Richard Norling knows personally and painfully the radical change of medical care.
Back surgery three decades ago kept the chief of Fairview Health System bedridden for 31 of his 32 days in the hospital. But after similar surgery in December, he stood up the next day and checked out in five, following a protocol of Fairview's best practices.
To the financial misfortune of hospitals, such medical advances, along with managed-care pressures, are blessing millions of people with shorter inpatient stays. Sometimes the mightiest institutions suffer most. That's how Fairview, a humble community system, ended up buying the prestigious University of Minnesota Hospital and Clinic in January.
Norling says Fairview's $87.5 million purchase of the struggling university facilities will heal the teaching hospital and help the Twin Cities. "The potential is incredible," he says.
If only everyone in the Twin Cities were as convinced. Unions say the university sold out its mission for a song. A citizens' group complains, to no avail, that quality of care could suffer.
Part of the trend. But the University of Minnesota isn't the only institution to take once-unthinkable steps. Some medical schools keep their hospitals afloat in joint ventures with for-profit Columbia/HCA Healthcare Corp. Others have merged hospitals with those of rival schools. The miserable outlook for academic medicine is a common conference and media topic.
In Minneapolis, the central task ahead is consolidating 554-bed University Hospital and its ambulatory-care services with 693-bed Fairview Riverside Medical Center, located opposite each other on the Mississippi River.
As an early example of the fate of academic centers in heavy managed-care markets, the deal holds lessons for other teaching hospitals. It also is a study in merger dynamics and the resulting cultural clashes.
Split personalities. Whatever problems the average hospital has, these guys face in triplicate. Fairview Riverside is to University Hospital what Mozart is to Madonna, Ripkin to Rodman, Wyeth to Warhol.
"We are trying to proceed through probably the most complex integration possible-community vs. academic, private vs. public, unionized nursing vs. nonunionized," says Joanne Disch, vice president of patient and family care at Fairview-University Medical Center, as the merged hospitals are now known. "It's going to be challenging-that's a word we've been using-and interesting."
Fairview-University now has two different callings: the community hospital duty of meeting basic healthcare needs and the teaching hospital role of advancing medical science. University-controlled by one vote and led by former University Hospital General Director Peter Rapp, it will act as a quasi-public division within private Fairview Health System.
In short, Fairview-University is trying to get along as something of a split personality. The danger, of course, is it will drive Fairview crazy.
As if this isn't enough, the consolidation is generating labor issues galore, such as union elections and wage cuts. To Fairview's chagrin, a local newspaper columnist reports some employees have derisively shortened the name to "FU Hospital."
Bright possibilities. Norling, wearing a back brace, says he's "eager with anticipation" for the future because the deal creates so many bright possibilities. Overnight, Fairview went from $600 million in annual business to $1 billion. But to make the most of its affiliation, the system must become larger still, Norling contends.
Disch says, "I really think we have a good shot at making this work because tons of effort has been put into the human side."
Service integration is occurring over the next 16 months. The Riverside campus will specialize in less technology-intensive services, such as delivering babies, counseling depressives and rehabilitating stroke victims. The University campus will handle almost all medical-surgical patients, including razzle-dazzle cases such as bone marrow transplants.
The $87.5 million also bought Fairview a 175-bed hospital in Hibbing, Minn., three clinics in addition to the main hospital's ambulatory sites and a 30-year affiliation with the university.
The book value of the physical assets is about $150 million, but university officials say the market value is less. According to university projections, left alone, University Hospital would bleed $85 million over just three years, eroding the university's fund balance.
Besides, Fairview took on an enduring financial obligation to the university. As part of the affiliation, it pledged to split the costs of unfunded research at Fairview-University and make an annual grant to the university of at least $1 million, more when certain profit goals are met.
University woes. University Hospital was in trouble. Admissions shrunk 14% from 1992 through 1996 as lower-priced competitors won contracts. In the worst case, patient volume fell below the minimum needed for teaching. After 400 babies were delivered in 1993, the university moved its obstetrics residency program to Fairview Riverside.
