Feature Stories - February 2004

Industry Focus: Healthcare

Costs, Recruiting, Growth Present Challenges

by Kathleen Foley

On December 10, 2003, CEOs from Nevada healthcare organizations met at a breakfast roundtable meeting at the Four Seasons Hotel in Las Vegas. The moderator was Connie Brennan, publisher and CEO of Nevada Business Journal. The group engaged in a lively discussion that covered topics ranging from recruitment and retention of medical professionals, to higher operating costs, the increasing number of uninsured Nevadans, and the challenges of keeping up with population growth. Following is a condensed version of their comments.

Liz Moon: Critical Care Systems is a home-infusion and specialty pharmacy. We have 29 locations in 16 states, including offices in Reno and Las Vegas. One of our biggest challenges is reimbursement – or the lack thereof – along with trying to recruit the professionals we need, primarily experienced nurses and pharmacists.

James Kilber: Desert Radiologists has 40 physicians now. We provide the professional component for five hospitals and Southwest Medical, and also operate five outpatient imaging centers. Our biggest problems are the increase in the uninsured population, along with recruiting and retaining professionals.

Weldon Havins: The biggest concerns of the Clark County Medical Society in the upcoming year will be tort reform, tort reform and tort reform.

Allan Stipe: I’m the CEO at Sunrise Hospital and for Sunrise Healthcare System, which includes MountainView and Southern Hills. Our challenges are keeping up with the needs in this growing community, as well as tort reform, manpower and enormous increases in our operating costs.

Anthony Marlon: At Sierra Health Services, our problems are similar. It’s costs and what I have to pass on to my customers, and trying to keep a lid on those kinds of things as we move forward.

Ken Armstrong: I’m the CEO of the new Southern Hills Hospital, which will open March 1st. We have a myriad of challenges in getting ready to open the new facility, including regulatory issues, staffing and physician relations.

Steven Hansen: Nevada Health Centers is a non-profit organization that operates 15 primary-care clinics and one mobile mammography van, the MammoVan. Our mission is to serve the under-served population, and our 100,000 or so visits are generally people who are 200 percent of the poverty level or below. We have five clinics here in Las Vegas, two of which are focused around the homeless population, and our biggest issues are the growing number of uninsured we care for.

Anthony Pollard: Rainbow Medical Center has been in the Valley since 1988 providing primary care and urgent care. I think the biggest problem for physicians right now is trying to figure out how to get some pricing power so they can stay in business.

Mike Walsh: I’m the interim CEO of the University Medical Center (UMC), and probably the most significant thing for us is the uninsured; secondarily, the shortage of medical professionals. There’s a tremendous shortage in this community, not only of nurses, but also radiology techs, laboratory techs, pulmonary and respiratory people, and most of the degreed professions. It’s driving up the cost of care significantly.

Mark Howard: The biggest problem I have at MountainView Hospital is overcrowding. During the last three to five days, we have set records for the number of patients seen in our emergency center, so our biggest challenge is lack of space within the facility.

Connie Brennan (Nevada Business Journal): The first topic on the agenda is recruiting and retaining medical professionals. Is there any relief in sight? Is there a bidding war going on?

Walsh: Yes, there is, in most of those professions I just mentioned. There are still a lot of people out there who want to go into nursing, but because of budget restrictions, either with the state or the Nevada college and university system, there aren’t enough facilities and the colleges don’t have enough instructors. It leaves a lot of people out in the cold who would like to go into healthcare, but aren’t able to. Having the university system expand its programs by getting more instructors would probably be a big help.

Havins: As you know, a bill was passed mandating a doubling of nursing students in the next two years. Nevada State College is going from 40 slots to 80. Community College of Southern Nevada (CCSN) is at about 130 now and is planning on going to 500. UNLV is not going to double, but it is going to increase about 50 percent. So far, CCSN thinks they will have the teachers on board and available to handle this. So it appears we’ll be producing about the number we should be producing every year just to stay even, but between now and the time these folks graduate, nurses are going to be scarce. It’s going to be very tough, but at least the colleges are mostly following their mandate to increase enrollment.

