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Hospitals phasing out non-clinical employees

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Sunday, July 14, 2013

Financial pressures are causing more hospitals in Western Pennsylvania to consider outsourcing as a way to trim costs.

The practice of hiring an outside company to handle non-clinical services such as laundry, food service and security appears to be picking up steam around the Pittsburgh region as hospitals try to manage lower reimbursements and falling patient volumes.

Yet the bigger outsourcing trend on the horizon is nonprofit hospitals contracting with for-profit companies to provide medical services, which could blur the distinction between a community hospital and profit-driven enterprise, experts say.

“It's something that started a few years back, and it's something that is a growing trend,” said John Bowblis, an assistant professor of health economics at Miami University of Ohio.

“This is just the start of it,” Bowblis said. “In five years, it will be obvious that this has been going on.”

Heritage Valley Health System in February outsourced its laundry service to save about $600,000 annually, spokesman J. Daniel Murphy said. The Beaver-based hospital network in May hired Allied Barton Security Services to handle security at its two hospitals.

“Our mission is to improve the health in the communities we serve,” he said. “We had to take a look at, ‘Is this our core business?' ”

Highmark Inc. created a company last year to handle purchasing and other supply-chain functions for hospitals around Western Pennsylvania. Provider Supply Chain Partners is helping 15 hospitals — including the seven Allegheny Health Network hospitals purchased by Highmark — get medical supplies at the lower cost.

In late June, UPMC laid off about 130 medical transcriptionists. It sends the work to Massachusetts technology company Nuance. Though Nuance offered to hire all the laid-off workers, some objected to lower pay and reduced benefits with the company.

Helen Johnson was among several transcriptionists who rallied at UPMC's headquarters in the U.S. Steel Tower to oppose the move. Johnson, 55, of Monroeville said she decided not to join Nuance because the health benefits would be too expensive.

She is angry that the region's largest hospital network dumped her after 34 years of service.

UPMC has said that better technology that automatically transcribes doctor notes is “improving our efficiency and reducing our need for transcriptionists.”

Hospitals, from behemoth UPMC to small, community institutions, are struggling with cuts in government reimbursements and reduced numbers of patients.

Managers typically hesitated to give up control of some functions, but the financial squeeze pushes them to examine outsourcing, said Denis Lukes, vice president of financial services at the Hospital Council of Western Pennsylvania, a Warrendale trade group representing most hospitals in the region.

“It's not something they want to do,” Lukes said. “But they're probably feeling forced into doing it.”

UPMC is on the other side of the outsourcing ledger, as well. Its nonprofit subsidiary, ERMI, provides emergency department doctors and other staff to seven hospitals: Clarion, Highlands, Monongahela Valley, Ohio Valley General, Southwest Regional Medical Center, St. Clair and Uniontown.

“ERMI helps its partner hospitals recruit and manage a stable group of high-quality emergency physicians, a huge challenge for community hospitals,” spokesman Rick Pietzak said.

That challenge of finding doctors led some hospital managers to work with a growing number of for-profit companies that specialize in supplying doctors for emergency medicine, anesthesia, intensive care and obstetrics.

TeamHealth, a Tennessee firm, provides doctors to about 800 hospitals, including three in Western Pennsylvania. Barbara Blevins, chief operating officer of the for-profit company, declined to name TeamHealth's clients here.

She said hospitals turn to her because they need specialists who can help achieve better health outcomes for patients — a measure that is becoming more important in determining reimbursement rates from the government's Medicare program.

“There is a financial incentive for them to be lined up with partners such as ourselves,” she said. “(We) provide better patient care and also make sure the outcomes that are achieved are the very best they can be. And that has a financial ramification for the hospital.”

The average hospital that hires TeamHealth is a community hospital with about 200 to 225 beds, Blevins said.

“We have had tremendous growth the last few years and continue to see that this year,” she said.

Although these companies say they help hospitals improve quality, Bowblis said handing over control of medical services to a for-profit company could create a need for the company to raise costs.

Academic studies about the implications of this trend don't exist, he said. But in a study of skilled nursing facilities that hired for-profit companies to handle clinical work, such as physical therapy, Bowblis said he found a significant trend of up-coding, or charging insurers and the government higher prices for medical services.

“In skilled nursing it's a money game,” he said. “They're trying to get the highest reimbursement codes that they can.”

Alex Nixon is a Trib Total Media staff writer. Reach him at 412-320-7928 or

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