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A proposal to let All Children's oversee the program for BayCare hospitals is found to be too much of a financial risk.
By WES ALLISON
© St. Petersburg Times, published August 22, 2001
ST. PETERSBURG -- All Children's Hospital and BayCare Health System, which last year announced plans to form a regional giant for pediatric care, have jettisoned the idea, calling it financially unwise.
The leaders of both systems on Tuesday blamed the decision on unexpected costs that became evident only after study, as well as on state cuts in Medicaid and other payments that could cost All Children's as much as $5-million over the next year.
Under the proposal, first outlined in November, All Children's would have overseen pediatric care for BayCare's five hospitals, including All Children's chief competitor, Tampa Children's Hospital at St. Joseph's.
At the time, the chiefs of each organization said they thought the partnership would improve local pediatric care and save money by reducing duplication, increasing patient volume at All Children's and absolving BayCare of the expense of managing a relatively small pediatric program.
But by last week, after months of meetings, it became clear All Children's could not afford the financial risk.
"The farther into it we got, (we realized) our responsibility as a board is to make sure the hospital is fiscally healthy, and I just don't think it's going to work fiscally," said Claudia Sokolowski, chairman of the All Children's Hospital board of trustees.
Each side spent the past nine months studying the other's books. All Children's president Dennis Sexton and BayCare president Frank Murphy said two key impediments emerged:
All Children's discovered the cost of running Tampa Children's would be higher than expected, largely because it would have had to hire support staff, such as nurses and technicians, who now serve both children and adults at St. Joseph's.
The Florida Legislature cut Medicaid reimbursements by 6 percent, which is expected to cost All Children's $2.6-million between July 1 and March 31. The Legislature also cut funding that gives All Children's higher Medicaid reimbursement rates because of its high percentage of poor patients.
That's expected to cost All Children's another $2.5-million. And Sexton does not expect those cuts to be restored any time soon.
BayCare also stands to lose a couple of million dollars from the Medicaid cuts, but that will be dispersed among member hospitals, Murphy said. Most of BayCare's funding comes from Medicare, the government's insurance program for the elderly.
"The decision to have one institution, essentially All Children's, assume that risk given the uncertainty of state funding was a mistake at this time," Murphy said. "They didn't think (it was right), and we can't argue with the feasibility problem."
Tuesday's about-face shows how quickly the business of health care can sour. When the plan was announced, the economy was strong, state financing seemed solid and hospitals had been buoyed by increases in federal payments for Medicare.
"I think the change in the national economy and the change in the health care reimbursements was pretty much of a shock," Murphy said. "Especially at the state level, that was quite a turnaround."
BayCare includes five area hospitals: Morton Plant in Clearwater, North Bay in New Port Richey, St. Anthony's in St. Petersburg, South Florida Baptist in Plant City, and St. Joseph's in Tampa. Tampa Children's Hospital, which would have been renamed All Children's Hospital at St. Joseph's under the plan, is a 163-bed unit within St. Joseph's.
All Children's is the region's largest children's hospital, with 219 beds. It also has nine satellite clinics in six counties and operates the pediatric ward at Sarasota Memorial Hospital.
All Children's also runs the neonatal unit at Morton Plant and will continue to do so.
Sick children tend to have complex, expensive problems, and experts say it's more cost-effective to treat large numbers of patients. Putting All Children's in charge of a regional operation, with Sexton as its chief, was designed to do that.
Sexton said it took four months longer than expected to determine the true costs of running Tampa Children's, mostly because St. Joseph's accounting system doesn't separate the cost of adult and pediatric care.
Eventually, it became clear All Children's would have to spend more money on staffing, equipment and other needs than expected.
All Children's, with an annual budget of about $300-million, typically earns a profit of 1 to 2 percent. Sexton said it might not make that next year because of the state cuts, and the situation was too tenuous to continue the merger.
"If we were off 3 percent in a $400-million-a-year children's system, that would be $12-million, and that's a lot," Sexton said. Dr. Rick Martinez, a pediatric cardiologist and chief of staff at All Children's, said Tuesday's announcement was a lost opportunity to improve care for local children, but the fiscal pitfalls could not be avoided. That view was shared by Dr. Albert Saltiel, president of Pediatric Services of Florida, which represents 220 doctors, many of whom work both at All Children's and Tampa Children's.
"We're all here for the same reason; it's not us against them," Saltiel said. "To that extent, people are discouraged, because we don't want to go back to the days where it was All Children's versus BayCare."
Sexton and Murphy said they will continue to discuss ways to cooperate.
"A collaborative system . . . made sense," Sexton said. "And we're not going to give up on that concept. It's just that this particular effort didn't work."