Feature Stories - February 2005

Industry Focus: Healthcare

What’s the Prescription for Nevada’s Ongoing Ills?

by Kathleen Foley

Healthcare professionals from hospitals, clinics, insurance providers and other segments of the market gathered at the Four Seasons Hotel on December 9, 2004 to discuss issues affecting healthcare in Nevada. The gathering was part of Nevada Business Journal’s Industry Outlook series. Connie Brennan, publisher of Nevada Business Journal, served as moderator for the roundtable, which included a discussion of rising prices for healthcare services, the mental health crisis, shortages of key personnel, and other challenges facing our state. Following is a condensed version of the discussion, which began with introductions.

Dr. Anthony Marlon: Sierra Health Services is an insurance company that provides HMO and PPO products predominantly in Nevada. We also deliver healthcare. We employ about 200 providers with various specialties and sub-specialties who deliver care as part of our network. The network that delivers our PPO and HMO products is a contracted network with another 2,000 to 3,000 contractors in locations throughout Southern Nevada. We do business with every hospital in the Valley.

Ingrid Whipple: Montevista Hospital is the only free-standing psychiatric facility currently in Southern Nevada. It is owned by BHC Health Services out of Nashville, but we’ve been doing business in the Las Vegas area for almost 20 years. We have always been a provider of mental health and addiction services. The uninsured population is a significant problem for all of us.

James Kilber: Desert Radiologists provides radiological services to six hospitals in the Las Vegas Valley, as well as outpatient clinics and also to Sierra Health Services. We have 350 employees and 40 physicians in our group.

Dr. Weldon Havins: I am the CEO and legal counsel for the Clark County Medical Society. About 38 percent of the licensed physicians in Clark County are members of our organization. Our biggest push through the years has been to get tort reform legislation passed, and that was recently accomplished through the initiative process. We hope to see that result in a drop in the malpractice premium rates and stabilization of the market here.

Greg Griffin: Fremont Medical Centers has nine locations, with 70 doctors and 400 employees. Next year will be our 20th year in the business.

Karla Perez: Spring Valley Hospital is one of the newest hospitals here in Las Vegas. We’ve been open about 14 months, and we’re part of the four-hospital Valley Health System chain, which is getting ready to break ground on its fifth hospital.

Brian Robinson: I am president of Sunrise Hospital & Medical Center and Sunrise Children’s Hospital; in addition, I’m president of HCA’s Las Vegas market responsible for our other hospitals: MountainView and Southern Hills. We also have a billing center here that employs about 600 people.

Steven Hansen: Nevada Health Centers is a nonprofit organization with clinics throughout the state. We operate 13 family practice clinics, two homeless clinics, three school-based clinics, an obstetrics clinic, three vans that provide dental care and one van that provides mammography services. We are a federally-qualified health center. We get a big grant from the feds that helps us serve the underserved and uninsured Medicaid populations.

Dr. John McDonald: I’m the vice president of health sciences and dean of the School of Medicine at the University of Nevada. We have major operations in both Reno and Las Vegas. We are undergoing a transition from a traditional family-medicine-based school of medicine into a hybrid between the more conventional school of medicine and a community-based school of medicine. The major challenge facing us in this market is the proportion of uninsured and noninsured patients we serve. We’re the primary provider of medical care for internal medicine in both the north and south.

Lynn Billingsley: I’m the executive director for the three Kindred hospitals in town. We’re long-term, acute-care specialty facilities. Like a lot of hospitals, we are in a growth mode. We just opened our third facility, which is a hospital-within-a-hospital in partnership with Desert Springs. One of the challenges we’re facing is meeting staffing needs. Nursing – although it’s a challenge throughout the state – has not been our biggest challenge. We are mostly having difficulty filling positions for physical therapists and respiratory therapists.

Dr. Anthony Pollard: I started Rainbow Medical Center in 1990. We employ about 147 people, including 15 physicians and two physicians’ assistants. We serve about 14,000 patients. What we do, primarily, is family practice and urgent care.

