Policy Question:

Your state is in an economic downturn.Health care costs are some of the highest in the country. All the providers in the fact pattern below are operating in a mid-sized urban community that is impoverished.The vast majority of patients are covered by Medicare or Medicaid.

Your state is dominated by two large health systems centered around academic medical centers. Each of these systems offers a broad array of services, including high volume OB/GYN service lines and neonatal intensive care units.Each of these two large systems is looking to grow its volumes and deepen its market presence in the mid-sized urban community.

Your state has a certificate of need program.

Many smaller community hospitals in the state have closed. The two community hospitals in your market are each suffering financially.One of the hospitals is Catholic.The boards of each of these hospitals have challenged their management teams to review their service offerings, to look to reduce costs and to focus on profitability so as to ensure the institutions' survival.

There are real disparities in care between urban and suburban populations.Women of color are 4 times as likely to die in childbirth.There is an inadequate panel of providers to service the state's Medicaid population. The OB/GYN services at each of the community hospitals have low volumes, are not profitable and have a high volume of Medicaid patients. Most of the OB/GYN providers in the mid-sized communities are in small independent groups and have had difficulty recruiting into their practices.

The legislature is concerned about the disparities in outcomes in OB/GYN services in particular.They also want to preserve access to health care in all communities and to promote cost-efficiency.

There is a freestanding ambulatory surgery center owned by a group of orthopedic surgeons who currently are on the medical staffs of the two community hospitals.The center's owners are interested in pursuing investments by other parties in the center, either hospitals or surgeons, and in potentially expanding the service offerings of the ASC so as to enhance their economic return.

Health care provider costs seem out of control.Rates are not regulated, and little public data exists as to either costs or outcomes.

Malpractice insurance has become a problem for the provider community, with rates increasing 67% and a number of large jury verdicts having been won against providers, particularly in the OB/GYN service line.

How would each of the parties - the community hospitals, the academic medical centers, the OB/GYN physicians, the surgeon owners of the ASC and the legislature- address these issues?What would be their goals and financial incentives?What laws and regulatory structures might impact their activities?