At first glance, Port Angeles, Wash., doesn’t look like the leading edge of American culture. The small city sits on the Olympic Peninsula in the most northwestern corner of the American Northwest. To the south and west, the Olympic Mountains rise in a snow-capped arc. To the north is the glistening blue water of the Strait of Juan de Fuca. Temperatures average in the 70s in the summer and life in the former logging center is generally slow and easy. But these factors that make the town so beautiful and favorable for its chief commodity—tourism—also make it attractive to retirees. In 2006, nearly a quarter of the area’s residents were more than 65 years old. And through that single demographic, Port Angeles—despite its idyllic appearance—found itself thrust onto the leading edge of one of the most important facets of American culture: the future of health care.
Michael Glenn was staring down the sharp edge of a crisis. It was fall 2005. Glenn was chief executive officer of the Olympic Medical Center when he learned the town’s largest primary care clinic, Virginia Mason Clinic, was being closed for financial reasons by its owner, a Seattle-based hospital. That meant about 12,000 of the community’s 65,000 residents were about to lose their primary place for care, and the clinic’s 16 physicians were about to lose their jobs. The people would be forced to turn to Glenn’s hospital for their needs, and it couldn’t possibly absorb that kind of demand.
So for the next 15 months, Glenn and the hospital’s board of commissioners were consumed in a struggle to balance the fears of an aging population with the demands of physicians and the realities of public-payer insurance systems.
And those involved were all too aware they were traveling largely uncharted waters—and their actions could well be a beacon for the rest of the industry. Because of Port Angeles’ peculiar demographics, the city was a microcosm of how America will look in the near future, so whatever they came up with was going to provide a futuristic snapshot of the human concerns and institutional strains caused by the aging of the Baby Boomers.
Says Jim Casey, the reporter who covered the story for the local Peninsula Daily News: “We’re 15 years ahead of the crest on aging in America.” Glenn casts the situation more pointedly: “We called it the sharp end of the spear.”
Glenn graduated from Xavier’s graduate program in health services administration in 1988. Much has changed in health care in the ensuing 19 years, and with the aging of Baby Boomers, much will change in the near future—as his situation in Port Angeles shows.
And such scenarios are causing industry insiders to rethink the way health care will be delivered in the future, says Ida Schick, chair of the health services administration program. To help deal with the rapid changes, the University is creating a center for health care informatics, which will be located along with the graduate program in health services administration within the new Williams College of Business. The center, which is being financed through the To See Great Wonders capital campaign, will train leaders in creating new strategies around technology-based health-care delivery systems and in streamlining existing systems to match the demands of the aging Baby Boomers.
“The big issue right now is how do you pay for health care?” she says. “Not just health care now, but health care in the future?”
It’s a challenge that must be addressed because it’s only going to get worse. According to a report by the U.S. Department of Health and Human Services’ Administration on Aging, individuals age 65 and older made up 12.4 percent of the total U.S. population in 2004. But by 2030, when all of the Baby Boomers reach retirement age, that number will rise to 20 percent. And that’s only part of the picture. Americans are living longer. The current average life expectancy is 77.6 years. The population of people 85 years and older is projected to grow from 4.2 million in 2000 to 7.3 million in 2020. Then there’s insurance. Most older Americans already rely at least in part on public payer health insurance: Medicare and Medicaid. In 2004, 96 percent of non-institutionalized Americans age 65 and older were covered by Medicare; about 61 percent had private health insurance; slightly more than 7 percent had military insurance; and 9 percent were covered by Medicaid. But among Medicare patients living in nursing homes—and thus requiring constant care—in 2001 about 58 percent were also covered by Medicaid.
Glenn says about 70 percent of those residents in Port Angeles and the surrounding county rely on Medicare and Medicaid as opposed to private insurance.
This is telling because the heavy reliance on Medicare and Medicaid meant less money in payments to doctors as well as to the clinic itself, says Jim Leskinovitch, a nine-year veteran of the hospital board of commissioners. And as the population ages and larger numbers of people rely on Medicare and Medicaid, the cost drain on hospitals and other health care providers will increase considerably, adds Tom Ruthemeyer, an assistant professor of finance in the University’s health services administration program.
The clinic was a fixture in Port Angeles for more than 60 years, originally started by a group of independent physicians back before mergers, consolidations, HMOs and health alliances. Over the years, the clinic grew to employ 16 physicians, five nurse practitioners and 77 support staff who logged about 50,000 patient-visits a year.
About 10 years ago, the Seattle-based Virginia Mason Hospital purchased the clinic and immediately began losing money—about $1 million a year—in large part because of the rate of Medicare reimbursement. The clinic saw roughly 12,500 individual patients in the previous two years, about half of which were Medicare patients.
So while it may not have been a complete surprise when the clinic was closed, the news nonetheless sent shockwaves through the community. In all, Glenn says, the clinic’s doctors provided about one-quarter of the family care in Port Angeles, and their loss would mean there simply wouldn’t be enough doctors to care for the patients.
Though the Olympic Medical Center was under no legal obligation to help, a lack of doctors could also likely produce a strain on the hospital’s emergency room facilities and finances.
Managing the issue was tricky on several fronts: One, local independent physicians quickly took up opposition to the idea of the hospital absorbing the clinic’s doctors for fear their own practices would be driven out of business. Two, the hospital lacked funds to merely buy the existing clinic and maintain some semblance of the status quo for its patients, Leskinovitch says. The tax-supported hospital was running on a $100-million operating budget and claimed reserves of $30 million, but had $30 million tied up in expansions, debt and charity care.
And, three, a one-woman protest at the clinic mushroomed into a grassroots confederation made of up patients determined to keep the clinic and its doctors in the area. Things reached a fever pitch at a late-March meeting where grassroots members squared off against the hospital commission. Aware of what he was facing, Glenn convened a group of 20 stakeholders representing all factions, brought in a consulting group and went to work. “Health providers have been watching this demographic prediction come to life for the last several years,” Glenn says. “In my mind, there’s no question that, with the aging of America, health care in rural communities is going to be challenged. We viewed this as a way to refine our systems, to retool in a way other communities might learn from.”
The solution—though still being refined—seemed to satisfy the stakeholders. The Olympic Medical Center ultimately purchased the clinic building and is upgrading it to hospital standards, which will allow it to operate as a department of the hospital and thus open the door for a critical, higher Medicare reimbursement to ensure break-even financial status.
The clinic’s doctors recently ratified an agreement allowing most of them to remain as independent contractors, and the hospital is offering all area doctors such services as electronic medical records and billing services.
With the situation for the most part resolved, Glenn was tapped by another Xavier alumnus, Barry Cesafsky, to become assistant administrator at a larger facility, Providence St. Peter Hospital in Olympia. But he says the experience in Port Angeles gave him a new, healthy look at the delivery of health care—a view with ramifications stretching into the future.
“When you sit in the administrative suite, you’re forced to do things from a 40,000-foot level to understand the health care landscape of the system,” he says. “This experience helped me understand that while a 40,000-foot perspective is helpful, an on-ground, face-to-face perspective is crucial. A health crisis is really whether your neighbor has access or not. And until you’ve resolved that in your community, you have a health care crisis.”