Brennan: But isn’t it a national problem?

Havins: It is.

Brennan: And what prohibits those graduates from going out of market?

Havins: Nothing. Several hospitals have funded scholarships, and the Medical Society hopes to encourage individuals and corporations to fund scholarships for students, who would agree to stay in the state for a period of time after graduation. Salaries will be good here. It’s just the numbers that are so low. We have the lowest ratio of nurses to population in the United States.

Walsh: Another problem is the age of nurses. The average age of a nurse in the country is 47, so we’re looking at a huge number of nurses practicing today who will be looking at retirement in the very near future.

Brennan: What about doctors? Is there still a demand for doctors?

Stipe: You bet.

Walsh: I saw an article mentioning there was a net increase of about 200 physicians recently because of the relaxing of some of the rules for reciprocity and some other things. So there has been an improvement, but I don’t know that it’s keeping up with the population growth.

Hansen: There is still a substantial delay in getting some providers here. We’ve hired two doctors recently – one took nine months to get licensed, and the other six – waiting on procedural issues. There are state regulations and board regulations that slow the process, and then there’s also the whole liability insurance issue that is a problem.

Havins: Last year, there was a net gain of licensees in Clark County of seven. There was a loss of 24 in Washoe County. Even though there were 312 new licensees with Clark County addresses, that was offset by those leaving Clark County. A record number of Nevada licensees are now outside the state.

Brennan: Do you see the nursing shortage as being a temporary one?

Havins: No. It’s probably the most critical shortage we have, and I think it’s going to be several years before it improves.

Stipes: It’s about to get worse. California’s Fixed Nursing Staffing Ratio bill is an imminent threat for us. Nevada has had union-sponsored legislation for at least the last two legislative sessions that attempts to establish fixed ratios in the various levels of care in the hospital. This would destroy the efficiency and productivity of a hospital organization in responding to the needs of patient care and optimizing the utilization of scarce resources. We are watching attempts to implement these ratios in the state of California now. They have failed to do so for several years because no one can figure out how to really do it without shutting off services and denying access for patients. This is one of those legislative agendas we need to all be very attentive to, because it will have a major impact on reducing the accessibility of healthcare here. A year or so ago, we took a look at the fixed ratios California had proposed and calculated they would have caused us to lose 100 beds at Sunrise. We’re in a position where we don’t have beds available in this community, and it would have been disastrous. So we have to ensure hospital management is able to continue to manage the labor force. We all have excellent systems for monitoring and tracking quality performance and outcomes.

Howard: The other challenge we’re having here is that the next two lowest states, when it comes to nurse-to-population ratio, are California and Utah, our neighboring states. A lot of recruiting we try to do is in California, and yet their ratio is almost as bad as ours.

Moon: We are a licensed home-health agency in this state as well as in California, Utah and many other states, and I applaud the fact that Nevada has gone forward and has the educators now to train more nursing students, but that is not happening in surrounding states. So I think as the ratios being enacted in California become more stringent, those nurses may or may not want to stay there. We’re actually able to recruit nurses, because they feel home-infusion service offers them an opportunity where they are not quite as regulated by staffing ratios. However, it’s still difficult, especially in rural communities.

Armstrong: When we look at the demographics over the next 20-year period, those in the age bracket of 65-plus and 80-plus will be increasing in excess of 50 percent, while numbers for 18-year-olds, those entering the education and workforce, are going to hold even. One in 10 Americans is already working in a healthcare setting, yet given the age demographics, one in 10 will be insufficient. So we’re going to have to address how to interest people to enter the healthcare workforce. We have an opportunity to recruit the non-traditional healthcare worker. The Hispanic workforce is increasing significantly, and the African-American workforce is increasing. We need to be providing opportunities for them and addressing socio-economic barriers to help them enter the healthcare field. Otherwise the shortage is only going to heighten. My concern is that we have the structure in place, but if we do not address the socio-economic issues, the seats will remain empty, and we won’t produce the numbers required for us to care for our aging population.

