Health care changing fast with closures, mergers

HOUGHTON — Health care providers are facing rapid change and challenges, with many going under or merging with other entities.

Brian Sinotte, CEO of UP Health System – Marquette, gave an overview of some of the struggles facing hospitals to the Upper Peninsula Economic Development Alliance Monday.

“A lot of us are in the space right now of having to change in an industry that wasn’t designed for huge change and in an industry that hasn’t had to undergo change,” Sinotte said.

Challenges include decreasing reimbursement from the federal level, increasing cost of providing care, rising pharmaceutical costs, labor spending growth, technology infrastructure costs and an aging population.

With that setup, many hospitals are closing their doors or merging with other large entities, a pattern Sinotte expects to continue.

“If you don’t have a margin, you don’t have a mission,” he said. “Your doors aren’t open and we’re seeing that a lot.”

This is an issue Sinotte doesn’t expect to go away anytime soon. Particularly in the realm of federal reimbursement as the issue remains a historical concern from both major parties to reduce spending.

“The big one that’s really taken the biggest bite now is the Affordable Care Act in 2009,” Sinotte said, though the impacts weren’t really felt until 2014 and 2015.

As the pressure on hospitals continues, they are struggling to stay in the margins. Some have closed while others are merging with other large entities. U.P. Health System is one of them with an acquisition from Lifepoint Health, which is now merging with non-urban health care provider RCCH HealthCare Providers which is under the umbrella of Apollo Global Management.

These types of mergers have been taking place even across state lines with the benefit of sharing back-office costs, improving negotiating with private insurers and spreading costs to improve margins, Sinotte explained.

Though non-urban health care has been very unpopular with investors, he sees Lifepoint “doubling down” on non-urban care.

“They want to be the ones that figure it out and create a model for non-urban health care at a time when everyone else is running from it,” he said. “…How do you provide world-class care as efficiently as possible because you have to maintain a margin or risk closing? That is really the riddle everyone is trying to solve.”

Despite the challenges, Sinotte sees his organization in a good and stable place but notes there may be more challenges on the horizon.

“A lot of hospitals would take our place in a heartbeat,” he said.