The state of affairs threatened the medical school itself, says Frank Cerra, provost of the university's Academic Health Center, which includes the medical school and six other schools for health professionals. Faculty took clinical trials off-site because there weren't enough patients. The medical school started reducing its student population, planning a 25% cut over three years, excluding primary care.
A July 1996 report to university regents contained dire predictions: "If the university does not stabilize patient volumes, it eventually will be required to outsource virtually all professional clinical training and risk loss of control over the health-related education process to other healthcare providers and health plans. Likewise, clinical research and technology will be outsourced."
Despite its plight, University Hospital was desired by Allina Health System, as well as by Fairview. But a deal with Allina would have been a bigger antitrust problem because Allina already owns a tertiary hospital in the Twin Cities. The merger with Fairview, on the other hand, created a more equal rival to Allina, rounding out the community-based system with a high-tech hospital, observers say.
In terms of the Twin Cities' inpatient market share, Fairview and Allina now are virtual equals, with respective shares of 26.8% and 26.6%, according to 1995 data.
Worth the price. For Fairview, the deal is worth an initial drain on its balance sheet. The university affiliation is particularly alluring, amounting to the acquisition of a massive research and development arm, Norling says.
Both organizations swore to make Fairview-University a world-class academic medical center. But some research and teaching likely will be filtered to Fairview's seven other hospitals and 27 clinics. That means Fairview will get a jump on new technologies, like the back surgery Norling underwent. The University of Minnesota should find it easier to train doctors and develop technology for the more coordinated, system-oriented medicine emerging under managed care.
The most vital tasks facing Fairview-University are integration of medical staffs, normalization of labor relations and creation of a third culture, its executives say.
Merger planners brought together a Fairview Riverside physician advisory council with medical school department heads one evening last December to discuss perceptions of each other. Fairview doctors described university faculty as "arrogant, sheltered, quality-driven." They, in turn, were seen as "hard-working, money-oriented."
Still, the 31/2-hour meeting cheered Norling. "Folks wanted to be there and spent the time doing it," he says.
Doctor vs. doctor. What's more, reputation and reality can differ. After graduating from the University of Minnesota, some Fairview doctors swore they would never direct patients to the haughty university physicians, Norling says. Yet half of outside referrals by Fairview-affiliated physicians were to University Hospital. "Now one-half of our out-of-network problem goes away," he says.
Medical staff integration, probably the most important issue in Fairview-University's future success or failure, is a three-headed beast:
University doctors must form one faculty-practice group, which will provide clinical care to Fairview and teaching services to the medical school.
The separate university and Fairview groups must present a single face for service.
All doctors must help Fairview operate as an integrated system and the university hospital work as an academic and research center.
Orthopedic surgeon Roby Thompson is leading the overhaul of university doctors. Thompson says if the doctors had gotten organized earlier, they could have averted a crisis at University Hospital. As it is, the shift to a single practice group is as disruptive to their routines as the merger with Fairview.
In 1993 the medical school reduced its 30 physician practices to 18 with the sledgehammer of administrative decree.
Melding the 18 groups, with their mix of benefits and ownership stakes, has required more than two years of at least weekly planning meetings. And work is continuing still. Known as the University of Minnesota Physicians, the group is supposed to begin operations in July.
Its predecessors' habit of hiding information from each other still might hamper unity. Groups often struggle to act cohesively when they don't have a history of sacrifice for the greater good, warns Rodney Dueck, M.D., medical director at HealthSystem Minnesota, a suburban hospital and physician clinic.
Thompson says most university doctors now accept the case for change. He compares their feelings to those of passengers on a runaway train: You're scared to death of jumping, but you'd be a fool to stay aboard.
"I was one of those who thought (the hospital's troubles were) overblown," Thompson says. "But the inexorable direction of cash flow became very obvious to me. We walk a knife's edge between financial viability and failure. About 20 patients one way or another makes the hospital viable or not."
