Center for Studying Health System Change

ost of the sources driving change in other parts of the country have been absent from Greenville -- until recently. Organizational change underway in Greenville’s health care provider market appears to be taking place in anticipation of other potential changes, such as entry by managed care organizations, which may be attracted by Greenville’s sizable population base, economic growth and low HMO penetration. It is not clear, however, whether managed care enrollment will be able to flourish in Greenville, given the market’s structural and cultural characteristics. Among these are: the perception by employers that health care costs are reasonable, a consolidated hospital market that can hold its ground in negotiations with health plans and resistance by local residents to limits on health care choices.

Opinions were mixed concerning the impact of recent health system changes on Greenville residents. Several respondents noted that health insurance premiums were rising and that some of those increases have been passed on to workers through higher copayments and deductibles. Health care quality was viewed as generally good, although some people expressed concern that managed care interventions in physician decision making were adversely affecting quality. Finally, many people agreed that the community’s access to primary care has improved (except for Medicaid recipients and the uninsured). However, concern was expressed about access to health insurance, particularly as businesses create more part-time positions that do not offer health benefits.

The direction and success of HealthFirst will have an impact on the Greenville health care market. Because it is owned by the area’s three largest hospitals, HealthFirst could become a platform for a provider-sponsored health plan capable of dominating the local managed care market.

HealthFirst’s effectiveness as a managed care organization will depend on whether it can align its goals with those of its owner hospitals. HealthFirst could be operated as an "independent HMO" and use its negotiating power and care management tools to control health care costs. It could also be used as a vehicle for channeling patients into Greenville Hospital System, Spartanburg Regional and Anderson Area Medical. HealthFirst’s top executives are professional HMO managers recruited from Group Health Cooperative of Puget Sound, a well-regarded staff-model HMO in Seattle. But the financial incentives for HealthFirst’s owners to "fill hospital beds" may conflict with HealthFirst’s operational strategies to reduce health service costs and premium rates. If organizational differences present an overwhelming barrier, HealthFirst presumably could be spun off as an independent company, allowing Greenville Hospital System to concentrate on health care delivery.

HealthFirst’s success also depends on the public’s willingness to accept what is perceived as a "Greenville Hospital System" HMO, because the community’s faith in that system remains shaky in the aftermath of the AGS merger debate.

There is also the matter of whether Greenville Hospital System and St. Francis will continue their intense competition or develop more collegial relations. In addition, it remains to be seen whether the community and the legislature will approve St. Francis’s CON application to start an open-heart surgery program, which would allow it to compete head-to-head with Greenville Hospital System as a full-service alternative. That could precipitate increased managed care penetration, if plans perceive an alternative to negotiating with Greenville Hospital System. However, some residents would prefer a compromise that provides St. Francis with access to Greenville Hospital System’s open-heart services at "reasonable" prices. It is unclear whether community leaders can achieve such an arrangement.

The future of regional service networks should also be tracked in the aftermath of the failed AGS merger attempt. There are reports that the three systems plan to pursue collaborative activities in lieu of a full-asset merger. Some respondents, however, expressed skepticism that these activities will be significant. Similarly, it is unclear whether Community Health Partnership, established in response to the AGS venture, will continue to move forward with joint contracting initiatives.

The biggest wild card in Greenville is Carolina Multispecialty Associates, which was identified as the organization most prepared to manage full-risk capitation contracts. So far, Carolina Multispecialty has maintained referral relationships with Greenville Hospital System and St. Francis. However, if Carolina Multispecialty does indeed become a major vehicle for global risk-contracting, its choice of a preferred hospital could tip the balance of power between Greenville Hospital System and St. Francis. Its selection of preferred physician affiliates could also shift the distribution of patient volume and revenues.

Finally, a number of forces could affect the provision of indigent care in Greenville. Most important, will the state look again at the Palmetto Health Initiative? Or will it take other steps to control costs through Medicaid managed care and expand insurance coverage for low-income residents?