians they do not employ. Mayo, Marshfield, and Aspirus, globally speaking seem to operate in this manner. HSHS is a substantial owner in Prevea clinic (which also left when HSHS shut down locally), but also allowed for “independent” community physicians to admit to and care for patients at its facilities, SHH and St Joes.
The CVHC is being promoted, at least in part, by these “independent” (an interesting moniker given that they are all banded together with some stake in the success of an affiliation in Oakleaf Clinics. They may be independently owned, but in some manner are not independent of each other, relying on referral patterns, etc.) physicians who have been left effectively homeless as HSHS left the area. One must assume, understandably, that to remain independent with thriving practices, that a new “independent-friendly” hospital would need to arise in order for these practices to remain solvent over the long run. Medicine, like churches, must be run like a business. Businesses have to grow, or they being to die. These practices need a new hospital home to grow and thrive. As stated before, understandable.
As the campaign is being waged by the board members of the CVHC and its Oakleaf supporters to build a brand new, state of the art hospital, in the Chippewa Falls area, despite Aspirus’ plan to open in the next couple of years in Chippewa Falls, questions come to mind to which the answers are not found on the Coops website, chippewavalleyhealthcooperative.org.
Below is a collection of these questions, roughly categorized into broad topics. The intent of the questions is to promote discussion and understanding of some of the issues involved in making a decision to “allow” for the construction of two hospitals in the Chippewa Falls area. I have no direct interest in how this gets resolved. As a taxpayer, and a potential patient in one of these future facilities, people should at least give these some consideration.
Community Cost
Building and running a hospital is no small task. Nor is it simple. Or inexpensive. Non-profit entities, which most hospitals are, get special tax status, often paying little or no property tax. To file as a “non-profit” the hospital must commit to providing some “good” to the community in which it is located, warranting the special tax status. We see frequent disputes about the property tax bills of for-profit companies in our area such as Menards and Walmart. The disputes are whether these companies owe property taxes of hundreds of thousands of dollars, or is it millions? The point being that when a for-profit company buys real estate, it does so knowing that property taxes are part of the deal and need to be budgeted for. They, and all for-profit businesses pump millions and millions of dollars into local government coffers as property taxes. These dollars go to help fund all the things county and city entities need—roads, schools, CVTC, social and health service programs, etc. Without them, personal property taxes may be higher, or government services are not as robust.
Aspirus (a non-profit organization), has apparently committed to building a state of the art facility in a newly emerging area of Chippewa Falls. What would otherwise be prime commercial real estate will be committed for the indefinite future to a non-profit (non-taxable) entity. That seems quite a commitment by a county to part with the property tax revenue that real estate could have produced. They must think Aspirus is going to do some real “good” for the area.
What is the estimated property tax opportunity cost to the surrounding community of putting an Aspirus facility in as proposed. What would the estimated property tax opportunity cost of taking another presumably desirable chunk of real estate off the property tax roles by a 501c3 (CV Health Coop)?
Essentially, these are “forever” property tax losses. As long as the privileged tax status remains.
How much marginal “good” will a second “new” hospital yield such that the price to county government is that property tax revenue?
Viability of the Model
Conventional wisdom suggests that hospitals that take Medicare and Medicaid patients must "make up" for low reimbursement from these entities with revenue from other "high priced" procedures. Why did that not work for HSHS?
Was “being” a community hospital, using independent physicians to provide services, part of precisely WHY HSHS went under?
How is CVHC going to avoid the pitfalls of HSHS and prevent the leakage of highly reimbursed procedures to current, and perhaps future, ambulatory surgery centers which can be owned by community physicians?
How will CVHC operate in any manner different from the recently defunct community hospitals that will insulate it against the market forces that drove HSHS out?
It seems to me the only two surviving hospitals in the area have EMPLOYED physician models wherein "independent" physicians are essentially not allowed. Aspirus seems to be an employed model. Is there an example where CVHC seen its proposed model work in a setting with 2 competing community hospitals within 10 miles?
Affordability of Care
Marshfield Clinic promised lower prices as a result of building their hospital in Eau Claire. Prices NEVER went down, and HSHS collapsed. Now effectively bankrupt, Marshfield is being taken over.
Where will prices/fees/charges be posted for the lay person to look and compare costs (transparency) of services in real terms as required by the federal government?
What will CVHC policy be around unsettled medical debt? Will it send unpaid bills to collections, contributing to the hundreds of thousands of individual bankruptcies occurring in the U.S. every year as a result of medical debt? How much uncompensated care will it be able to afford? Some of the surrounding counties have among the lowest average per capita incomes in Wisconsin.
Competing Interests?
If the need for a hospital is so great, and Oakleaf doctors are so committed to filling this need, why would CVHC NOT arrange to purchase or lease the St. Joseph Hospital facility, if only on an interim basis, from HSHS in order to rapidly back fill the need for services, allowing specialty providers from Oakleaf to resume/begin their work in an established location? It may need some updating, but an entire medical “neighborhood” grew up around St. Joes and has happily operated there for years. Planning for a new facility could be carried out in the meantime. If the Coop idea is successful, plans for a new facility could then be carried out while simultaneously providing the care that is not being met currently.
It was said during the post-closure period that HSHS “would not respond” when local professionals made an offer to buy Sacred Heart Hospital. If this is true, why is that so? Almost one year hence, is this still true? The non-profit owners of health care real estate worth presumably 100s of millions of dollars won’t have a sales conversation with earnestly interested potential customers? So HSHS has to pay security teams to keep the buildings safe, and maintenance people to keep them from falling apart, but don’t want to sell them if possible? What motivates HSHS to NOT interact with Oakleaf?
Finally, is there any conflict of interest that needs to be divulged by board members/leadership of CVHC who may stand to profit by promoting the construction of another "community" hospital? Or is there some legal commitment preventing this kind of croneyism. A 501c3 hospital is technically a "nonprofit" but the construction companies, real estate companies, etc. who get paid to build it certainly are for profit. What are all the deals that have been cut before the formation of any Cooperative? Will we ever know if agreements have been made to share in the profits reaped from new construction among those promoting it? Or deals made which provide some favored status regarding who will be engaged to do all the work?
Who will be the hospital leadership/CEO? What will his/her salary be? Is there any risk-sharing structured into that compensation package such that payment is lower or withheld if things belly up? Or will there be a “golden parachute”, regardless of financial condition of the new hospital? Non-profits can have “golden parachutes” too.
If Aspirus is coming to the same area, presumably with a proven business model, why not wait to see how that works out for the community before saddling the community with a fourth hospital? The area was not able, it seems, to be able to support four in 2023.currently.
How does a cooperative deal with year over year losses?
In short, some might be cynical about doing something the same way and expecting a different outcome.
We know generally how these non-profit systems operate—Mayo, Marshfield, Aspirus, even HSHS. The model is proven, though not perfect, and it is expensive. None of these has headquarters in Eau Claire.
Yet, being locally owned and managed does not necessarily make a business model any more solvent, in the long run, than those owned and managed from afar. If I were a government leader, or citizen, being lobbied to get on board with construction of a new hospital which is purportedly “community owned”, I would have lots of questions.
I would ask the proponents to “show me the money!”. All the money.
Are you proposing a new hospital to make money on construction in the short run, and to effectively subsidize the businesses of these independent practices, without any real risk to you in the long term?
If the answer is “NO!”, then please show me how you are sharing any risk, in case things don’t work out. It is easy to ask someone else to risk their wealth to build something you say they need, even if that someone is a “community”. Show me ALL THE MONEY.
