Beyond the Status Quo
Baystate Health is undergoing some pain now, including the loss of many leadership positions, but plans to be on solid financial footing by the end of 2025.
Spiros Hatiras was looking for some wood to knock on.
The president and CEO of Holyoke Medical Center (HMC) had just told BusinessWest that his hospital had a solid year in 2024 and made progress with many of the challenges facing all providers, and he was generally optimistic about the immediate future.
“Knock on wood,” he added quickly, noting that he and others in this sector are always wary of the unforeseen — like a global pandemic, for example, or the extreme workforce challenges that came in its wake, or a cyber attack … or any changes to Section 340B of the Public Health Service Act, which requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to hospitals that serve many uninsured and low-income patients.
“That’s a program that’s a lifeline for hospitals, and it constantly gets attacked, usually by pharmaceutical companies who want to do away with it because they have to discount drugs at a very high rate,” said Hatiras, who, like and others we spoke with, is not expecting any real changes to the 340B program, but acknowledged they could happen. In the meantime, they stressed that, while the unforeseen is always concerning, the many challenges that are in plain sight are certainly daunting enough.
Indeed, ‘relentless’ was the word Dr. Robert Roose, president of Mercy Medical Center, used to describe these ongoing headwinds, which include everything from spiraling costs and inflation to persistently inadequate reimbursements from payers, especially those of the public variety; from continuing workforce challenges to access and capacity issues.
And then, there is the overriding issue driving all those listed above — caring for a population that is older and sicker than what has been seen historically.
Dr. Robert Roose
“The challenges in healthcare over the past five years have shifted, but they have not let up. And they ultimately result in financial challenges that are stressing the ways in which we collectively provide access to care in our communities.”
“The challenges in healthcare over the past five years have shifted, but they have not let up,” Roose said. “And they ultimately result in financial challenges that are stressing the ways in which we collectively provide access to care in our communities.”
The many hardships facing hospitals large and small have been effectively encapsulated in recent headlines involving the Baystate Health system, which includes four hospitals.
The system went public recently to detail recent struggles — including $300 million in operating losses over the past few years — and its response.
That includes the sale of its lab (which helped stem the flow of red ink for the fiscal year that ended Sept. 30), the pending sale of Health New England, and, most recently, the announced elimination of 130 administrative positions.
Those steps are part of what Baystate’s new president and CEO, Peter Banko, called a “transformation plan, one that calls for making hard decisions, relieving cost pressures, some cuts, but also investments in the years to come and greater financial stability.
“Next year at this time, we’ll be talking about being in a growth mode,” he added. “Not contracting, not selling things, but investing $1.2 billion over the next six years.”
There has been a good deal of red ink within the industry — 75% of Bay State hospitals will lose money in 2024, according to the Massachusetts Hospital Assoc. — but Hatiras said HMC has been able to stay in the black, in part through help from the Commonwealth, which has been very supportive of its hospitals, but also by managing carefully.
“We don’t have a lot to fall back on, so we’re careful,” he noted. “We also try to think outside the box and be smart about the risks we take.”
As they looked ahead to 2025 and beyond, those we spoke with made heavy use of that phrase ‘guarded optimism’ when it comes to improvement of the overall bottom line as well as issues such as the workforce. But they also spoke of the need for real change when it comes to how people are cared for.
Peter Banko
“We need to develop more personalized care. One-size-fits-all doesn’t work; someone who’s 85 needs different care than someone’s who’s 65 or 55 or 25. I’ve been in this industry for 40 years; we’ve never personalized care or personalized care models to each person — it’s ‘here’s our model, and you’re going to fit into it.’”
“We need to develop more personalized care,” Banko said. “One-size-fits-all doesn’t work; someone who’s 85 needs different care than someone’s who’s 65 or 55 or 25. I’ve been in this industry for 40 years; we’ve never personalized care or personalized care models to each person — it’s ‘here’s our model, and you’re going to fit into it.’”
For this issue’s look at the healthcare outlook for 2025, we talked with these hospital leaders about what’s happening today, and what needs to happen for tomorrow.
Age-old Problems
Nov. 2 at 4 a.m.
That’s when Mercy Medical Center flipped the switch, if you will, and converted to the Epic EHR electronic health records system. The conversion comes at a price tag “in the eight figures,” over the next several years, and has been, in general, both all-consuming and quite necessary, Roose said.
“This has been a journey for us for several years that intensified over the past year — it’s a transformational moment,” he explained, adding that the system will greatly improve coordination of care. “It’s been incredible investment in terms of time — tens of thousands of hours — and money.”
Conversion to systems like Epic, taking place across the country, comprise just one of the many challenges — and huge expenses — facing all healthcare systems today.
And those challenges have been, as Roose said, relentless — both since the start of COVID and, on many fronts, since well before that.
One of the larger issues facing all providers today is simply caring for a population that is older — the oldest Baby Boomers are approaching 80, and there are a lot of them — and, for reasons both known and unknown, sicker.
“There’s been a spike in things, which everyone is still trying to explain,” Hatiras said. “We’ve seen a spike in cancers, a spike in heart conditions, spikes in cardiovascular and stroke … people are very, very sick, sicker than in years prior.
Spiros Hatiras
“There’s been a spike in things, which everyone is still trying to explain. We’ve seen a spike in cancers, a spike in heart conditions, spikes in cardiovascular and stroke … people are very, very sick, sicker than in years prior.”
“People are still trying to figure out why this is happening,” he said, not wanting to speculate himself but while also listing theories ranging from long COVID to vaccines to people putting off needed care during the pandemic.
