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‘A New Set of Standards’
YNHH's Zaccagnino discusses the changing health-care landscape and its impact on his hospital — and all of us
Part II of two parts (see BNH, October 20, for Part I).
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Business New Haven
11/3/1997
By: BNH
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What the impact of the current consolidation of HMOs in Connecticut?
In 1994, 20 percent of the population were enrolled in managed care plans. In 1997, we have 44 percent. In 1994, there were about 15 or 16 managed-care companies serving Connecticut. In 1997, within about 12 to 14 months, we've seen a consolidation on the payer side that has three payers controlling 70 percent of the covered lives in the state - placing them in the position of having enormous influence to direct and influence patients and decision-making regarding pricing and contracting with providers.
Is that good for consumers?
Controlled competition is healthy. If too much influence is amassed in the hands of too few, then there's always the risk that the influence can be used to the disadvantage of the consumer. In the case of the payer, [the danger is in] wielding so much influence over the providers that they dictate reimbursement levels which are inadequate for providers to sustain themselves and meet the patients' needs. Or simply to be able to charge to the purchasers of health insurance rates which are not reasonable.
Will Connecticut will become essentially a two-system state - the Yale-New Haven system and the Hartford Hospital system?
At the Yale New Haven Health Systemwe have every reason to believe that we will attract other important providers to join us because the benefits we can bring the population. The Hartford Hospital system has formed relationships in the northern part of the state, although they do have a looser affiliation with the Hospital of Saint Raphael in New Haven. St. Francis has a hospital network under development. The Stamford and St. Vincent hospitals have an affiliation through Connecticut Health Enterprises. I'm certain there will be other high-quality systems in this state.
New Haven has two comprehensive hospitals. Can both survive?
Yes.Saint Raphael's is a very fine community teaching hospital. It is an affiliate of the Yale School of Medicine. It is different by degree of commitment to education, to clinical research, than YNHH. It's different in its comprehensiveness of services. I feel that both institutions will change over time because of market demands, but that we will have two vibrant institutions in this city.
This is one of the last areas in the country where you still see one-, two-, three-physician 'cottage' practices? Are these doomed ?
It is unusual to the Northeast, and Connecticut in particular. In other parts of the country we have very large group practices. Here, in the Yale-New Haven vertical network, we have the Yale faculty practice plan, which is a very large multi-specialty group practice made up of the full-time faculty of Yale School of Medicine that has nearly 600 physicians. The next-largest group, I believe, has maybe 150 physicians. Beyond that you tend to drop down very quickly to very small groups. Physicians are trying to determine what model makes the most sense to them. MSO [management service organizations] can provide practice management support, economies of scale in purchasing and managing their business affairs and, in some cases, assisting them with managed-care contracting. Yale New Haven Health System provides MSO services for physicians. Others are considering joining specialty groups forming, such as in obstetrics, to see if their collective participation can bring them similar benefits and position them better for managed-care contracting.
The jury is still out relative to how physician organization will ultimately shake out. I think our physicians in Connecticut are sophisticated, will carefully evaluate alternatives and, I hope, align with their long-term historical partners, which are .
How has your job as a hospital administrator changed since you began your career?
It's changed markedly, and I feel good about it. When I entered this field [in 1970], there was a very different health-care environment. Medicare had recently come into play, many of the exaggerated concerns about what governmental intrusion into health care [might result in] had already waned and people recognized that having the support for this important portion of the population it served was very helpful and helped us have a very predictable revenue stream.
The focus in the 1970s was growth and development: Let's build better buildings, expand programs, more physicians, federal grant programs to build better hospitals or to renovate old hospitals. It was a predictable environment. Less focus on the business aspects because there was comfort associated with being cost-based reimbursed. You spent it, and you would be reimbursed. Less exciting. Less challenging.
Over time there was more attention to how much it cost to deliver care, to the business perspectives that were necessary to ensure that compassionate care could be delivered and [the institution] still remain viable as an enterprise.
As finance changed, loss of cost-based reimbursement and introduction of DRGs...we began to see a greater sophistication in the overall management and conduct of the hospital's affairs.
Although stressful at times, it is very challenging and satisfying to the extent that you can move an organization forward in the best interest of serving the public better under a new set of standards.
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