Hospital officials in Wisconsin are seething over the state's most recent attempt to control healthcare spending, which is this: Don't let hospitals build.
Earlier this month, Wisconsin's Senate approved a proposal that would permanently ban hospital construction in the state. Added as a provision of the state's annual budget bill, the ban would prohibit hospitals from building new facilities or even renovating existing ones.
Although Minnesota enforces a similar moratorium on hospital construction, few if any other states have gone as far as the proposal now working its way through the Wisconsin Legislature, sources said. Legislators are proposing the ban at a time when low interest rates have prompted a spike in hospital construction, according to the Associated General Contractors of Greater Milwaukee. Specific figures on the total number of new hospitals, renovations and expansions were not available at deadline.
Like many states, Wisconsin faces a $1.1 billion budget deficit at a time when demand for healthcare services is increasing and Medicare and Medicaid reimbursements are decreasing. A big part of the problem, legislators there said, is an undisciplined hospital business that allows new building despite a lack of need and provides too many fancy boutique hospitals.
"Boutique hospitals starting up are milking the system for the most profitable procedures," said state Sen. Russell Decker, a Democrat, who co-sponsored the construction ban. "We have to force these folks to look more at how to utilize their existing facilities rather than competing with each other by building elaborate facilities to get patients in the door."
Decker said he believes a construction ban will go a long way toward solving the healthcare cost problem. "Small businesses are experiencing 20% to 50% increases in premiums, and we're looking to slow it down; force (hospitals) to become more efficient," he said.
The Wisconsin Hospital Association, which represents the state's 124 hospitals, does not see it that way. The association-and many of its members contacted by Modern Healthcare-said efficiency would suffer because hospitals wouldn't be able to make facility improvements that streamline care.
"If this proposal is not stopped, Wisconsin hospitals will essentially be frozen in time, unable to upgrade or even modernize facilities as they age and become obsolete," according to a bulletin the association issued to its members.
On April 5 Wisconsin's state Senate narrowly approved an annual budget bill containing the construction ban, which would take effect immediately upon its passage. As of last week that bill was in a Senate/House conference committee, and legislators didn't expect action on its healthcare provisions for a few weeks.
Wisconsin hospitals are working on roughly 40 construction or expansion projects, the hospital association estimated. As for boutique hospitals, only two have opened in the state over the past two years, according to the association.
In 2000, acute-care hospitals in Wisconsin had a collective occupancy rate of roughly 54%, according to data from the state's Bureau of Health Information. Hospital officials, however, said occupancy rates have increased since then, with hospitals in Madison and Milwaukee often filled to capacity and sometimes forced to divert patients to other facilities.
The language of the proposed construction ban is vague, observers said, but does allow for exceptions in cases where threats to patient safety require facility renovations. If their facilities suffer structural damage as a result of a natural disaster, hospitals would qualify for an exemption as well. Those hospitals that have already committed funds to construction or renovation projects would also be exempt, Decker said. Officials contacted by Modern Healthcare were unclear on how the ban would be enforced.
"I don't know that we understand the details of the current proposal," said Glenn Forbes, M.D., president and chief executive officer of Franciscan Skemp Healthcare, a three-hospital system based in La Crosse and affiliated with the Mayo Clinic. "We are in the middle of planning and implementing constant improvements to our facility design. If (the ban) becomes a final law, we would need to assess that."
Wisconsin's Department of Health and Family Services, which would be charged with enforcing the ban, declined to comment and referred a call from Modern Healthcare to state legislators. Wisconsin has no certificate-of-need program; hospitals there said that because the construction ban is part of a budget bill, it was not subject to public hearings or comment from healthcare organizations.
Enforcing the law, some said, could increase costs, as government agencies grapple with processing exemption applications.
To apply for an exemption, "We don't know if we'd go to the Legislature, the (Department of Health and Family Services), or a new department," said Tom Reilly, director of government affairs at 13-hospital Aurora Health Care, Wisconsin's largest hospital system and the state's biggest employer with some 23,000 employees.
Aurora, an aggressive builder that last year opened the controversial Aurora BayCare Medical Center, a $95 million, 108-bed hospital in Green Bay, is more concerned about its long-range planning than construction and renovation efforts under way.
"Because of the permanency of this provision, we've tried not to focus on pending projects, and instead look at what this means for the next 20 to 30 years," Reilly said. He said he could not immediately quantify the dollar value of Aurora's current construction projects, but the system has opened two new facilities since last year and plans to open five more by the end of 2004.
Other hospitals in the state are equally concerned about the pending ban. "It's not good public policy," said Paul Spaude, chief administrative officer of Community Healthcare, a Wassau-based system with two acute-care hospitals. The system is spending some $3 million for ongoing construction projects. Plans won't change until the construction ban is on the books, Spaude said.
Lawmakers in Wisconsin are "trying to play games with the legislative process," said Joseph Neidenbach, administrator of St. Vincent Hospital, a 265-bed facility that treated more patients last year than it has since 1974. The construction ban, he said, "is a rotten solution. It's a knee-jerk reaction to healthcare costs with no proof that it will deal with those costs."