“The bottom line is, we’re a lot busier,” he went on, adding that this phrase applies to many constituencies, including employees. Indeed, the hospital, which is self-insured, has seen claims for such conditions as cancers, cardiac disease, and stroke up 30% to 40%, spikes that are certainly not normal.
Banko noted that, in many respects, what hospitals are seeing relates to demographics — a large percentage of the population reaching its 60s and 70s at the same time more people are living well into their 80s, 90s, and beyond — and the resulting consequences. Meanwhile, in Western Mass., there is virtually no growth among younger people, leaving an older, sicker population to care for.
“We look at our growth over the next five to 10 years … there’s a little in the 25-to-44 age range, the 45-64 range is declining, the zero to 25 is declining. The most rapid increase in our population here in Western Mass. and the Northeast is the 65 and older, and the largest increase is 75 and over.
“What that means is more complex care and more chronic conditions; today, we’re at 70% Medicare, and that’s only to increase moving forward,” he went on, adding that these statistics explain why hospitals in this region are under more financial stress than those in growth areas such as the Southwest and Southeast.
“People are living longer, and when they live longer, there are chronic conditions,” Banko continued. “Decisions made in your 30s, 40s, and 50s show up in your 70s and 80s … you’re probably going to experience cancer, and you may experience heart disease or stroke, and you may need a hip replacement or spine surgery.”
Work in Progress
This surge in business presents a host of challenges, including crowded emergency departments, with backlogs of people getting into beds, and then backlogs when those people are ready for discharge because there is a lack of beds in nursing homes and other facilities.
“We have access issues,” Banko said. “It’s hard to access primary care and specialists, we don’t have physicians and workforce to care for the needs of the community, we don’t have enough beds … we don’t have enough capacity.”
These capacity issues are compounded by financial struggles, which make it more difficult to make needed investments in facilities and personnel, he went on, adding that a big part of Baystate’s transformation plan is to invest and expand so that more people can be treated in this market and fewer people will have to go to Boston or other markets for care.
Looking ahead, he said 2025 and the years to follow will be “tough but invigorating.”
And these challenges come amid workforce issues, amplified by those aforementioned demographics — Boomer doctors, nurses, and other professionals are retiring — and the unprecedented levels of stress generated by the pandemic, which prompted some to leave healthcare for other sectors or retire early.
Those we spoke with said there has been some easing on the workforce front, especially as hospitals offer incentives to nurses and other professionals, as well as more flexibility with hours and work/life balance. But the challenge persists.
One of the reasons why is capacity, said Hatiras, noting that incentive programs, which all area hospitals have now implemented, mostly result in professionals moving from one hospital or system to another, with no general improvement in numbers across the sector.
“I wish that, rather than us trying to attract staff that works somewhere else — when we hire someone, that leaves a hole somewhere else — we could find some way to grow the pie rather than share it differently,” he said. “But if you’re a small player like us, in order to survive, you have to have staff. Unfortunately, the game we have to play is to make this place as attractive as possible to attract people here, even if it’s from other institutions, which I’d rather not do, but, unfortunately, I have to.”
To attract these professionals, HMC and other providers are focusing on culture, while also creating more flexibility with schedules, something that is in demand, especially from younger generations of workers.
“We find more people who don’t want to work weekends, or they don’t want to work nights,” said Hatiras, adding that someone has to work those shifts, and the challenge is to incentivize people to want to.
Roose agreed, noting that, through some creative initiatives involving schedules, compensation, and overall culture, Mercy Medical Center has recorded a 33% reduction in turnover rates over the past nine months.
Bottom Line
As they looked ahead, those we spoke with again referenced the unforeseen, which is always a concern in this sector — again, because the ongoing issues are stern enough.
Hatiras said that, in addition to ongoing attacks by Big Pharma on Section 340B, there is some concern about planned cuts to the amount of support given to disproportionate-share hospitals, as contained in the Affordable Care Act.
Those cuts, included in the landmark legislation on the assumption that more people would have health insurance and that the need for additional support would be reduced, have not been implemented, he told BusinessWest, adding that the program expires Jan. 1, and there are questions about whether this lame-duck Congress will continue to kick that can down the road.
“If those cuts go into effect, it’s a lot of money — in Massachusetts, I think it’s $600 million, maybe $800 million,” he said, adding that hospitals like HMC will certainly be impacted.
Banko isn’t predicting any cuts to 340B or Medicaid’s Disproportionate Share Hospital program, adding that reductions to either would be devastating to the state’s hospitals and, therefore, unlikely.
As for the longer term, he noted that the demographics he cited earlier will continue to challenge hospitals and healthcare systems in this region, underscoring the need for real change in how care is provided.
“How we get paid versus how we provide care are two different things,” he said. “We’re going to have to figure out new care models with physicians, advanced practice providers, how we provide nursing, more virtual care, more outpatient care. Compared to other parts of the country, we don’t have a lot of ambulatory outpatient access points, so not a lot of imaging centers, surgery centers, or urgent care.
“So now, we’re stuck going to the big-box hospital,” Banko went on. “So we have to find ways to offload care to community settings, less costly settings, and starting to develop personalized care.”
Roose agreed. He called this an inflection point for the sector, one that requires a call to action and a transformation in how care is provided, with more intervention earlier that may prevent real problems later.
“Personally and professionally,” he said, “I see a real calling to try move upstream and intervene earlier — not only with individual improvements through lifestyle changes that can attend to the factors that can contribute to chronic disease, be that movement, appropriate nutrition, or good sleep, but also thinking more systemically about how we support the decisions and the resources within the community to lead people toward better health, better wellness.”