Marlon: Are we filling the seats in the nursing schools now?

Havins: Yes, we are. For a couple years it was low. A brochure has been developed that will be utilized throughout the high schools to try to get students interested in nursing. There’s going to be an attempt to work with the school board to get some of the prerequisites required by CCSN to be completed in high school. Until recently, it took five and a half years to do a four-year program at UNLV. It took three and a half years to get through a two-year nursing program at CCSN. But those issues are now being addressed.

Brennan: What is the entry level salary for a nurse just coming out of school with no experience?

Havins: Probably $18 an hour for an RN.

Howard: The average nurse in Nevada makes $51,000 a year, and that is excellent. If nurses want to work on evenings and weekends, with the additional per diem and weekend pay, they’re starting at $22 and $23 an hour coming right out of school. Compared to a schoolteacher, they’re making almost twice as much, and coming out with a two-year degree, too. Keep in mind, too, that all the hospitals here in Southern Nevada have tuition programs and scholarship programs to help an individual with a two-year degree to get a four-year degree. So I think the hospitals are doing an excellent job in producing some of their own.

Brennan: Let’s talk about the medically-indigent population and the people who don’t have insurance. At our last roundtable, Dr. Marlon made the comment that he felt it should be mandatory that all employers provide healthcare insurance.

Marlon: Well, it happened in California, and it’s going to be interesting to see how that plays out. They passed a law that any employer with more than 50 employees has to provide a minimum level of coverage. The other interesting thing about the uninsured is that we keep hearing numbers in the 40-million range, but I saw one study that suggested that about half of those 40 million uninsured people are undocumented aliens. If, in fact, half of your uninsured are illegal aliens, I’m not sure there’s anything you’ll ever be able to do to drop that below the numbers we’re talking about.

Walsh: I don’t know that it’s half the problem here, but it certainly is a significant number. There are a lot of resources for American citizens who are truly indigent.

Marlon: I know healthcare costs are going up. We’ve had increases in the double-digits. It’s going to be a little more modest next year – it will be high single digits. But in the people we insure, I have not seen a decrease in the number of employers providing insurance. We do a big business with the [Las Vegas] Chamber [of Commerce}, and we insure a lot of small groups with the Chamber. I’ve seen more cost-sharing go on, but I have not seen employers drop coverage, because it’s so difficult in this market to keep people. One of the important benefits an employee has is health coverage. We renew virtually 100 percent of our base on an annual basis, so I don’t see the people dropping coverage.

Moon: Speaking as an employer who provides coverage, I’ll talk to an employee who maybe makes $13 to $18 an hour, with four or five children, and they end up opting not to take the insurance because they can’t afford the premium. I think that’s an issue, as an employer, to say, "How can I help that employee afford health insurance?" The provision may be there, but the fact remains it’s very hard for someone to decide whether to pay the rent and buy food versus paying for health insurance. This then starts to put more of a strain on the state Medicaid programs – and these are employed people, making an okay salary.

Hansen: We’ve seen an increase of people using our services whose families are no longer covered. The breadwinner is covered, but the family is not, and we see that among our own employees. Very few people insure their children now.

Marlon: But do they get the coverage through the various state programs?

Hansen: Sometimes. With Medicaid and Nevada Checkup, you have to be really poor to qualify.

Walsh: There are huge numbers of people who change jobs and for a short period of time can’t get healthcare benefits in their new position. I think they are being counted as uninsured, when it’s just a temporary issue for them because they change jobs. In this community, a lot of job-changing goes on.

Stipe: Just looking at statistucs in the emergency departments and in hospitals, the number of uninsured has accelerated post-September 11th. We can never come back to recover that kind of a pre-September 11th position. The absolute numbers have significantly increased, and we haven’t seen it recede. The tide is in.

Brennan: Dr. Marlon says insurance is going to increase and I’m going to have to pay more to keep my people covered.

