Worcester Business Journal

10 Worcester Business Journal • February 2, 2015 www.wbjournal.com With payments, not all hospitals are equal by Tufts who previously used the two hospitals might have to look elsewhere for care, as the two parties struggled to come to an agreement. Tenet Healthcare, the hospitals' parent company, wanted to narrow the gap between its payments and those Tufts makes to comparable area hospitals, according to Erik Wexler, regional CEO for Tenet. "Our goal was to reduce the gap between us and the other major hospi- tals in the communities (we serve)," Wexler said recently. The parties did finally settle on a new, three-year contract Dec. 31. Terms of the agreement are private, but Wexler said it was an "equitable" deal that satis- fied the goal of narrowing the gap. While the public isn't privy to how much Tufts and other commercial insur- ers pay Saint Vincent and MetroWest, there are ways to discern who gets paid the most, who gets paid the least, and who falls in the middle. A good metric is relative price, which is calculated through the state's Center for Health Information and Analysis (CHIA) based on information submitted by insurers. Relative price indicates how much a hospital is paid relative to other hospi- tals within an insurer's network, without attaching dollar amounts (CHIA is not privy to that confidential information). It's easy to see where a hospital falls on the price spectrum across all commer- cial insurers by viewing CHIA's compos- ite relative price data. Composite relative price is measured on a scale of 1 to 100, with 100 being the most expensive. Small community hospitals tend to generate lower com- posite relative prices, while major urban hospitals and academic medical centers, especially those in Boston, tend to have higher prices. Heywood Hospital in Gardner, for example, had a composite relative price of 22 in fiscal 2012 (the most recent year for which data is available). UMass Memorial Medical Center in Worcester, an academic med- ical center that operates the region's trauma center, had a 79 the same year. Saint Vincent Hospital's composite relative price in fiscal 2012 was 56. While updated figures are due from CHIA later this month, the 2012 figure provides a good idea of the gap Wexler referred to, given UMass Memorial's price of 79. The data doesn't indicate how much Tufts Health Plan pays Saint Vincent compared with UMass Memorial because CHIA analyzes only relative price for individual insurance companies for the top three commer- cial payers for each hospital; Tufts wasn't one of Saint Vincent's top payers in fiscal 2012. What's behind the pricing differences? It depends in part on a hospital's cost structure. Academic medical centers, for example, tend to generate more expenses. "Disproportionate share" hospitals — those that have a large number of low-income patients who receive pay- ments from the federal gov- ernment to help care for the uninsured — also tend to have added costs. But Wexler takes these oft- cited explanations with a grain of salt. He argued that the cost difference between an academic medi- cal center that does research and acts as a teaching hospital, and a hospital such as Saint Vincent, a teaching hospital not attached to a medical school with research activities, are not that great. Academic medical centers generate revenue through their activities that other hospitals do not, which some- what offsets operating costs, he noted. "These differences are quite minor and small in nature and should not drive significant disparities between institutions," Wexler said. So what does? In the case of Saint Vincent and MetroWest, Wexler said the hospital was not as aggressive as it should have been in negotiating con- tracts with insurers about a decade ago, and now it's catching up so that pay- ments increase to match the higher cost of doing business. Illustrating Saint Vincent's and MetroWest's relatively low prices is the fact that they fall in the lowest-cost tier of every commercial health plan they do business with. And while the pay- ments from insurers might be lower, there's a definite advantage to falling in an insurer's low-cost tier; out-of-pocket expenses for consumers are lower, so they're more likely to use your hospital than shop around for cheaper care. Wexler said it was important to remain in Tufts' lowest-cost tier to maintain an edge with consumers, something to consider when negotiat- ing payment contracts. If Tenet had negotiated rates that were too high, it could have ended up in a higher tier. (Officials from Tufts Health Plan, based in Watertown, declined to comment for this story). Ed Moore, president and CEO of S out hbr idge-b as e d Har r ington Healthcare, knows what it's like to walk this fine line. Despite running a small community hospital system, Harrington has struggled to achieve low-cost tier Taken together, these projects are building up the image of Worcester as a college city, as opposed to a city that simply has a few colleges. "We've always thought that Worcester had the potential to be a col- lege town more than it demon- strates," QCC President Gail Carberry said, summarizing the attitude of the city's higher- education institutions. "The