Cost Issues Woven Into Health Care’s Recent History

The headlines have been all-COVID, all the time, but larger forces continue to shape care delivery in the Kansas City region.

In 2014, Ingram’s devoted a calendar year to exploring the history of this region’s leading business sectors. And the biggest of those, without question, is health care, where hospitals and health systems account for the lion’s share of companies with annual revenues that surpass $120 million—nearly half of the 30 largest private companies (13) with combined revenues of more than $44 billion in 2020.

Among the reasons those enterprises are able to flex such financial muscle today has a lot to do with investments made in the seven years since that historical review. Much of that has been about scaling, and finding ways to hold the line on the costs of care across a patient population.

But the challenges those organizations have faced in that time span have only been exacerbated by demographics: The vast majority of health-care expenditures in the average American’s life come in their final decade. And since 2014, more than 25 million Americans—Baby Boomers—have entered retirement age. Based on the Kansas City metro area’s population of 2.2 million, that would work out to about 170,000 new retirees, who bring to the health-care market lifetime aggregations of maladies associated with age: cancer, high blood pressure, cardiovascular disease, osteoporosis, Type 2 diabetes and Alzheimer’s, to cite just a few.

Christopher Wilson, vice president for system integration and innovation for The University of Kansas Health System, said investments there have been designed to both increase quality and decrease costs—a tricky proposition in any case.

“People are living longer and often with serious chronic conditions,” he says. “These demographics of the country are creating a significant demand on health-care systems at the same time that health care and research are advancing. This dynamic requires constant vigilance and creative solutions to balance the cost of care.”

Of course, the global pandemic didn’t help.

“The cost of health care over the last 18 months has been dramatic because of the COVID-19 pandemic,” said Steve Reintjes, CEO at North Kansas City Hospital. “The American Hospital Association recently projected hospitals in the U.S. will lose about $54 billion in this fiscal year. That’s after taking CARES Act funding into account. By the end of the year, because of the higher costs of caring for extremely ill patients combined with lower outpatient visits, the AHA expects median hospital margins to be 11 percent below pre-pandemic levels.”

Almost incongruously, the losses incurred from reduced elective procedures will likely increase the costs of treating people who deferred care over the past 18 months, and continue to.

“At the onset of the pandemic, people began delaying cardiac, cancer and diabetes screenings and other preventive health assessments,” Reintjes says. “Those delays are tied, in part, to the lower number of outpatient visits. Over time, we expect this delay in care to result in more advanced disease diagnoses and treatment needs as those patients return to the normal pace of receiving health care.”

According to the Kaiser Family Foundation, per-capita health care costs in the U.S., in constant dollars, rose an aggregate 44.75 percent between 1999 and 2009, but by less than half that, 21.34 percent, in the decade through 2019. So something is happening out there.

At AdventHealth Shawnee Mission, says CEO Sam Huenergardt, “Our ability to rein in those costs was due to Interoperability—leveraging our size and economies of scale to reduce costs in the supply. We have also invested in safety, and reducing infection rates and complications significantly reduces costs. As a whole, I think health-care system consolidation has also played a part, allowing many small, rural facilities to reduce costs by being part of larger systems.”

Even if health systems are able to rein in some costs, consumer expectations are also keeping costs pushing back the other way.

Colette Lasack, Wilson’s KU Health System colleague as vice president of revenue-cycle Operations, noted that “health care, in general, is not getting cheaper. People want the best, most-advanced care options medically available, and at the same time, they want them to be affordable. If covered by insurance, they often don’t question the cost of care. Patients just want to be sure it is covered under their health plan.”

The market, meanwhile, is moving more of the expense back onto the patients with higher deductibles and co-pays, she said. So priorities there are helping patients get healthy and stay healthy, and helping them better understand the cost of care.  “We work hard to help our patients understand how they can better control their own health-care costs before they need care,” she said, “as well as pay for the health care they need.”

Around the region, health-care enterprises have invested billions in physical expansion, additional programs and hiring over the past five years alone. Among some of the more prominent projects: 

The University of Kansas Health System

• The University of Kansas Health System completed its Cambridge Tower addition, expanding to the north across 39th Street with an impressive $360 million building that added 224 beds and 11 operating rooms. A big assist with that came from the Sunderland Foundation’s $66 million donation, creating inpatient treatment and care facilities, a family center and patient-education center, and space for programs in blood and marrow transplant and cellular therapy.

• While KU Health System is an independent public health authority, it took part in another major market transformation in 2017, teaming up with for-profit Ardent Health to acquire the 378-bed St. Francis Medical Center in Topeka. Acquisition of that struggling hospital and its clinics added to the larger system’s expanded footprint across the state, with other acquisitions in Great Bend, Hays and Larned, though the later two have since announced their withdrawal from that alliance.

• Also in 2018, the system took the wraps off a $100 million expansion of its Indian Creek Campus at I-435 and Nall Avenue in Johnson County. 

Saint Luke’s Health System

• One of the biggest market moves of the past five years came in late 2017, when Saint Luke’s Health System announced that it would acquire six Mosaic Life Care clinics in Kansas City. That was just the latest in a series of strategic expansions for Saint Luke’s, which had previously opened a pair of multispecialty clinics in Overland Park and Blue Springs, and 13 Convenient Care clinics inside grocery stores around the region.

• In 2019, Saint Luke’s opened a 120,000-square foot Rehabilitation Institute in Overland Park, a project that came not long after the addition of new surgery suites at Saint Luke’s East in Lee’s Summit, a $10-million, 25,000-square-foot expansion.

HCA Midwest Health

• A $110 million expansion of HCA Midwest’s Overland Park Regional Medical Center, completed in 2014, included 218,000 square feet of new and renovated space. That brought to 343 the number of licensed beds there, expanded the hospital’s trauma center, and added a new parking garage.

• In 2019, Menorah Medical Center started work on a $65 million Neuroscience and Orthopedic Center on its Overland Park campus. The three-floor building was designed with 32 fully private inpatient rooms, bringing the facility’s total of licensed beds to more than 155.

AdventHealth

• Just last month, AdventHealth took the wraps off a $150 million expansion at its South Overland Park location in the massive BluHawk development, bolstering its services in in-patient care, the birth center and emergency services. Overall, the 193,000 square-foot project nearly doubled the bed count there to 85.

• The hospital system also added a $36 million outpatient clinic at College Boulevard and Metcalf Avenue, and, though the project was delayed by the pandemic, it will move forward at Lenexa City Center with a 200-bed facility and wellness center.

Olathe Health

• In 2018, Olathe Health completed a $100 million expansion with a 25,000-square-foot cancer center, home to radiation equipment and chemotherapy infusion suites. The largest expansion in the hospital’s history, covering a combined 200,000 square feet, also yielded new buildings for obstetrics and patients with dementia.

Stormont Vail Health

• One of the region’s biggest hospitals, in terms of admissions, Topeka-based Stormont Vail expanded its footprint to the west this year by starting construction of a $38 million medical complex at K-State Research Park in Manhattan. When it’s completed, nearly two dozen clinics with separate missions will set up in the 79,000-square-foot facility, focusing on internal medicine, behavioral health, neurology, digestive health and reconstructive surgery.