Marlon: I don’t think there’s any question about that.

Brennan: Is that because you’re paying the doctors more?

Marlon: I think it’s a combination of everything. Drugs cost more, hospitals cost more, doctors cost more, everybody costs more.

Pollard: Come on. I’m not getting paid any more.

Brennan: Then is it drugs?

Marlon: No, it’s a combination of all three things. Pharmacy costs are up probably an average of about 10 percent a year. Hospital costs are up in the 8 percent range on an annual basis, and physician costs are up somewhere between 4 or 5 percent on an annual basis.

Moon: Is a lot of that due to higher utilization?

Marlon: No. The numbers I just gave you are unit-cost numbers. Another 2 percent or 3 percent can be added due to utilization of more high-technology equipment like CAT scans or PET scans. People with certain diseases would not live without drugs that cost their insurance programs a million dollars a year to provide. We’ve got two patients like that. Anti-cancer drugs and some of the newer drugs for certain genetic diseases are enormously expensive, and there’s no end in sight.

Walsh: The Medicare program over the last 10 years has given us a boost of about 2 percent or 2.5 percent a year in reimbursements, but there are no federal restrictions on what vendors can charge us for products, such as inplantables or drugs. So, our operating cost might go up 6 percent to 8 percent a year.

Stipe: We have 30 percent Medicare population.

Walsh: We’re at about 20 percent. So we’re not getting paid enough to even keep up with inflation on a big segment of the population we serve.

Howard: The other challenges we have are increases coming from suppliers, like United Blood Services, Nevada Power, the water district. Except for our employees’ salaries, everything else is a commodity we have to buy from someplace else.

Pollard: From 1990 to 2002, the cost of doing business as a primary-care provider went up about 28 percent. Doctors’ increase in reimbursements went up about 8 percent. So you do the math. You cannot stay in business that way, and that’s a fact. Physicians across the Valley may be getting a 5 percent increase, but in primary care, we’re not getting 5 percent. If anything, we’re getting decreased and squeezed a little bit more. Everything around us continues to escalate, including health insurance premiums for our staff and malpractice insurance costs. You’re going to have more doctors quit, because nobody in his right mind is going to spend in excess of $100,000 to go to school and then put himself a half a million dollars in debt to set up a practice where he’ll lose money. So the private entrepreneur physician is going to be gone. It will all be clinic-based. I don’t know what the answer is, I really don’t.

Marlon: Somebody asked me about healthcare costs in an interview a couple of weeks ago, and I said, "The best you can hope for is a slowing down of the slope of the line. Please, don’t ever expect that costs are going to go down."

Moon: In my business, our reimbursement, if anything, continues to go down, and our costs go up. Hospital leaders I’ve spoken with feel they are not being reimbursed more for a unit of service. So how do we all operate?

Marlon: None of the hospital people here is going to tell me their units don’t go up from my payment. Hospital goes up, pharmacy goes up, doctors go up – everything goes up.

Armstrong: It may all be going up, but the challenge we’re seeing is that costs are increasing at a faster rate than revenue increases, and so there’s a net deterioration. That flows all the way down to the individual business whose insurance premiums are going up at a rate faster than their per-unit revenue costs. Pure logic looking at that says it is unsustainable. Inevitably, you will cross a threshold, and we’re all going to manage the best that we can until that inevitable does occur. When it does, it will be a national issue. There’s a huge question mark of what the future of healthcare in this nation will look like.

Marlon: If you listen to CNBC, they keep talking about the inability of the average company, no matter what it is, to increase prices. It is an economy in which inflation is very, very low. Interest rates are very, very low, and everybody is looking toward increases in productivity to boost their margins, so you end up focusing on that piece. Unfortunately, we’re in a business where productivity increases are very difficult to come by, but that’s what you really have to look at.

Brennan: In this community, there’s a big difference between going to an emergency room today versus 20 years ago. You wait a lot longer and the service is worse.

