Over the last decade, they decided they’d rather niche than fight. Today, revenues for both Lewiston hospitals remain strong, and St. Mary’s has grabbed a more robust share of the local market.
LEWISTON – It still makes him chuckle.
But in 1991, it was serious business when Jim Cassidy spotted the tiny ads that appeared at the bottom of the local newspaper’s front page.
One week it was St. Mary’s Regional Medical Center. The next it was Central Maine Medical Center. Both were plugging their respective hospitals’ mammogram screenings.
“I thought it was pretty comical,” he said during a recent interview.
Cassidy can’t remember who started the ad wars. But he does remember that his hiring that year as head of the city’s Catholic hospital marked the beginning of the end of that advertising practice. He could see it was a losing strategy.
“It was kind of that ‘me, too’ stuff that seemed to be the way things were for a number of years,” he said.
Since then, the city’s two hospitals, both more than a century old, have been busy carving out different medical niches in an effort to serve the needs of the community while trying to stay profitable.
They did not sit down at a table and divide the spoils of health care. Anti-trust laws would have prevented that. It was a natural evolution, said Steven Michaud, president of the Maine Hospital Association, which counts both hospitals as members. “They don’t compete nearly as much as they used to.”
One recent example of the two working more cooperatively: their joint effort to fight proposed state reductions in Medicaid reimbursement. Last week, the hospitals’ CEOs even co-authored a guest column on the subject in this newspaper.
Market share shift
In carving out its niches, St. Mary’s focused on capturing a greater portion of the local patient population. That strategy has not only turned the hospital’s once-shaky finances around, but also fulfilled its mission to serve the community’s neediest.
An analysis of eight years of hospital discharge records reviewed by the Sun Journal reveals a major shift from CMMC to St. Mary’s in the number of hospitalizations of city residents and those who live in nearby towns.
In the mid-1990s, CMMC dominated the local hospital market, capturing 53 percent of patients from Androscoggin County, compared to St. Mary’s 27 percent.
By 2002, St. Mary’s had nearly closed the gap, claiming 39 percent of that same market to CMMC’s 40 percent.
From 1994 to 2002, St. Mary’s picked up an additional 2,000 annual admissions of patients from Androscoggin County. By contrast, Central Maine Medical Center lost roughly 700 of those local patients it admits to its hospital annually.
(These statistics do not take into account a growing number of outpatient treatments or patients from outside the local area who were hospitalized at one of the two hospitals. No data detailing outpatient treatments is available, but CMMC officials say their outpatient numbers doubled over the past 10 years.)
While St. Mary’s has clearly gained in matching CMMC’s share of the local resident market, that does not mean CMMC has suffered from the shift. Market share does not directly translate to revenues. Although St. Mary’s finances have greatly improved, records show the hospital’s total annual revenues still lag behind CMMC’s, as do its total assets.
Several factors help explain the trend in shifting market shares, say hospital officials. They include:
• The proliferation of St. Mary’s community health centers;
• CMMC’s inability to take on new patients in a number of medical disciplines after reaching capacity, and St. Mary’s decision to try to attract those additional patients; and
• CMMC’s focused on the creation of an ambitious new heart surgery program that took years to get up and running.
Outreach
Instead of waiting for sick people to come to the hospital emergency room, St. Mary’s has opened a half-dozen family clinics throughout the Twin Cities and in Poland, hiring about 50 primary-care doctors to staff them.
By offering the clinical services of their hospital-based doctors, officials hoped those patients would go to St. Mary’s when they and their relatives needed surgery, gave birth or had some other reason to check into a hospital.
Although the cost of owning and operating the clinics stretched budgets, the gamble appears to have paid off.
For instance, while some numbers have dropped since 1994, such as eye, throat and general surgeries, the total number of inpatient surgeries at St. Mary’s has actually risen from 933 to 956.
While the increase is small, by contrast, inpatient surgeries for local residents at CMMC have declined from 1,873 to 1,346 over that same period, a drop of 28 percent.
The increase for St. Mary’s has occurred during a time when managed care plans, coupled with advances in technology and medicine, have had the effect of reducing hospitalizations nationally, while increasing out-patient and physician-office visits.
The state provides no data on clinics and similar outpatient services provided by the two hospitals. Nor could hospital administrators offer meaningful numbers, given the broad range of outpatient medical services offered through affiliated providers. CMMC has made more limited efforts to provide primary care to residents in some of the cities’ suburbs.
A full house
In the late 1990s, St. Mary’s was busy expanding medical services as demand went up. But CMMC had a harder time meeting those needs in some cases, said Chuck Gill, CMMC’s vice president for marketing.
He said the hospital had reached capacity for medical professionals in several departments, including obstetrics, where the hospital ultimately lost about one-quarter of total inpatient discharges between 1994 and 2002. As a result, they could not accept new patients. Since then, new doctors have been added, Gill said.
At St. Mary’s, the total number of discharges increased almost 50 percent during the 1994-2002 period, thanks, in part, to the creation of the Corinne Croteau Lepage Women’s Health Pavilion. It opened in 2000 with 10 rooms, most of them birthing suites. By 2002, the number of hospital births more than doubled at St. Mary’s.
Carving the niche
The third factor that helps explain why St. Mary’s captured an increasingly bigger portion of the local patient population can be seen in the brand new wing that houses CMMC’s Central Maine Heart and Vascular Institute.