Connie Brennan: The first item on the agenda is the uninsured and underinsured population and the affect it has on the healthcare community. Is that problem growing?

Hansen: About 65 percent of the patients we see are uninsured. The remaining count on Medicaid or Nevada CheckUp or similar programs. We’ve gone from one clinic to six in four years, so we see a growing need for care for those patients. One of our biggest problems is getting them into specialty care. With the problems that Medicaid has had over the last couple of years, a lot of specialists have decided not to accept Medicaid anymore.

McDonald: Are you alluding to the time lag between billing for service and receiving payment, or to the schedule of payment, or both?

Hansen: Both. A lot of people dropped out when they weren’t getting paid.

The Prognosis for Healthcare Costs

Brennan: That ties into the affordability of healthcare. Is there any hope of healthcare costs going down?

Marlon: A lot of things conspire against healthcare costs going down. You’ve got the aging population, which is a critical factor, and the second thing is technology. I don’t see any improvement over a 6, 7, or 8 percent increase, unless we start to let the government intervene with prices. (At Sierra Health Services) we’re expecting prices to rise 6 percent or 7 percent on average across the board. That’s about the best we can do. We get rate increases from hospitals, doctors and prescription drugs, and we have to pass those costs on. Of all the pricing mechanisms that are out of control, I would submit that pharmacy bills, with the AWP mentality are, in fact, unconscionable. They raise prices every three or four months, and there’s no yardstick by which they raise that price. Over the course of a year, you end up having basic pharmaceuticals going up somewhere between 10 and 15 percent, and there’s just no relief in sight.

Kathleen Foley (Nevada Business Journal): What is AWP?

Marlon: Average Wholesale Price. A group of pharmacy companies get together several times a year and establish a base price for drugs. Last year, for Lipitor, you might have been paying $50 for a 30-day supply, and all of a sudden you’re now paying $57 for a 30-day supply due to an increase in the AWP, not the cost of making the drug. That’s the one thing we don’t have any control over. We can negotiate with doctors and hospitals to try to hold rates, but for pharmaceuticals, everybody deals off the AWP, which is the price paid by the pharmacies to the manufacturers.

McDonald: Wasn’t it ironic that the two presidential candidates both campaigned to allow us to purchase drugs from a foreign country (Canada)? These drugs had been manufactured in this country, shipped to a foreign country and then reshipped back to us. It’s hard to see the business sense in that.

Marlon: The issue with Canada is more complicated than that. Not all the drugs sold in Canada are, in fact, manufactured here. It’s an easy argument for the drugs that are manufactured in the United States and shipped to Canada, but a large percentage of the Canadian drugs are manufactured in Canada. So then the question becomes, does the FDA have the right to go in there and review the manufacturing process for drugs that are manufactured in Canada? It’s a complicated issue.

Brennan: You said you expect rates to go up next year by 6 to 7 percent. Is that typical for the insurance industry?

Marlon: I’m hearing numbers of around 10 percent on the average, and I think some self-funders are experiencing higher trend rates than that because of inability to control pharmaceuticals or other factors. It’s a potpourri of numbers out there, but let me answer your original question by saying, "No, they aren’t going down."

The Ongoing Crisis in Mental Health

Brennan: Karla (Perez) and I were speaking before the meeting about the mental health crisis. A lot of ER rooms are being used as holding areas for mental health patients. What’s the outlook for that situation?

Robinson: I think it will continue to get worse, as the population continues to grow. It’s actually a two-fold crisis. It’s a crisis for mental health patients who are not receiving the level of care they need and deserve, but it also puts the medical/surgical emergency patients in crisis as well. When a third of the beds in Southern Nevada emergency rooms are occupied by patients holding for mental health services, where do the medical/surgical emergency patients go? They’re being squeezed as well.

Brennan: Is this a problem that’s unique to Nevada or is it occurring across the country?