Stipe: The wait times are much longer, but if you come in with a serious problem, the odds of you walking out of that emergency department are a whole lot better then they were 20 years ago. We have had an increase in outcome-improving therapies, and also a boom in subspecialty physician representation in this community. Even though the wait times may be longer, from the outcomes perspective, it’s a good thing it’s 2003 today. If you came in with an acute MI (heart attack) 20 years ago versus today, the outcome would be completely different.

Howard: Not only is quality up, but our efficiency is better. Forty years ago, a cataract surgery would require 10 days in the hospital; just 15 years ago, three days in the hospital; today, they’re in and out the same day. Whether it’s open-heart surgery or total joint replacement, people are out of the hospital faster, and they’re leaving the hospital healthier than they were 10 years ago.

Brennan: But isn’t some of that a result of pressure from insurance providers to get patients out of beds?

Howard: We’re finding out that patients recover faster in their own home setting.

Marlon: It’s a combination of things. The doctors are a lot better, the hospitals are a lot better, and there’s pressure to utilize resources. Number one, the hospital needs the bed, but number two, there’s no real need to stay there longer.

Stipe: We even do brain surgery on the out-patient basis now, with the gamma knife. The level of sophistication, the technology that’s available, and the skill level of the physicians have all tremendously impacted the efficiency of the system.

Kilber: Radiology plays a big part in improving turnaround time and efficiency. We can do a diagnostic test in the hospital, and a surgeon can look at the results at an imaging station in the surgery suite. The cost of the equipment is enormously expensive, with PET scanners up to almost $3 million. The technology is there and all of these things increase efficiency, but the costs come along with it, and then it’s passed on to the customer.

Walsh: We’re looking at a PACS system, which is digital imaging, and the price tag is $6.8 million.

Marlon: I just put that in. You can do three times the number of procedures in a day in a digital radiology room than you could in a standard setup. It is an amazing jump in efficiency, but it does not come cheap. The other piece of that, which is very important to me, is the litigation side. You never lose a film. It is an amazing technology that will be adopted across the entire Valley, but it’s an enormous expense.

Kilber: It’s going to archive all your imaging instead of having film storage at a storage facility located 10 miles away. So there are some positive advances being made. If the vendors could just keep the prices down a little bit – which won’t happen – that would be great, but the costs get passed on, unfortunately.

Brennan: Are the hospitals pretty much 100-percent occupied now?

Walsh: We are.

Howard: Or more.

Brennan: What if we have a disaster? Are we prepared for it?

Howard: We’re having one this month with the flu. If you walk through any emergency center today, you would be amazed at the number of gurneys and beds out in the hallways with patients in them.

 Walsh: Our facility is mostly multi-bed rooms. There’s a huge increase in the number of live-TB cases in this community right now. So there are a lot of beds that we are not even able to use because we can’t put tuberculosis patients in multi-bed rooms. So, even though we may not be at 100-percent occupancy in terms of our licensed beds, we’re effectively more than full. In mid-day, admitted patients could be more than 100 percent of our licensed beds, because of surgeries in the morning and late discharges, and we spend a lot of time and effort trying to clear out rooms so we have beds for patients who are coming in. It’s a nightmare.

Brennan: So do we need more beds?

Howard: Yes, absolutely.

Brennan: Are we going to get them?

Hansen: Well, they’re building hospitals.

Stipe: We’ve just invested $140 million in the southwest Valley, where we’ll be opening up a facility in February. We’re investing another $20 million at MountainView with a fix that’s going to put on another 36 beds, and then they’re going to go forward with a tower. Today, we’re going to break ground for a $75 million women’s and children’s facility at Sunrise. With the addition of Spring Valley Hospital, and with the other hospitals that are planned, I think the issue of the demand for hospital beds has been pretty well addressed.

BRENNAN: With the continued growth of the community, is that going to be sustaining for the next few years?

Stipe: I think we’ll still remain behind the curve a bit, as we are today. When we get to be 3 million people, we’ll have a few more hospitals in town.

Kathleen Foley
Kathleen Foley is a freelance writer based in Southern Nevada.