Freeman

ARTICLE

Health Care in Fort Wayne - The Six Million Dollar Fizzle

DECEMBER 01, 1977 by JOE HOCHDERFFER

In its 20-year history our hospital had grown from 250 beds to a 600-bed regional referral center. We were one of the most successful and financially sound hospitals in the nation. We had consistently operated at high occupancy (over 90%), had engaged in six expansion projects and paid for them without incurring major debt, and were charging our patients $10 a day below the state average and $30 a day under national averages. In American Hospital Association records we could find no hospital in our class operating as inexpensively as we were.

 

In 1970 we had added 56 beds and paid for it out of operations. In 1973 we needed to expand ancillary departments to handle the increased capacity, as well as the burgeoning growth of outpatient business.

 

When the planners asked us how much it would cost to add new beds, we had to speed up the planning process for beds and delay the ancillary expansion plans. We asked if we should submit both proposals at once, because our most pressing need was for ancillary, not bed, expansion.

 

No, said the planners, that would cloud the issue. Just tell us how much the beds would cost.

 

Okay, we said, but we can’t add beds without expanding service departments. The new beds will mean that we must enlarge our ancillary areas slightly more than our existing plans call for. How will we show that in our proposal for new beds?

 

Just take a percentage of your ancillary expansion needs and tack that onto your bed proposal, said the planners.

 

So we did. It was backwards planning as far as we were concerned, but we did it the way the planners told us.

 

Our bed proposal was approved, including the percentages of upcoming ancillary expansion, plans which had not yet been submitted. Then followed the two years of lawsuits and injunctions, during which time we had undersized service departments to accommodate growing numbers of patients. We could not proceed with ancillary expansion, because the size of that expansion depended on whether or not we received final approval for the new beds.

 

New Planners for Old

 

During the waiting period, PL 93-641 replaced PL 92-603 as the Federal health planning law. Old health planning boards were replaced with large new ones. New bureaucrats moved into the wealth of new Federal jobs created. And when the court decision finally freed us to add the beds, we faced a new agency with a new set of rules in trying to get approval for ancillary expansion.

 

We brought our ancillary expansion proposal before them.

 

Our hospital, with its one part-time planner (me), faced a new agency with a staff of 25 planners.

 

"How many meals do you produce per square foot?" they asked. "Why is the volume of x-rays performed so much higher on the day shift than on the night shift? Can you fully document the need for 2,750 more square feet of surgery? Why not 1,375 square feet?"

 

Thus began a six-month ordeal to try to get facilities to serve patients who had been denied them too long.

 

What evolved was an 80-page application plus a 40-page financial feasibility study conducted by independent auditors. The fourth draft of this document was accepted as adequate.

 

Following Federal guidelines to the letter, we met with the HSA staff a given number of days before the board hearing was to be held. They informed us that the staff would recommend our project be rejected.

 

Why? we asked.

 

Because it does not meet Federal mandates to contain costs, they replied.

 

But, we protested, our hospital has the best cost record in the country. It would seem that you would want to encourage operations such as ours.

 

True, they said, you have a good cost record. But we have no assurance that it will continue.

 

During the next hour our board members and administration made almost no impression on the HSA staff. So we decided to take our case to their board anyway.

 

Our presentation before the board convinced them that our project was deserving and financially feasible. We were able to demonstrate that, even with proposed expansion, our square footages were below the ranges the planners had used. Even with construction and financing costs added, our rates would still be far under state and national averages.

 

The board went against its own staff and approved us.

 

But, we were to discover, the fight had just begun.

 

Proposal Rejected

 

The group that endorsed our project was known as a "sub-area council." The next step was to get approval before the executive committee of the Northern Indiana Health Systems Agency. This was a small committee, most of whose members lived more than a hundred miles from our community and whose allegiance to the professional planners was unmistakable.

 

The hearing was held 70 miles from home. The procedure allowed no presentation on our part. We were permitted to answer questions, but nothing else. It took less than 10 minutes for them to dispose of us. Our proposal was rejected.

 

We had one more chance.

 

At this point the HSA had only "recommending" authority. The final decision still rested with the state board of health. Our alternatives were either to take our application to the state board of health -with one "approval" and one "disapproval" on our record-or withdraw it, as the planners hinted we should do, and revise it.

 

Our inclination was to go to the state board. These were reasonable people who were familiar with our hospital. Surely we could get a fair shake.

 

But the Federal procedure stated that if an applicant is turned down by the state agency, it cannot submit the proposal again for three years. Our patients had already waited three years, should we gamble?

 

Through unofficial channels we tried to get a feel as to how the state board of health viewed our proposal. What we learned was frightening.

 

Subsidy Means Control

 

The state board was intimidated. Much of the State Health Department’s funding comes from Federal sources. And the word was that if the state didn’t go along with the Federal recommendations, there would be serious questions raised about Federal Funding in other areas of operations.

 

We learned (unofficially) that our project didn’t stand a chance.

 

So we withdrew it, as the planners had suggested. Our next step was to meet with them and learn the surrender terms.

 

In a two-hour conference with the top HSA officials, we asked what it was in our application that should be reduced or eliminated. Should we, for example, scale down the dietary department or surgery, or what?

 

The director merely looked over our heads at the light fixtures. We were patiently reminded of Federal concern over medical costs and gently scolded for not being more cooperative with the planning staff. After a series of hints and innuendoes, we finally got the picture.

 

"Cut at least 10% from the costs. We don’t care where or how you do it. 

ASSOCIATED ISSUE

December 1977

comments powered by Disqus

EMAIL UPDATES

* indicates required

CURRENT ISSUE

December 2014

Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
Download Free PDF

PAST ISSUES

SUBSCRIBE

RENEW YOUR SUBSCRIPTION

Essential Works from FEE

Economics in One Lesson (full text)

By HENRY HAZLITT

The full text of Hazlitt's famed primer on economic principles: read this first!


By FREDERIC BASTIAT

Frederic Bastiat's timeless defense of liberty for all. Once read and understood, nothing ever looks the same.


By F. A. HAYEK

There can be little doubt that man owes some of his greatest suc­cesses in the past to the fact that he has not been able to control so­cial life.


By JEFFREY A. TUCKER

Leonard Read took the lessons of entrepreneurship with him when he started his ideological venture.


By LEONARD E. READ

No one knows how to make a pencil: Leonard Read's classic (Audio, HTML, and PDF)