Robinson: There are mental health issues across the country, but I would argue – given the fact that Clark County has the dubious honor of being the only county in the U.S. that’s declared a mental health crisis – our problem is far worse here in Southern Nevada. We only have about 25 percent of the average number of mental health beds of anyplace else in the country.

Perez: Let me give you some statistics I think will help support that point. In Southern Nevada, the psychiatric bed rate is 8.1 beds per 100,000 population. In Northern Nevada, that rate is 24 beds per 100,000. The national average is 33 beds per 100,000. What’s causing the issue is there is no place to send patients, so they occupy beds in the emergency room until a bed becomes available or there’s some other resource out in the community where they can go.

Pollard: Isn’t the real problem that no one wants to put up a mental health facility, with the rising costs and the issues involved in it? I think you could find psychiatrists; we just don’t have the facilities. There were some facilities, but they were closed down. Hospitals were willing to put up some beds, but they closed those down, too.

Perez: From a private-hospital perspective, it’s a money issue. When you are reimbursed below what it costs you to provide the care, it doesn’t make good business sense to expand and continue to provide those services. So the private hospitals have closed their beds, with the exception of Montevista.

Whipple: My understanding is there were at least three psychiatric facilities in this town a number of years ago when the population was much lower. The reimbursement from Medicaid certainly isn’t adequate, and then there’s the reimbursement from managed care. So I think that created a climate where it just wasn’t economically feasible. We struggled for awhile, but we’re seeing some hope on the horizon.

Brennan: What makes Nevada unique? It seems to me if other states are finding psychiatric beds, we can do it.

Griffin: A lot of the people don’t have insurance, and there’s no state funding here.

Marlon: There are a higher percentage of uninsured in the mental health category.

Whipple: Right. Montevista opted out of the Medicare program a year or two ago, primarily because we were so flooded with uninsured patients that we couldn’t serve anybody very well. We need more beds. In other states, the government doesn’t provide all the beds, so I think that’s another issue. Other organizations would come and build beds if, financially, it made sense.

Robinson: There are beds in Southern Nevada that would be accessible and could be reopened if there were state funding.

Whipple: Yes.

Foley: Is that one of the issues that might appear before the upcoming Legislature?

Perez: Definitely. At the last session, lawmakers approved building a new mental health hospital, but the misunderstanding about that particular facility is that it’s technically not a new hospital – it’s a replacement hospital. The current 103-bed facility will close when the new 150-bed facility opens, so there will really be only 47 more beds. If you look at the number of mental health patients who are currently holding in our emergency rooms today, that number fluctuates between 80 and 100 patients on a daily basis. So even if that facility were open today, there wouldn’t be enough beds. One of the bills we’re going to try to push through is to expand the new facility from 150 beds to 190 beds right from the beginning. In addition, we believe a new system for triaging needs to occur. The reason these patients end up in hospital emergency rooms now is that a state regulation requires that before patients can be admitted to a mental health facility, they have to be medically screened. Because the state mental health facility doesn’t provide that service, they all come to emergency rooms to be medically screened. Only about 2 percent of them actually require physical medical services; the rest require mental healthcare services. So the patient is held in the emergency room until a bed becomes available in the state mental health facility, and that can sometimes be days, even weeks, if you have a difficult-to-place patient, particularly children. Our children’s services in this state are really lacking, and oftentimes we have to send children out of state. The unfortunate part of it is that when you look at the entire state, Northern Nevada actually has excess beds. They have about 40 beds that are closed because they don’t have a need for them. There was a recent push to try to transport some patients from Southern Nevada up to Northern Nevada, but some consumer-advocate groups felt it wasn’t appropriate to take patients out of their local environment. I think, frankly, they would probably appreciate getting mental health services even if they had to go eight hours on a bus or whatever it took in order to receive those services, versus holding them in our emergency rooms. Their mental health issues really are not addressed while they’re holding in that emergency room.

