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Communities and Health Care

Communities and Health Care: The Rochester, New York, Experiment

Sarah F. Liebschutz
Volume: 19
Copyright Date: 2011
Published by: Boydell and Brewer,
Pages: 272
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  • Book Info
    Communities and Health Care
    Book Description:

    During the 1992 presidential campaign, candidate William J. Clinton praised Rochester's hospital experimental payment (HEP) program for containing costs and providing access to high quality health care. "If Rochester, New York, can do it with two-thirds of the cost of the rest of us," Clinton asserted, "America can do it too." This book is a detailed case study of a community that devised and implemented a unique, successful, and celebrated hospital cost containment experiment in the 1980s. Author Sarah Liebschutz describes the economic and social culture of Rochester dating to the early part of the twentieth century that provided the fertile soil for regional health planning and the HEP program. This study also examines how the changing economy ultimately stimulated robust competition among health care insurers and providers. What does Rochester's experience tell us about the role communities play in organizing and financing health care? The national government has long played-and will continue to play-a central role in determining health policy, funding health insurance, and reimbursing health care providers. The responsibility for dealing with the interlocking issues of access, quality, and costs, however, is not exclusively national. State governments shape the health system as they legislate, regulate, and finance such key components of health care as insurance coverage, quality of care, hospitals, and other providers. The book draws heavily on files of the Rochester Area Hospitals Corporation, made available specifically to the author, and on extensive interviews with business leaders, hospital trustees, and administrators whose decisions fostered collaboration and then competition. Sarah F. Liebschutz is Distinguished Service Professor Emerita at the State University of New York, College at Brockport.

    eISBN: 978-1-58046-779-7
    Subjects: Health Sciences

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. List of Illustrations
    (pp. ix-x)
  4. Foreword
    (pp. xi-xiv)
    Paul F. Griner

    In the current debate over health care reform, issues of access, cost, and quality are paramount. Much can be learned from what we might call “experiments of nature,” real-world examples of innovations designed to address one or more of these critical health care issues. The unique payment program begun more than twenty-five years ago in the Rochester, New York, area is one such example. In Communities and Health Care: The Rochester, New York, Experiment, Sarah F. Liebschutz describes the hospital experimental payment (HEP) program that the nine hospitals in Rochester and its surrounding counties participated in from 1980 to 1900....

  5. Acknowledgments
    (pp. xv-xvi)
  6. Chapter One Communities and Health Care
    (pp. 1-8)

    For a time, the experience of one community, Rochester, New York, seemed to belie this indictment of the nation’s health care system. Rochester’s community effort was singled out for praise by William J. Clinton in his 1992 campaign for president. “If Rochester, New York, can do it with two-thirds of the cost of the rest of us, America can do it too. I’m tired of being told we can’t. I say we can. We can do better, and we must.”¹

    Such commendation, for containing costs and providing access to health care, reflected the success of a collaborative, global budgeting demonstration...

  7. Chapter Two Health—A Community Affair
    (pp. 9-19)

    What does the experience of one community tell us about the role of communities in organizing and financing health care? To set the stage for that discussion, the concept of community in America will be considered from several perspectives, as well as the diversity of community health systems. The chapter concludes with a description of a project of the Robert Wood Johnson Foundation (RWJF) in the 1980s aimed at involving local community coalitions in containing the growth of health care costs.

    What is a community? The concept of community is elusive. It has “a privileged place in the romantic symbolic...

  8. Chapter Three Rochester’s Community Legacy
    (pp. 20-52)

    Rochester’s widely admired health care system did not occur out of the blue. As the beneficiary of a legacy of collaboration dating from the 1930s, it was “the deliberate product of cooperative crafting by business leaders, local government officials, health providers, health insurers, and health planners.”¹ In the absence of this “unusual history of concerted community-wide efforts to contain costs and improve access in the health care system,” it is inconceivable that the hospital experimental payment program (HEP) could have been devised or implemented, or that it could have succeeded.²

    Five main institutional players were on the Rochester stage from...

  9. Chapter Four The Rochester~Area Hospitals
    (pp. 53-78)

    Nine hospitals in the two-county Rochester area played essential roles in the hospital experimental payment program. The other major institutions on the main stage—businesses, payers, planning entities, hospital associations, and external factors—were described in the previous chapter. Here the focus is on the individual hospitals, their distinctive historical missions, responses to local demographic trends, and services rendered to their patients. Each hospital is profiled from its founding to the 1970s, before the start of HEP in 1980 or its precursor, MAXICAP, in 1976. We begin with a brief history of hospitals in America, a history characterized by Rosemary...

