By Mark Hansel
NKyTribune managing editor
A St. Elizabeth Healthcare official says the decision to challenge an application by Christ Hospital to build a $24 million ambulatory surgical center on the former Drawbridge Inn site isn’t about protecting its turf.
“I think we are protecting our ability to keep Northern Kentucky healthy and to be a good community partner,” St. Elizabeth Healthcare Chief Strategy Officer Sarah Giolando said.
Giolando
Christ Hospital has submitted a Certificate of Need (CON) application to the Kentucky Office of Health Policy, which, if approved, would allow it to build and operate the facility in Fort Mitchell.
Giolando said St. Elizabeth will request a hearing on the CON application before the deadline to do so expires today.
The Kentucky Cabinet for Health and Family Services indicates the certificate of need process is designed to prevent proliferation of health care facilities and services that can increase the cost of quality health care in the commonwealth.
St. Elizabeth is the dominant health care provider in Northern Kentucky, which is an attractive market with more than 400,000 residents in Boone, Campbell and Kenton Counties alone.
Cincinnati-based Christ Hospital’s decision to purchase the property at 2477 Royal Drive in Kenton County in 2015 signaled its intention to increase its presence in the Northern Kentucky market.
The application calls for an approximately 24,000-square-foot facility on 2.6 acres of land that would accommodate two operating rooms and support space, with room for expansion. The surgical center is envisioned as part of a larger development that would include additional independent health care services and other components as part of the Fort Mitchell Gateway Project.
Giolando said the request to operate this type of facility on the site would circumvent the checks-and balances in the CON process that ensure there is not an oversupply of health care services.
“We have seen very clearly that (an oversupply) increases costs because people try to fill them with procedures and other services to make them financially viable,” Giolando said.
She pointed out that there have been several applications that Christ, UC Health and others have put forward that St. Elizabeth felt were consistent with the state health plan and did not oppose.
“This one is not consistent and the reason is that there are nine ambulatory surgery centers in the market already that are operating at an average of 50 percent utilization,” Giolando said. “So, they are basically being utilized half of the time that they could be. It doesn’t really make sense to put up a whole other building.”
St. Elizabeth Healthcare owns five of the ambulatory surgical centers and the other four are operated independently.
Giolando said there is not expected to be a significant increase in demand for outpatient surgeries in Northern Kentucky in the near future.
“The projections that our counselors tell us is that outpatient surgery rates are expected to increase by 1.9 percent in our market area,” Giolando said. “What’s more likely to happen is surgeries will get pulled away from the independent market providers, and us, and taken to the new facility, so there will be more facilities operating at less-efficient capacity.”
Christ Hospital logo
Giolando acknowledges that the financial impact of another provider in the region is a concern because of the potential impact on St. Elizabeth’s role as a safety net provider.
St. Elizabeth provides $112 million in uncompensated care and community benefit every year, according to Giolando. She said St. Elizabeth is also a strong community partner, contributing to the NKU Health Innovation Center, the R.C. Durr YMCA, Skyward, LiveWell NKY and other organizations.
“You see us out in the public, promoting public health with the types of activities that are not profitable at all, such as education, health programs and free health screenings in the community,” she said. “We can only afford to do that if we have the profitable side of the business that gives us the financial means.”
Giolando makes it very clear that she believes there is a big difference between the impact St. Elizabeth has in the region and the role other health care providers play.
“Out-of-state providers come in and typically really try to focus on the commercially insured patient base,” Giolando said. “We’ve seen that even to date from Christ Hospital in their current Northern Kentucky operations.”
She used Medicaid percentages to make her point.
According to Giolando, St. Elizabeth’s Medicaid rate is about 24 percent for in-patient services in hospitals and 21 percent for outpatient services, of the type Christ Hospital is proposing in Fort Mitchell.
She compared that to Christ Hospital’s inpatient rate, which she identified as four percent for Northern Kentucky residents and three percent at its Fort Wright location for outpatient services.
The state average for Medicaid, which includes KCHIP and other programs, is about 25 percent.
“A fairness question comes in to play a little bit,” Giolando said. “If you are going to make our Medicaid percentage go up and our commercial go down and take away the piece of our business that we can make money on, then we are going to have to bear an undue burden. That doesn’t seem like fair competition to us.”
Kentucky also has something called a provider tax that all hospital systems pay into.
Giolando said Christ Hospital, with its current operation in Kentucky, is not required to pay that tax.
“The money that is generated from that tax goes into the Medicaid budget, which is another way we support Medicaid,” Giolando said. “Not only are they not paying the provider tax, they are not serving the Medicaid population in a proportionate manner.”
About 60 percent of St. Elizabeth’s business is government-based health care, through Medicare and Medicaid.
“We don’t set those prices, they tell us what they are going to pay for a service, and if it costs us more, we just have to accept the price they give us,” Giolando said. “The only price capability we have is on commercially insured business and that’s why when somebody comes in, they just want to serve that business because that’s the most profitable piece of the pie. When you start chipping away at that high-profit service, you put at risk the community benefit and the level of community-service role that a health provider can play.”
The request for a hearing is a simple process and a hearing officer, who is a member of the Cabinet for Health and Family Services, makes the determination.
While the officer is not a judge, the hearing is very similar to a trial, with testimony on both sides and an opportunity to use expert witnesses to strengthen a case.
The burden of proof is on the applicant so, in this case, Christ Hospital would have to demonstrate there is a need for another ambulatory surgical center in the region.
A hearing date will be set and the hearing itself can take several days, but Giolando said a decision could come by late summer.
If either party does not agree with the outcome, the decision can be appealed in Franklin Circuit Court.
Contact Mark Hansel at mark.hansel@nkytrib.com
I don’t know much about the “certificate of need” procedure but I’ll bet the local politicians will be waist deep in the muck and mire and not give it much support. St. E has had a monopoly for several years now and they are not going to give up easily. I try to utilize non-St. E physicians as much as possible but that’s pretty difficult if one lives in NKY. Good luck Christ Hospital.