The Mission-HCA Deal

The Mission-HCA Deal

With all that has been going on, it’s easy to forget that Buncombe County’s largest employer, Mission Health Systems (Mission), is in the process of being bought by the Healthcare Corporation of America (HCA). 

HCA is the largest for-profit hospital company in the United States, owning 178 hospitals and employing more than 240,000 people.  In 2017, HCA had profits of $2.2 billion on revenues of $43.6 billion.  Mission is a non-profit that has been in Asheville for over 130 years and is consistently rated as one of the best hospital systems in the country.  Though City Council does not have a role in approving or denying the sale, I wanted to give you my understanding of the sale and ask some questions as well.

 

Why Is This Happening?

At a joint meeting with City Council and County Commissioners in June, CEO of Mission Dr. Ron Paulus explained that he had concerns that a hospital system of Mission’s size would have difficulty surviving in the future.  According to an (excellent) August 11th Citizen-Times article by Mark Barrett, approximately three quarters of Mission’s patients are covered by Medicare and Medicaid, which do not fully pay for the cost of the services Mission provides to those patients.  The article also cited $76.6 million as the value of subsidies Mission provided in 2015 for “unprofitable medical services or to support programs to promote community health.”  Consequently, Mission explains, it needs to find annual savings in the $70 million range, which it argues is not sustainable in the long-term. 

 

Why HCA?

On its website www.missionhealthforward.org, Mission explains that it selected HCA for its commitments to patients, providers and the community. 

Having not been privy to the Mission Board’s discussions, I have no evidence to doubt their stated rationale.  Perhaps as relevant, however, is the belief that HCA can make money on Mission’s patient mix, which is overwhelmingly Medicare and Medicaid.  In a May 10th powerpoint, Dr. Paulus presented a slide that showed for-profit hospitals with a positive 1% margin for Medicare Fee for Service in 2014 compared to a negative 2.5% margin at Mission.    

As the Citizen-Times article reported, Dr. Paulus believes that it costs Mission and HCA roughly the same to provide direct health care services, but that HCA can provide “back office” services such as billing and procurement at a much lower cost due to its organizational structure and its ability to negotiate prices for supplies and equipment.  That said, as a for-profit company, HCA will need to pay annual property and corporate income taxes that Mission does not currently pay.  HCA will also need to make a profit to return money back its shareholders that Mission also does not have to do.

Because Mission is a non-profit, the money from any sale will go to a foundation named the Dogwood Health Trust that is charged with “improving the health and well-being of all people and communities across Western North Carolina.”  The North Carolina Attorney General determines whether the sale can happen.

 

Thoughts and Questions on the Proposed Sale

I do not pretend to be a health care expert, nor do I have experience evaluating hospital sales, but I’ve done my best to read the analysis provided by Mission and to follow the coverage in the media.  As a council member, I’m obviously concerned about the impact that the sale of our county’s largest employer may have on its employees and patients. 

My biggest outstanding question (and one that others share as well) is what impact, if any, will occur if a for-profit hospital system takes over a non-profit.  By definition, a for-profit entity needs its revenues to be more than its expenses to earn money for its shareholders.  HCA is publicly traded on the NASDAQ stock exchange, announced a quarterly dividend of $0.35/share in March, and is trading at close to an all-time high as of today.  They must believe that they can make a profit even with the additional taxes that they will need to pay.   

National studies have looked at what happens when for-profit hospitals acquire non-profit hospitals.  The Mission Health Forward website cites a 2014 study that concluded “hospital conversion to for-profit status was associated with improvements in financial margins but not associated with differences in quality or mortality rates or with the proportion of poor or minority patients receiving care.”  I read the study, which also noted that its finding differed from some studies in the 1990s that did see higher mortality rates and less uncompensated care. Also, interestingly, the 2014 study makes the following caveat regarding uninsured and Medicaid patients (who also make up a reasonable portion of Mission’s patient base), “We only examined outcomes for Medicare patients and therefore cannot be certain whether our results would generalize to privately insured or uninsured patients or to patients with Medicaid as their primary payer.  We do not have a reliable measure of free care provided and therefore cannot rule out a decrease in this specific type of care provision.” 

Mission has also touted the fact that it has been named one of the top 15 health systems by IBM Watson for six of the last seven years.  In 2018, all 15 hospitals on that list – including Mission – were non-profits. 

Again, I don’t know what impact moving to a for-profit hospital system will have on Mission’s services, but it’s hard for me to think that HCA would not phase out or reduce unprofitable areas of service.  In particular, I’m concerned about care for children.  The Citizen-Times article noted that many services at Mission’s children’s hospital were subsidized, which is not surprising since many pediatric patients are insured through Medicaid (if insured at all).  Additionally, Mission has a well-respected child safety unit that specifically evaluates children who have allegedly been abused or neglected.  Few of these kids have insurance which means that Mission is subsidizing their care.  It’s not as if those same economic pressures do not exist with Mission, clearly they do, but it seems less likely to me that a non-profit would stop providing these services given its mission.

Seemingly to address these concerns, in an August 31, 2018, press release, Mission stated “nearly all Mission Health facilities and clinics will become part of HCA Healthcare while continuing to operate under the Mission brand.  Importantly, HCA has committed to maintaining key clinical services for at least five years and keeping open all rehabilitation and acute-care hospitals for a minimum of ten years, other than St. Joseph’s Hospital which was already planned for transition.”  I underlined three important words in that statement – “nearly”, “maintaining”, and “key”.  As a lawyer, they stand out to me and beg for more specificity.  Through Mission’s website, where the public can ask questions, I’ve asked them to clarify:

  1. Which Mission Health facilities and clinics will become part of HCA and which will not?
  2. Which clinical services are defined as “key” (meaning they be maintained for at least five years) and which are not?
  3. What is meant by “maintaining”? Does that mean keeping the same level of staff and service or does that include phasing out a program slowly?

Now that Mission and HCA have a “definitive agreement,” these questions need to be answered.

Finally, at the joint meeting in June and recently, I have asked for a representative from HCA to meet with Council and the Commissioners to discuss the commitments it is making and to learn about its plans for Mission.  If this sale goes through, HCA will ultimately be calling the shots, not Mission.  To date, all the communication we’ve received has come through Mission. 

As always, I welcome your thoughts.