Since the late 1990s, CMMC has focused its time and efforts and much capital on creation of a new wing housing a heart center that opened last spring. It offers bypass surgery and angioplasty, services only three hospitals in Maine now are permitted to provide.
Already that center has exceeded expectations by performing 85 open heart surgeries and 160 angioplasties (a procedure where a tiny balloon is inserted into an artery and pumped up, restoring blood flow).
So far this fiscal year, inpatient admissions at CMMC are up 18 percent over last year, thanks largely to the new heart center, Gill said.
Before that effort, CMMC had focused on pursuing designation as one of the state’s three major trauma centers, which draws many patients from outside the local area. With the advent of LifeFlight, an emergency transport helicopter, launched in 1998, CMMC often treats patients from western and central Maine and beyond.
While it was carving those niches, CMMC was also expanding its offerings of specialists, including endocrinology, hematology and infectious disease.
Meanwhile, over recent years St Mary’s has established specialty clinics, including hyperbaric chamber therapy, which features a pressurized oxygen chamber used primarily to treat patients with carbon monoxide poisoning and to heal wounds. The hospital also has one of two accredited sleep disorder clinics in the state.
Before the mid-1970s, no Maine hospital offered specialty care outside of Portland, Gill said.
St Mary’s “went a more primary track. Ours was a more trauma specialty track,” Gill said. “Does that serve this region better? Sure.”
Perhaps the biggest niche St. Mary’s has established for itself is as one of the state’s largest and most comprehensive mental illness hospitals, specializing also in substance abuse treatment.
From 1994 to 2000, the number of patients in those two categories more than doubled, from 706 to 1,478 at St. Mary’s, comprising nearly one-third of all hospital discharges in 2002.
The patient populations fitting those medical descriptions at CMMC have historically numbered fewer than 50.
That’s not to say both hospitals don’t continue to provide core medical services, including fully staffed emergency rooms.
Medical services still not available in the region include a burn unit and transplants. Twin Cities residents also still have to go to Portland or Boston for pediatric oncology, Gill said. Until there is enough of a patient base to support those services in central Maine, they won’t be offered here, he said. “It’s not cost effective.”
In fact, that’s always the question hospital administrators must ask themselves, especially in today’s market with rising overhead costs of technology and medical advances, Gill said. “How do you strike a balance between quality, cost and access?”
The bottom line
While the shift in hospital market shares has clearly helped boost revenues and assets for St. Mary’s, CMMC’s revenues have also grown and the hospital has expanded during that same period of time, according to federal finance reports filed by both hospitals.
Over an eight-year period ending in 2002, net revenues at St. Mary’s rose 84 percent from $50 million to more than $92 million. Over the same time span, CMMC’s net revenues went up roughly 63 percent, from $78 million to more than $127 million.
St. Mary’s also has managed to nearly double its assets from $36 million to about $66 million, records show, reducing its debt by 17 percent. CMMC’s assets grew from $75 million to $95 million.
Why hasn’t a shift in market share also meant a shift in revenues?
Although CMMC has slightly more hospital beds and employees than St. Mary’s, the average charges for medical services delivered to patients in CMMC’s beds is higher, Gill noted.
More significant is the number of people treated on an outpatient basis at CMMC, about double what it was a decade ago, Gill said.
While both hospitals are registered nonprofit corporations, they, like for-profit corporations, are in business to make money.
The decision by CMMC administrators to launch a heart center was an effort to fill a community need, Gill said. It also was expected to generate greater revenues for the hospital.
When St. Mary’s embarked on its mission to reach out to families where they lived by opening neighborhood health centers, that hospital also achieved the goal of hiking its inpatient market share and money-making surgeries.
Surgery is one of the more lucrative hospital services, which helps with the bottom line, Cassidy said.
“A hospital as a business does have to have areas where it can do well financially in order to meet those parts of its activity that don’t do well financially,” Cassidy said. “Surgery is really the major piece.”
In keeping with its business approach, administrators there monitor the numbers of patients seen by clinic doctors each day to make sure they are being cost effective.
“We have an expectation that physicians will see a certain number of patients … and that just has to be done to be financially viable,” Cassidy said.
On the other hand, most of the St. Mary’s patients treated for mental illness, and especially substance abuse, rely on Medicaid for payment, which often fails to cover hospital costs, Cassidy said.
“Certainly, hospitals do not go into behavioral service to make money,” he said. “Alcohol detox is one that’s very difficult to maintain financially, but there’s a tremendous need in the community for that.
Because St. Mary’s admits more Medicaid patients who receive medical services eligible for lower state reimbursement than CMMC, Cassidy said his hospital must charge more than CMMC for certain procedures to help make up the difference.
“When we’re paid less than our cost by governmental payers, we have no choice but to charge more,” Cassidy said.
During his leadership at St. Mary’s, Cassidy said that hospital’s financial picture has gotten brighter.
“We do have to be financially viable. We know that,” he said. “We do try to develop services that will provide some good revenues for us in order that we can provide services to people who can’t afford to pay.”
The hospital is paying closer attention to expenses, Cassidy said. “We’re being much more careful financially, controlling costs, more efficient, working hard to maximize our revenues.” That includes taking advantage of government programs and focusing more on fund raising.
Since he came to St. Mary’s in 1991, Cassidy is proud to say there has been no talk of a merger with a more financially stable hospital, such as CMMC, putting earlier rumors to rest.
“As we’ve done better, we’ve really been able to reinvest that in providing more care for the community,” Cassidy said.
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