Center for Studying Health System Change

he health system in and around Syracuse appears to be on the verge of change. Much of the change-related activity, however, has been anticipatory, and many of the events expected to drive or unleash change either have not occurred yet, or have been less disruptive than anticipated. For example, the termination of the state’s comprehensive hospital rate-setting system has not yet produced the financial consequences originally expected. The threatened entry of national managed care organizations into the local market is occurring less precipitously than anticipated. Medicaid managed care enrollment will probably not increase significantly until January 1998, when mandatory Medicaid managed care enrollment will start to take effect.

There is little evidence that cost, access, quality of care or insurance coverage has been affected by the changing environment. Hospitals, health plans, community health programs and physician groups are all taking steps to survive -- or prevail -- in a deregulated, price-competitive environment. But these activities are tempered by a strong ethos of caution and resistance to "outside solutions" and the traditionally close working relationship of business and health and civic interests.

The environment for health care organizations in the Syracuse area has shifted from one of comfort and cooperation to one of uncertainty and anxiety.

High-cost teaching hospitals and providers that supply a large share of uncompensated and Medicaid care are vulnerable to the payment reductions associated with the demise of NYPHRM and the onset of negotiated rates and Medicaid managed care. Excess hospital bed capacity remains and is likely to grow. Hospitals in the counties outside Syracuse are in a precarious position due to the dominance of the four Syracuse-based hospitals and the higher rates of uninsurance reported in those outlying areas.

In the health insurance market, four local HMOs face difficulty if they have to compete with large, well-capitalized national plans.¹⁸

The Syracuse Community Health Center depends heavily on the success of its Medicaid managed care product, and will likely face competition for Medicaid enrollees and rising uncompensated care demands. The local and state health and social services departments are also in the midst of reorganization and changes in responsibilities with regard to Medicaid and welfare reform.

The changes underway in Syracuse’s health system are largely in anticipation of events that are still unfolding. Nonetheless, these anticipatory responses are likely to create other changes. For example, the implementation of PHO and MSO strategies and the purchase of physician practices may redefine referral patterns between doctors and hospitals. Advertising campaigns, the purchase of primary care practices and investments in sophisticated information systems may divert resources from patient care or increase health care costs in the short term. Increased risk assumption and contracting may alter patterns of care.

It will be important to track respondents’ early perceptions to see whether predictions hold true over the longer run. Among the questions that bear watching:

• Will access to primary care improve for Medicaid managed care enrollees?

• Will the recent decline in HMO premium costs relative to indemnity plan costs continue, and will mandatory Medicaid managed care trigger a more widespread transition from fee-for-service to managed care in the commercial market?

• Will hospital consolidation and alignment between physicians and hospitals go forward?

• Will physicians gain greater power relative to hospitals and health plans, either in joint relationships or by initiating their own ventures?

• Will the historic collaboration of hospitals with each other and with civic and business leaders reassert itself, or will competitive or antagonistic forces prevail?

• Will the replacement of the NYPHRM hospital payment system with a deregulated market-based approach occur smoothly, or will it provoke more turbulence?