downtown hub of Worcester is becoming more and more a college presence and will increasingly show that." The opportunity for schools to lift up Worcester is always a consideration when they undertake improvement proj- ects, she said. While the col- leges must do everything with their students in mind, the schools have as much to gain from improvements in the city as Worcester has from cultivating its colleges and uni- versities, said Barry Maloney, president of Worcester State University. This has led both academic and city officials to work together on school projects. With colleges spread throughout the city, they're able to anchor and improve individual neighborhoods, boosting the entire city, added Timothy Murray, pres- ident and CEO of the Worcester Regional Chamber of Commerce. Clark's work in Main South has improved a neighborhood that has seen tough times, he said. That was a con- scious move on the school's part, said Jack Foley, vice president for govern- ment and community affairs and cam- pus services. Foley is overseeing the school's Alumni and Student Engagement Center, slated for comple- tion in 2016. While that proj- ect will benefit students by offering more space for informal meetings and cen- tralizing many student ser- vices under one roof, the sur- rounding neighborhood was part of the planning process, he said. "This will bring great lighting to that area and sta- bilize that area … it will be a real beacon … making this a safe anchor," Foley said. Strong neighborhoods can anchor parts of the city, Maloney added. And this effect contin- ues to grow in Worcester as schools expand beyond their core campuses. When QCC expanded into down- town, boosting the economy by bringing more people to the center of the city was a strong consideration, Carberry said. The need for the expansion was a direct result of both growing attendance — up 50 percent to 12,000 since 2006 — and the demand for workforce development that the 73,000-square-foot facility on Franklin Street addresses. "That was a big factor for us: How could we better support the revitaliza- tion of downtown?" Carberry said. "We needed the physical space and we thought downtown was the best place to do it." QCC and Becker College, which is planning to renovate a building into a center for innovation and entrepreneur- ship, have joined the ranks of WPI, MCPHS University and Clark in creat- ing a larger impact when their expan- sions are taken together, Carberry said. These locations can help draw more students, which means a more vibrant downtown with more customers for businesses, Murray said. While the buildings send a strong message, the people in them have the ability to effect significant change, he added. "Symbolically, having those fresh buildings is important but equally important, especially to the businesses, is having those people downtown," Murray said. "Businesses want to be where there is a well-educated and well- trained workforce. We have that, but students and often times those busi- nesses want to be in places where there is that feel and that atmosphere." Signature buildings While the city's well-being is a consid- eration with schools' projects, serving students must be at the forefront, according to officials from the colleges. Current projects improve or expand stu- dent programming and, in some cases, act as "signature" buildings that draw attention through their architecture or the individual programs within them, enhancing the schools' marketing and admissions efforts. Some schools have entered into an "arms race" of sorts, creating expensive facilities that are used to market the school. For example, the University of Massachusetts Boston recently complet- ed a $182 million science complex. These signature buildings will be plas- tered over every marketing brochure for a school, said Charles "Chick" Weiss, director of the Office of Strategic Initiatives & Corporate & Foundation Relations at Holy Cross, which recently secured a top design firm to create a signature building for its new arts center. However, he and Foley, at Clark, don't see their current projects as being with- out substance. Rather, they see them as creating spaces that enhance student life. Yet, the Holy Cross building will also enhance Worcester's performing arts scene through accessible theater and concerts, Weiss said. With the upcoming addition of the performing arts center and other high- er-education projects in the city, the boost to the city's economy and com- munities from local colleges will only continue to grow, Murray said. "The college and university (facilities) that have been built have begun to change the dynamic and perception of the city … symbolically, having those fresh buildings is important," he said. "There's no doubt that when (schools) are engaged and partnering with busi- ness and neighborhood groups, that you can make some real good things happen and we have." n Building a 'college city,' campus by campus Jack Foley, of Clark University: Main South was part of planning process for new student center. Eric Wexler of Tenet: Recent agreement with Tufts helped narrow payments gap. >> Continued From Page 1 >> Continued From Page 1

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