Robinson: It’s very unusual for medical triage not to be a part of the mental health system. If there were adequate funds so mental health screenings could be done at state facilities, in the long run, it would be a break-even scenario for the state, and/or perhaps reduce the state’s costs. In the present system, there’s the cost of the emergency department as well as transportation costs to get the patients back and forth. If medical screening were provided at the facility where the patient received mental health services, you’d eliminate outside costs and you’d be providing more consistent care to the patient.

Whipple: I think that’s a real important issue.

Pollard: That’s what Charter did before they shut down. That’s what Lake Mead Hospital did before they shut down. There are no triageable facilities, so there’s no place for them to go.

Whipple: So often with mental health, the solution isn’t just beds; it’s also adequate outpatient care and other levels of care. The need for acute care overall isn’t really as great as an entire system of care, and that, probably, is the bigger problem underlying some of the issues.

Pollard: It’s all economically driven. If you had funds here, there’d be more psychiatrists here and more facilities.

Marlon: Barbara Buckley, along with Joe Hardy and a number of other legislators, have been meeting over the last six or eight months to propose a modest expansion of the Medicaid program. What they’re suggesting doing is trying to tap into some of the money the county spends on its indigent pool and try to get it matched with some federal funds. One-third of the money would be contributed by the county and the state and almost two-thirds would come from the federal government. What they want to do is take the women and children’s program from about 133 percent of poverty, which is where it is now, to about 180 percent or even up to 200 percent of poverty. So that would allow about another 2,500 to 3,000 pregnant women into the program, and children as well, so it would take them out of the uninsured pool. The other interesting part of the program is a premium subsidy program. About one-third of the uninsured are people who work for companies that provide insurance, but they pay only 50 percent to 75 percent of the premium. The employee making $10 or $15 an hour elects not to take the insurance because it costs so much. What they’re doing under this program is providing a premium subsidy of up to $100 a month so employees can buy insurance. They think this will cover about 10 percent of our uninsured. It’s a modest attempt in a bipartisan fashion to tap into some federal money. So keep your eyes open for that. If they can get the appropriate cooperation from the various governmental agencies, what they’re trying to do is use this to start some sort of a program for the medically needy who don’t fall into one of the present categories.

Foley: Lynn, are you having the same kind of challenges in the long-term-care segment of the market?

Billingsley: Yes, both from the uninsured standpoint and from the mental health standpoint. Patients come to us for medically complex reasons, but they may also have an underlying psychiatric diagnosis. Once we’re taken care of their respiratory failure or infection or whatever the medical condition is, we have a patient who’s got significant psych issues and there’s no place for them to go. In fact, we’re trying to see if we can’t help in some way create some general psych beds. The thing we’re running up against is that often these are Medicaid patients and the funding isn’t there and we can’t cover the cost of care. In the indigent arena, because of the way patients come to us, we may find they run out of funds before their term of care is completed, but, like other hospitals, we know a percentage of our business is going to come in unfunded, and we budget it that way.

Tort Reform and Malpractice Insurance

Brennan: What’s the situation with tort reform after the November ballot questions?

Havins: Question Three passed, which is essentially California MICRA, but instead of a $250,000 cap on non-economic damages, it’s a 350,000 firm cap. There’s also elimination of joint-and-several liability, so the deep-pocket issue is gone with this legislation. The Legislature, by our Nevada Constitution, cannot amend, repeal or change ballot initiative questions changing the statutes for three years, so it will be in place for three years unless Nevada courts intervene. The big unknown right now is, whether Question Three will be sustained as constitutional or not. The first step in the process of getting malpractice rates reduced was to get our laws changed. So we expect some stabilization of rates, but we don’t expect substantial decreases until these provisions have withstood their constitutional challenge in our Nevada Supreme Court.

Brennan: Are you confident that will happen?

Havins: No – I’m not at all confident it will happen. The Supreme Court has had some unusual rulings from most legal scholars’ perspective in the last few years, and so it’s certainly not a given.

