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Hospitals Leave Downtowns for More Prosperous Digs

Facilities aim to ‘capture’ well-insured patients

St. Elizabeth’s Hospital in Belleville, Illinois, founded by Catholic nuns in 1875, has been losing money for at least a decade, largely a result of the costs of maintaining an obsolete facility and of treating more low-income and uninsured patients from Belleville and neighboring East St. Louis, one of the poorest cities in the Midwest.

Now hospital officials are taking a radical step: Like a small but growing number of hospitals around the country, they plan to close the 303-bed hospital and move elsewhere. According to a new report from Kaiser Health News, they are seeking state approval to build a $300-million facility seven miles northeast, in O’Fallon, a wealthier city that is one of the fastest-growing communities in the St. Louis region, with new subdivisions, proximity to a regional mall, and quick access to Interstate 64.

Describing plans to leave behind some services, including a walk-in clinic, St. Elizabeth’s CEO Maryann Reese insists the hospital is not abandoning the city or the poor.

Hospitals have moved to follow population migrations before, but the relocations are becoming more common. That’s partly due to the aging of many facilities built in the 1950s and 1960s, and the desire to attract better-paying patients. A 2012 Health Affairs study found that hospitals in 12 markets used geographic expansion strategies, including building new hospitals or adding freestanding emergency departments, to “capture” well-insured patients.

“Where you choose to place new facilities almost always involves moving to an area where there is a substantial privately insured population,” said Paul Ginsburg, chairman of medicine and public policy at the University of Southern California.

Currently, hospital relocations are planned or under way in South and Central Florida, eastern Tennessee, central Georgia, Birmingham, Alabama, and northeast Ohio. Some have stirred controversy, as in Belleville.

Hospital officials point to their aging, landlocked facilities and argue it is cheaper to build, rather than renovate. What they don’t say publicly is how geography is often economic destiny for a hospital, especially at a time of increasing financial pressure as a result of Medicare funding cuts, including penalties that may result from new pay-for-performance measures in the Patient Protection and Affordable Care Act.

By moving to wealthier areas, hospitals can reduce the percentage of uninsured and lower-paying Medicaid patients, while increasing the proportion of privately insured patients –– what hospitals refer to as attracting a better “payer mix.” That’s also why they locate outpatient centers and medical offices in affluent suburbs. But relocations often spark anger from those left behind, who worry about the loss of jobs and about access to care, particularly for the poor.

When the hospitals are nonprofits, such as St. Elizabeth’s, questions loom larger because they are exempted from taxes in exchange for providing benefits to the community. “Hospitals were established in inner cities where the greatest needs were, and now, essentially, that charity obligation has gone by the wayside as they are looking at their bottom line,” said Gerard Anderson, of the Johns Hopkins Bloomberg School of Public Health.

Even nonprofit hospitals want to be near wealthier residents. “You move to where the money is,” he said.

Belleville Mayor Mark Eckert fears that losing St. Elizabeth’s will leave barren whole blocks in the middle of the city, devastate the downtown economy, and make it more difficult for some people to get care.

“They are definitely running from the poor,” he said.

St. Elizabeth’s officials deny that, noting that only a quarter of their patients come from Belleville and that the new site will be closer to the majority who live in other communities, including eight of the 10 zip codes in their service area with the highest poverty rates. “Being more centrally located will also make care more accessible for everyone, regardless of income,” the hospital said in a statement.

Another vehement opponent to the move is Memorial Hospital, a few miles from downtown and the only other hospital in Belleville. It, too, is targeting the more affluent population to the east of the city — building a 94-bed hospital in Shiloh, also just off the interstate and a 5-minute drive from the proposed site for St. Elizabeth’s. State officials approved that facility in 2011— over the objection of St. Elizabeth’s, which claimed there was no need for it.

“As a nonprofit community hospital, we want to fulfill our mission — and meet our budgetary needs,” said Memorial CEO Mark Turner. “And to do that, there has to be enough money coming in to pay for that.”

Unlike St. Elizabeth’s, though, Memorial retained its Belleville hospital, albeit with fewer beds. Memorial officials say they fear that if St. Elizabeth’s moves, their Belleville hospital will be overwhelmed and will get most of the area’s uninsured and Medicaid patients. Memorial also worries that the new St. Elizabeth’s will pull the best-paying patients from its new hospital, set to open next year.

Source: Kaiser Health News; April 13, 2015.

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