Population shifts, suburban slums, and hospitals

Maggie Mahar at Health Beat is doing a series on health care spending related to hospitals; Part I and Part II. Here is a snippet from Part II (go read the rest, it is quite informative):

In recent years, much new construction has been designed to house new technology or upgrade amenities rather than add to the number of hospital beds. There is just one exception to that rule: the suburbs.

“When hospitals do increase inpatient beds,” Paul Ginsburg, the president of the Center for Health System Change notes, “the new construction typically occurs in rapidly growing suburbs, where well-insured patients live.”

In its March 2008 report, the Medicare Payment Advisory Commission supports Ginsburg’s observation: “much of the added capacity is located in suburban areas and in particular specialties, raising the possibility that health care costs will increase without significantly improving access to services in lower income areas.”

While having a hospital in every suburb might seem like a convenient idea, the fact is that we cannot afford to duplicate multi-million dollar equipment that is available in a large city 45 minutes away. Here, I am not talking about emergency equipment or trauma centers; I’m talking about positron emission tomography (PET) machines and neo-natal intensive care units.

In order to offset notorious money-losing locations (read: depressed areas) health systems have built hospitals in suburban areas where the payer mix is much more likely to be profitable. It’s really a smart business decision, but as Ms. Mahar notes, the redundant and expensive technology is sending health care costs up. That’s a problem, but here is something else to consider: what happens when Americans stop moving to the suburbs?

Would people really do that?

They are. The Atlantic had an article in March that noted the emergence of suburban slums:

The decline of places like Windy Ridge and Franklin Reserve is usually attributed to the subprime-mortgage crisis, with its wave of foreclosures. And the crisis has indeed catalyzed or intensified social problems in many communities. But the story of vacant suburban homes and declining suburban neighborhoods did not begin with the crisis, and will not end with it. A structural change is under way in the housing market—a major shift in the way many Americans want to live and work. It has shaped the current downturn, steering some of the worst problems away from the cities and toward the suburban fringes. And its effects will be felt more strongly, and more broadly, as the years pass. Its ultimate impact on the suburbs, and the cities, will be profound.

Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today.

For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s—slums characterized by poverty, crime, and decay.

Richard Florida writes on a host of issues including regional development, quotes a San Francisco Chronicle article on his blog:

When asked if the edge suburbs are turning into slums, Florida concurs with Leinberger’s ominous vision. “Yes, they are already well on their way,” he says. “The knowledge workers can’t afford the time cost, they can’t afford the commuting time.” …Florida and Leinberger say that retooling the suburbs is going to make urban renewal look like a walk in the park. “Suburb development is really fragile,” Leinberger explains. “It’s going to be very complex to rebuild.”

A CNNMoney.com article from 2006 notes that it is not just young urban professionals who no longer want to live in suburbia:

Retirees, empty nesters and young professionals usually have little in common, but they’re all in the vanguard of a recent trend – they’re repatriating center cities.

The trend, which began in the late 1990s, marks a reversal of the post-war urban flight to the suburbs. Now, it’s strengthening.

Young professionals make up a big part of the trend. “It’s carefree living,” says Caparo. “Young professionals just want to put the key in the door and go to bed at night and lock it up again in the morning.” It’s also where the action is, professionally and socially. “For them, there’s lots of DNA to hook up with,” says McIlwain.

Retirees love the museums, restaurants and, most important, access to the best health care. Empty nesters get to live near work.

“For years people traded a commute for affordable housing,” says Jim Gillespie, CEO of Coldwell Banker. The further out in the suburbs, the more affordable the homes. But as suburbs expanded and got more crowded, road construction did not, could not, keep up. Congestion grew worse.

So what is the problem? The closing of SSM St. Francis Hospital and Health Center is a start. Hospital closings are rare, their economic impacts are very important to the communities they serve. Jane Sarasohn-Kahn at Health Populi writes about those difficulties:

Always remember that one worker’s income is another one’s cost. For some communities, the hospital is the local monopsony providing the lion’s share of meaningful employment.

The chart on the right from the AHA study illustrates that in many states, hospitals provide at least 1 in 10 jobs: this is true for Maine, North Dakota, Pennsylvania, and nearly 1 in 10 for Massachusetts, Michigan, Missouri, Ohio and West Virginia, among others.

The microeconomy of the hospital is thus a major contributor to the States’ and nation’s macroeconomy.
When there’s talking of closing hospitals, there’s no doubt why it’s so tough to do so. Financing hospitals, appropriately, has implications well beyond “the bed” and the individual patient.

So localities will fight to keep their hospitals open even as population shifts render their locations irrelevant and unnecessary.  Not necessarily a good thing.  The more unnecessary hospitals we have, likely the more unnecessary hospital spending that will occur.

Ms. Mahar sums it up best:

Granted, out West, there are states where hospitals are too far apart. But in the Northeast, on the West Coast, and in many areas in the South, research shows that we already have too many hospitals—leading to supply-driven over-spending and over-treatment. (“Build the beds and they will come.”)

Here is what we need ask ourselves: are we building responsibly?  What happens when (we’re approaching unsustainable spending levels) government decides to say to hospitals “you made your bed, now sleep in it?”

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