Havins: I think the rates will stabilize, and we’ll have a greater percentage of doctors coming in than we’ve had in the last couple of years. In 2002 we had a net gain of seven active licensees in Clark County. We’ll see substantial increase of those numbers for 2004. We’re still down across the board in every specialty. We’re well below the national average. Part of that is that we don’t have an academic medical center, and we don’t train specialists and sub-specialists here locally. About 80 percent of doctors practice within 50 miles of the place where they took their residency training, so an academic medical center is important for us here to expand our programs. New Mexico, which is about our size, has an academic medical center and has plenty of physicians. It does have tort reform in place, and I’m sure that helps, but they also train their own, and that’s the direction we need to head in Nevada.

Robinson: Just to stay even because of the population growth here in the Valley for a family physician-type practice, we need to add one to two new physicians every month.

Finding and Training Healthcare Professionals

Brennan: Greg, is physician recruitment an issue for you?

Griffin: Not on the family-practice side. I have a harder time on the OB and emergency side. With family practice and pediatrics, we’ve been able to get them to come, although we can’t get enough of them.

Brennan: James, what about radiology?

Kilber: Yes, it’s extremely difficult to find radiology specialists like interventional neuroradiology. Last year we were very fortunate. We recruited seven physicians and this year, one.

Brennan: Are you looking nationally?

Kilber: Yes, we are.

McDonald: What’s the stumbling block?

Kilber: I think part of it is the tort reform issue. The lack of schools of radiology is another issue, as well as lack of residencies.

Robinson: When we talk with physicians, what we see is they look at reimbursement in this community. They look at malpractice costs and housing costs. And other communities become more attractive.

Brennan: It seems to me that if a lot of physicians practice within 50 miles of where they train, as Dr. Havins indicated, you would want to train more here. Do you have any openings at the medical school? I know you’re not taking a lot of new students.

McDonald: We are addressing that in two ways. We have an enhancement request before the Legislature to increase the class size from 52 to 62. But we’re much more focused on the other side of our portfolio, which is growing residencies. In order to do that, we need to build a supporting infrastructure; we need to recruit physicians and support the academic physicians’ time. About 40 percent of our budget comes directly from clinical revenue. And for a number of our clinicians, virtually all their salary is generated through their clinical efforts. If you’re asking physicians to teach residents, in essence, you’re reaching into their pocket and taking away part of their salary. So part of our request to the Legislature is to offload some of the cost of that educational effort, to account for the inefficiencies of having residents in your practice in a hospital.

Robinson: Correct me if I’m wrong, even if you get approval at the state and you get the residency positions accredited, it would be July 2006 before that training would even begin.

McDonald: Yes, absolutely correct.

Robinson: The efforts of today really don’t begin to pay dividends for years. For obstetrics, we’re waiting till 2006 to start, and that’s a three-year residency, so we’re into 2009 before the first class of this new expanded initiative is available to benefit the community.

McDonald: That’s an important point.

Havins: There is another medical school opening here: Tuoro University School of Osteopathic Medicine. The School of Medicine at UNR is working with them in a cooperative effort. They have 78 students in their first class, which matriculated in August 2004. They’re going to go up to around 100 per year, and they’ll begin graduating here in four years, but if there are no residency slots available to them, they’re going to be leaving the state because they have to go for additional training. So it’s good to have another school here. It’s in a slightly different discipline, but very similar. However, if we don’t have the slots for them to continue to train, we’re going to lose them.

 Brennan: But even with the new school, don’t we have more qualified applicants for medical school here than there are slots available?

Havins: Yes.

Brennan: So they’re going out of state.

McDonald: In Reno, we’re limited by our ability to accommodate students. We can hold up to 100 in our lecture halls and the new Pennington building, but we don’t have the anatomy lab and the other infrastructure resources to grow much beyond 60 there. We’re meeting with UNLV to discuss a potential partnership to combine the efforts of UNLV and UNR to increase, not just the physicians, but also other healthcare providers.

Brennan: Are we still having a problem getting other healthcare professionals such as nurses? Has the nursing shortage gotten worse?