Still, the merger is a hard knock for doctors on both staffs. It means choosing either an academic or community doctor to head each hospital department. For the medical school departments of anesthesiology, radiation oncology and radiology, that could have been especially wrenching. They base their teaching operations in the main hospital only, instead of using multiple sites like other departments. As it happened, in each case the academic department head was named chairman of the respective hospital department.
Others watching. Other academic medical centers are paying attention to University Hospital's history and tracking its transition. "We have the opportunity to learn lessons that Minnesota missed because they didn't recognize what was happening to them," says Mike Geheb, M.D., chief executive officer of University of Alabama at Birmingham Health System. "The places that get organized with their docs do better; the places that don't, go down the tubes."
Union issues are creating another chasm at Fairview-University.
The Teamsters and the American Federation of State, County and Municipal Employees represented 30% of the University Hospital work force, but Fairview refused to recognize them as bargaining agents.
Meanwhile, unions covered about half the Fairview Riverside staff, including nurses. As a result, nurses and employees who wish to be unionized will work at Riverside; the University campus will be union-free.
Norling says he had little choice. Union contracts were with the university, not the hospital, and the unions wouldn't promise to accept a negotiated deal. Fairview will work with the unions if they win elections, expected in April.
AFSCME proved a scrappy opponent. Although it couldn't persuade Minnesota to conduct an antitrust review, it did get the Minneapolis City Council to decide against issuing $175 million in tax-free bonds for Fairview. Norling says other options exist, such as state bonds or the private market, if necessary.
Peter Benner, AFSCME Council 6 director, complains that hospitals don't care enough about labor relations. "Both sides are willing to spend an outrageous amount of time working to make sure the docs are taken care of," Benner says. "If we had just a tenth of that effort, most of the union stuff could have been resolved. Of course, Fairview doesn't agree with my estimate of time."
Benner says he'll try to cooperate with Fairview in the future: "I hope what we have found out is that both of us are principled representatives of our interests."
Rough transition. Many workers face a rough transition. Pay scales and benefits changed Jan. 1, but former university employees won't feel the difference for a year thanks to $3.6 million from the state Legislature and university. The bottom line: About 12% of former university employees will earn less, while 8% will get pay hikes to match the Fairview scale, says Sheryl Gifford Ericson, Fairview vice president of human resources.
Observers contend the consolidated hospitals can't possibly need their current roster of 7,100 employees. Ericson says net employment will depend on the market's response to the new entity, but currently she is recruiting to fill positions left open during merger negotiations. She says the transition is like running a continuous marathon or building a house while fighting a fire. "I expect it will be about a year to two years before people feel comfortable," she says.
The depth of cultural rifts is debated.
Consider the different smoking policies for psychiatric wards. Fairview Riverside didn't allow smoking at all, citing a state ban on smoking in public facilities and its obligation to protect patients and employees. University Hospital allowed smoking in some psychiatric patient rooms, arguing patients were under too much stress already.
Disch, Fairview-University vice president of patient care and a former University Hospital official, views this as symbolic. "It represents different philosophies as to what psychiatric care needs-the rights of the group vs. the rights of the individual," she says. "I do think academic health systems in general are more oriented toward the exception."
But she suggested Kathie Taranto, Fairview-University director of behavioral services and a Fairview veteran, be questioned for her views as well.
Taranto says both facilities struggled with the matter. They arrived at conflicting answers largely because of differences in legal counsel and physician personalities, rather than philosophies. In the end, the consolidated ward became nonsmoking.
Although Taranto says it's early to ferret out the nuances that separate community-hospital from university-hospital environments, she sees one pattern emerging. Fairview Riverside responded to pressures to get patients out of the hospital sooner with outpatient and partial-day psychiatric programs. "The university did not, partly because of focusing on getting the full (inpatient) training experience for residents," she says. "But I know they're excited about the (training) options in a system. When residents leave the university, they have to live in this environment."
Other differences are sure to arise, but both Disch and Taranto say they're surmountable. "As we work together, we find similar philosophies on what's really important," Taranto says.