That's the message from two hospital systems that promised not to raise prices after consolidating most of their markets.
Unlike other hospitals that must file compliance reports with their states to show they kept their pricing promises following mergers, hospitals in Grand Rapids, Mich., and Greensboro, N.C., will police themselves.
In both cases, the merged hospital systems will control about 70% of their markets. In both, local HMO and point-of-service market penetration is still relatively low, less than 30%. And in both, there's little to prevent the hospitals, which are some of the largest employers in town, from using their new market power to keep prices high and managed care at bay.
In interviews with MODERN HEALTHCARE, some business leaders in Greensboro and Grand Rapids expressed willingness to give the hospitals the benefit of the doubt based on strong, historic ties between the business community and the hospital boards. Only time will tell whether their trust is well-placed.
Pricing promises and other community commitments were among the factors cited by a federal judge last year in his decision to approve the merger of Blodgett Memorial Medical Center and Butterworth Health System. The Grand Rapids hospitals spelled out their promises in a 15-page statement, which was filed as a consent decree with U.S. District Judge David McKeague in Lansing, Mich.
In the consent decree, the hospitals promise to hold the line on prices for seven years following their merger, restrict profit margins and increase services for the uninsured (See chart, p. 20).
But the consent decree now appears to be unenforceable. McKeague did not agree to retain jurisdiction after antitrust litigation ended in September when the Federal Trade Commission decided to drop an administrative challenge of the merger.
According to several observers, an injured party would have to argue for standing and then persuade a busy court to set aside other cases to perform oversight.
"In theory, I guess people would say if we have a problem we could still run to Judge McKeague," said Lody Zwarensteyn, president of the Grand Rapids-based Alliance for Health, a coalition of healthcare providers and purchasers. "But how much time would he have to consider the nuances of healthcare reimbursements?"
It's doubtful the FTC would take up the cause. The antitrust enforcement agency declined to sign the consent decree, which would have made it a binding, enforceable order of the court.
"Our view is (pricing promises) are not a substitute for competition, so it's not something the commission wanted to be involved with," said Robert Leibenluft, the FTC's chief of healthcare antitrust enforcement.
Terry O'Rourke, chief executive officer of Spectrum Health, the system formed by last month's merger of Butterworth and Blodgett, said public scrutiny will be the crux of enforcement.
"Our moral commitment to our own community-that's the highest charge for all of us," he said.
In the consent decree, the hospitals promise to disclose pricing, budget targets and rationale each year in an open meeting before setting new prices. They also promise to establish a permanent financial advisory committee to advise the board during the budgeting process. According to the consent decree, an independent accounting firm will assist in the public meeting and data interpretation.
Still, Spectrum will control the process of public scrutiny. Members of the financial advisory committee, which O'Rourke said already has been established, are appointed by the Spectrum board. The accounting firm will be selected by that board-appointed advisory committee and paid by Spectrum.
Payers also are concerned because the hospitals could boost revenues by ordering more procedures or by billing for more expensive procedures. Butterworth has maintained its per-patient revenues despite freezing list prices over the past few years, Zwarensteyn said.
Spectrum also could wield its power to dominate the managed-care market. The system owns the area's largest HMO, Priority Health, which has 44% of HMO enrollees in a 12-county area. The hospitals promised to equalize prices charged to all HMOs but haven't fully explained how that will happen. It could also be difficult to prove because HMOs have varying rate structures, Zwarensteyn said.
"Everybody is in a position of wait and see. We're counting on good will from these people (on the Spectrum board)," he said.
Charles Zech, regional vice president for Blue Cross and Blue Shield of Michigan, which has about 25% of the HMO market in southwestern Michigan, expressed confidence in the Spectrum board. "I respect them and expect they will be true to their commitment," Zech said. "We take them at their word."
Zech said if Spectrum violates its promises, the Blues might share that information with its customers.
"I think customers will decide what is tolerable and what is not tolerable," Zech said. "They could demand in a very public way that the hospitals adjust their practices."
Unlike the FTC, the state of North Carolina was willing to accept pricing promises as a substitute for competition in a hospital merger case. However, it ended up with neither.
State Attorney General Michael Easley was convinced that pricing limits would override negative effects of a merger between Moses Cone Health System and Wesley Long Community Hospital in Greensboro, N.C. The FTC opted not to challenge the Oct. 1 merger with the understanding that the hospitals would negotiate a consent decree with Easley. However, talks between the attorney general's office and the hospitals broke down over the length and terms of the pricing promises. In the end, there was no signed agreement.
The new system, called Moses Cone Health System, operates 547-bed Moses H. Cone Memorial Hospital, 199-bed Wesley Long and a 115-bed women's hospital. It now controls all the acute-care beds in Greensboro and 69% of the acute-care beds in the surrounding Guilford County.
Enforcement has been left to the hospitals. Dennis Barry, CEO of the combined system, said the hospitals plan to release a formal report to the community on an annual basis for the next five years showing how they have met their stated promises. The details of how the report will be released and in what forum have not been determined.
The system has fulfilled one pledge by contributing $50 million to a new community health foundation.
The new system also has appointed a board of trustees made up of community leaders. P. David Brown, chairman of the new system's board and president of Gate City Motor Co., said the system plans to conduct internal and external audits annually.
"We will have an ongoing dialogue with the community," Brown said.
Local employers and managed-care organizations do not seem particularly troubled by this arrangement.
Rather than pushing for legally binding assurances that the new system will not raise prices, they pledge faith in the integrity of Moses Cone executives, including Barry, who became president and CEO of Moses H. Cone Memorial in 1979. He continued in those posts*when the hospital reorganized into Moses Cone Health System in 1984.
They also point to the hospitals' track record on pricing. For the past five years, Wesley Long said it has had no rate increases. Over the same period, Moses Cone said it has reduced rates a total of 4.3% and most recently lowered prices by 6.7% in October 1996.
And they say area businesses that have employees living throughout the greater Piedmont Triad region, which includes four other acute-care hospitals in the nearby cities of High Point, N.C., and Winston-Salem, N.C., would be quick to call them on any unfair pricing.
"There is no historical record of the hospitals breaking promises," said Tyler Cox, a spokesman for American Express, the fifth-largest employer in Guilford County. "We're not aware of anyone who is worried that the promises won't be kept. People are aware that healthcare costs are continually rising and not staying flat. The good news is that they made these promises."
Partners National Health Plans of North Carolina, which is the largest HMO in the area, even wrote a letter in support of the merger in response to a query from the FTC.
But as Bob Greczyn, president of the Carolinas region of Philadelphia-based Cigna Corp., observes: "If they live up to their pledges it will be a unique situation where two hospitals coming together can work in a fashion favorable to the community. That's not necessarily the track record."
This wait-and-see attitude may be all the employers and managed-care organizations can do. Moses Cone has a high profile in the community. It's not surprising that the Greensboro Area Chamber of Commerce would pass a resolution endorsing the merger when the hospital system is its largest member second only to the public schools.
And the managed-care organizations, which typically have the most negotiating leverage to lose when a city becomes a one-hospital town, may not have enough clout in the area to begin with to threaten a move by a potential business partner.
The Piedmont Triad region is ripe for managed-care expansion. According to Michael Casey, a market research analyst for Medical Data International in Irvine, Calif., Greensboro is an "immature" market for managed care with an HMO penetration rate of about 25% in 1996.
"Employers are dictating what they want and they haven't jumped on the HMO bandwagon," Casey said. "Relationships between payers and providers are not exactly adversarial."