Perez: I don’t know if it’s gotten worse, but it hasn’t gotten any better. We are still ranked last in the nation in terms of nurses per population. At the last legislative session, legislation passed that requested a doubling of the nursing programs, and they are well on their way to doing that. In fact, this year we will probably graduate almost 75 percent of the goal. Next year we will achieve the goal of having doubled the number of nurses who graduate in the state. However, in Southern Nevada we’re still short about 700 nurses and that doubling won’t cover all those 700 nursing positions.

Havins: I agree. This doubling just keeps us dead last, and right now there are not enough nursing instructors.

Perez: There’s a requirement that says that you have to have a master’s degree in nursing in order to teach in the nursing program.

Havins: That is being modified.

Perez: Yes, they’ve backed up a little bit and now they’ve said 25 percent of the instructors don’t have to have a master’s degree in nursing. They can have a master’s degree in something else. So we may see a few more instructors, I think.

Havins: It’s still a critical problem right now. These universities are conducting national searches to bring people in. One of the problems is that even at UNLV and Nevada State College, what they’re offering to pay is less than what the person can earn out in the market, so they have to take a substantial pay cut to be a nursing instructor. But nursing schools are coming, and 10 or 15 years from now perhaps we’ll have an adequate supply of nurses. Robinson: We need to talk about a healthcare worker shortage rather than just a nursing shortage. In other disciplines vitally important to patient care, we have equally as great shortages – from respiratory therapy to pharmacy, to radiology technicians. So we need to look at funding for health professionals and not just funding for nursing schools.

Hansen: We hire pharmacists, dentists and other specialists to serve the underserved population in Nevada. We pay dentists more in this state – they’re the highest-paid of any state in the nation, because it just comes down to the economics of supply and demand. It’s the same thing with pharmacists. You have to have more of them so the cost can stabilize a little bit, but in the interim, people are making a lot more money and it’s a lot harder to hire them.

Legislative Outlook for 2005 Session

Brennan: I did want to touch briefly on the upcoming legislative session. Are there healthcare issues we need to watch out for besides what we’ve already discussed?

Robinson: We touched on mental health, and I think that relief from that problem, if there’s going to be any, will come through the Legislature.

Perez: Nobody has actually sponsored the bill yet. I’ve met with just about every legislator and toured many of them through the ER.

Marlon: But you have no champion yet.

Perez: Not yet, but a few people have expressed interest.

Hansen: SB-133 is sunsetting. It allows dentists to come in on a limited license to work in underserved areas. They can get limited licenses if they’re working for a federally qualified health center or in an underserved area.

Marlon: Which is about three-quarters of Las Vegas.

Hansen: Right. The situation now isn’t great, but if SB-133 is allowed to go away, it’ll get worse.

Marlon: What they’re also trying to do is allow dentists to get a Nevada license if they pass a regional board. The difficulty with our Nevada State Board is that it is almost invariably subjective. Its oral examination is an attempt by local dentists to keep the competition out. We pass only a very small percentage of the people who apply. If somebody is licensed in California, Arizona, Utah or New Mexico, we should give them a license by reciprocity, but the current dentists are fighting that. There will be a bill this year to try to increase the number of dentists we have in the state.

Havins: We had the lowest "pass" rate for many years, and still do. Of dentists taking the Nevada Boards, only about 50 percent pass, and these are all people who have graduated from qualified dental schools and have taken and passed national boards.

Pollard: Since we’re all aware of what we lack when it comes to healthcare, who truly makes the decisions to fix these problems? I come from a military background, so I’m just trying to figure out who’s in charge.

McDonald. Well, the medical schools discussed having a bipartisan, neutral player to try to help facilitate some of these discussions. I’m so pleased to be here this morning to meet you all, because the governor has made a plea for a more rational approach to confronting these healthcare issues. We’ve started a council to look at some of the issues of residency training and a medical council, and I’m hopeful we can get community leaders and bipartisan support behind us.

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