St. Louis, Mo.
1995
owerful forces are converging to reshape the St. Louis health care market, much as the Mississippi and Missouri rivers have shaped the city itself. In recent years, these mighty rivers have breached their banks to transform the contours of the surrounding countryside. Today, new business initiatives, the imperatives of religious cultures, and the nationwide push toward managed care and consolidation is threatening to breach the "banks" of the region’s reputable, traditional health system.
St. Louis is a region of sharp contrasts in terms of its people, economy, and health system. The market spans the Mississippi River to include parts of Missouri and Illinois, a nine-county area with nearly 2.5 million people. The Missouri suburban counties are prosperous, while the urban areas, especially East St. Louis in Illinois, are depressed and have very high poverty rates. The business sector includes the fifth highest number of Fortune 500 corporate headquarters in the country, but employment is largely generated by the 90 percent of firms with fewer than 100 workers. The health system has a reputation for providing high-quality care, largely because of its two medical schools, Washington University and St. Louis University. The schools’ emphasis on training specialists and cutting-edge medical research has spawned a system top-heavy with tertiary, high-tech health care and one of the highest concentrations of hospital beds in the country. Yet, St. Louis also has a reputation as "the syphilis capital of the United States."
The market is being driven by three hospital-based delivery systems that have divided up the area’s medical schools and children’s hospitals. The 1993 merger of Barnes, Jewish, and Christian hospitals into the BJC Health System "was like an explosion" that shocked other players into action. BJC (which also owns Missouri Baptist hospitals) is allied with Washington University and St. Louis Children’s Hospital. The SSM Health Care System, a four-state Catholic network, includes St. Louis University and Cardinal Glennon Hospital for Children. Unity Health Network is also a Catholic system, based in the Sisters of Mercy order. About one-quarter of the market is served by 15 still-independent facilities, including the quasi-public Regional Medical Center, whose clientele are mostly low-income people.
Managed care plans in St. Louis are relatively "unmanaged," but they are feeling pressure to change as employers and government purchase health care more aggressively. About 40 percent of all insured residents are covered by managed care plans, including 15 percent in HMOs. However, to date, most health plans have very large, nonexclusive networks and pay physicians discounted fees, not on a capitated basis. Two new employer purchasing initiatives, one for large firms and one started by medium-sized firms, have obtained significant premium reductions through competitive contracts. The state is using competitive bids to implement mandatory Medicaid managed care in St. Louis and has recently moved many public employees from indemnity insurance to HMOs. Premium shares paid by public employees vary significantly by plan, giving employees a strong incentive to choose lower-cost HMOs; this mechanism is expected to further pressure HMOs to cut costs and improve service.
Change is less apparent in the physician community. Many hospitals are in the beginning stages of creating physician-hospital organizations (PHO’s) or purchasing practices. Some health plans, such as Prudential, are also buying practices, especially primary care ones. And a few medical groups have merged to gain market power. Despite these developments, the medical community remains largely unchanged and continues to be unorganized and dominated by specialists. However, signs of change are on the horizon. As a number of observers noted, the pressures evident in many other markets for physicians to "sign up, join up, sell out, or be bought" are building in St. Louis.
While the primary market covers nine counties, both health plans and providers are stretching their networking efforts across Missouri and into other states. Pushed by public employer purchasing, each hospital system has, or is seeking, alliances in the 300,000-person market in central Missouri (where the state capital is located). The area’s two children’s hospitals already draw patients from a 250-mile radius. SSM Health System includes hospitals in Illinois, Wisconsin, and South Carolina, and it owns a 49 percent share of a Wisconsin-based HMO. Health insurers such as Blue Cross and Blue Shield of Missouri, Humana, and Mercy Health Plan are developing networks beyond St. Louis to cover the entire state.
While the transformation of the health system appears very rapid, observers noted that most change in St. Louis comes slowly. This resistance is attributed to a conservative culture anchored in both the city’s powerful religious organizations and a shadow government of large-business CEOs. The Catholic archbishop has explicitly sought to enforce the charitable missions of Catholic hospitals, a force that some believe has complicated the drive to find efficiencies, reduce costs, and forge financially advantageous alliances. Many corporate leaders sit on boards of directors of the major hospitals, insurers, and charities, creating a complex of overlapping interests in which "everyone is afraid to step on anyone’s toes." The result is, for example, hospital alliances that are consummated at corporate management levels, but that have yet to produce true board mergers, significant clinical integration, or major bed reductions.
Change is occurring despite this resistance. Most interviewees expressed the anxieties and fears typical of a turbulent market. They predict that the rate of change will move from fast to furious as more consolidations occur among hospitals, physicians, and health plans. As one person said, "What took seven to ten years in other markets will take three years here."