  10. Chapter Five MAXICAP: Precursor to HEP
    (pp. 79-85)

    Rochester’s innovative regional approaches to health care planning dating to the 1940s attracted attention around the state and the nation. With health care costs rising rapidly during the 1960s and 1970s, federal and New York State officials responded favorably to Rochester-initiated proposals for cost containment. This attention resulted in several demonstration projects—on how to contain hospital costs, to divert chronically ill and elderly persons from acute and long-term institutional care, and to provide quality care in the community for the chronically mentally ill who had previously received care in public institutions.¹ MAXICAP, a federal-state-local demonstration between 1976 and 1978...

  11. Chapter Six The Rochester Area Hospitals Corporation: Decision~Making Forum
    (pp. 86-113)

    The hospital experimental payment program commenced on January 1, 1980. A two-county demonstration, HEP was designed to test the proposition that a community on a voluntary basis could more successfully control the rate of increase in hospital costs, improve the efficiency of hospital services, and maintain or improve the solvency of the participating hospitals than under New York State regulations. HEP operated for a decade, until 1990 with three iterations. The original experiment, HEP I, was inaugurated on January 1, 1980, to last for three years, and was extended, upon agreement of all parties at the end of the first...

  12. Chapter Seven The Hospital Experimental Payment Program: Basic Facts
    (pp. 114-125)

    what was HEP? It was, in brief, a locally driven, locally designed response to the financial pressures in the 1970s affecting not only Rochester-area hospitals but hospitals throughout the state and the nation. The successor to MAXICAP, the nine-county western New York hospital reimbursement demonstration project in 1976–78, HEP retained MAXICAP’s basic design. Its features were a “predetermined, guaranteed annual budget, a constant revenue stream, and greater flexibility to deliver care in more cost-efficient ways without losing income.”¹

    If HEP had not been an experiment or demonstration project, it would have violated antitrust laws. “Until the 1970s,” according to...

  13. Chapter Eight HEP in Retrospect
    (pp. 126-139)

    Eighteen months into HEP I, William D. Ryan, chair of the RAHC board of directors, announced “good news from Rochester, New York,” in testimony before a congressional committee.

    We in Rochester are showing that old-fashioned American ingenuity and determination to work together is enabling our hospitals to achieve the lowest rate of cost increase in the nation. We accomplished that while improving our solvency and maintaining our substantial commitment to the highest standards of quality, access, and educational programs in those hospitals.¹

    HEP was designed to test the proposition that a community could more successfully control the rate of increase...

  14. Chapter Nine The Post~HEP Years: The Changed Environment
    (pp. 140-153)

    After HEP was terminated and RAHC reinvented, Rochester’s hospitals did not soldier on in the tradition of collaboration for the benefit of the community. Rather, as Howard Berman, president (1985–2002) of Excellus BlueCross BlueShield, observed, “Rochester migrated toward the mean.”¹ To understand why Rochester moved toward a competitive hospital environment, key changes in the local and national environments that promoted competition will now be considered. In chapter 10, the consequences for the Rochester community of three competitive hospital systems formed in the late 1990s are described and analyzed.

    Rochester was late in migrating toward the competitive hospital environment that...

  15. Chapter Ten Sprinting toward the Mean
    (pp. 154-177)

    While the RAHC hospitals were participating in the HEP demonstration during the 1980s, their counterparts across the nation were devising market positioning strategies. After HEP, Rochester was said to “migrate” toward the competitive environment that characterized the health care industry nationwide. Once such activity among the local hospitals began, however, its pace was more a sprint than a leisurely migration.

    Rochester’s local hospital landscape changed dramatically in the mid-to-late 1990s. The hospitals, unrestrained by caps on capital spending as during HEP III, began to sharply increase spending on capital improvements and technology. As the decade wore on, local “health insurers...

  16. Chapter Eleven The Relevance of the Rochester Experiment
    (pp. 178-188)

    The Rochester experiment was a locally driven, locally designed response to the financial pressures in the 1970s that affected hospitals in the Rochester area, in New York State, and across the nation. With waivers from the federal and state governments and Blue Cross and Blue Shield of Rochester, the hospital experimental payment program enabled nine Rochester-area hospitals to attain financial stability and to pursue capital plans they devised in the 1960s and 1970s but were unable to fund in those years. The experiment was conducted between 1980 and 1990. When it ended, the hospitals were better positioned to meet the...

  17. Notes
    (pp. 189-230)
  18. Bibliography
    (pp. 231-246)
  19. Index
    (pp. 247-256)
  20. Back Matter
    (pp. 257-257)