August 28, 2013

A Word with the Boss: Numbers man is trying to make health costs add up

MaineHealth CEO Bill Caron hopes to keep the baby boomer 'tsunami' from breaking the bank.

By Colin Woodard cwoodard@pressherald.com
Staff Writer

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CEO Bill Caron oversees a MaineHealth network that employs about 16,000 people and has nearly $2 billion in annual revenue. In fiscal 2011 he earned a base salary of $1,058,110, according to IRS filings.

John Patriquin/Staff Photographer

Q: MaineHealth is a big network, and continues to expand. Ultimately, what's the right scale for you to fulfill your mission?

A: If you add up all our revenues, we're just under $2 billion. We're big enough to do what we need to do from a scale standpoint. We have the clinical horsepower, we have enough people that if we want to effect a change, we can do it throughout the region.

Now the health care world is crazy in the sense of all these mergers and acquisitions that occur. I hear colleagues of mine around the country say, "Unless you can be an $8 billion to 9 billion health care system, you're not going to survive!" I don't believe that, and we'll do fine. But I could be wrong, and five years from now the MaineHealth system could determine that we have to be part of a large system in Massachusetts. But I just don't see it. 

Q: So is competition good or bad in your industry?

A: We need competitors out there because if you ever built a system in the state of Maine where 100 percent of the providers in the southern part of the state were in the same organization, the state or federal government would be running the organization, because you've just created a public utility!

But would I rather it not be that way? If I could spend two hours with you, I could explain why I believe competition in health care doesn't lower costs, it leads to higher costs. And in a rural state like Maine, we need to take a scarce resource and make sure everybody collaborates.

The problem in health care is that unit cost isn't the issue, utilization is the issue. If you have competition in health care, you're going to drive over-utilization, which far outweighs any unit cost savings -- doing procedures you don't need because you need to justify the equipment you just bought. And the other problem in competition is that the user is not the purchaser, but rather (it's) the employer or the federal or state government. Since we're isolated from the big decisions about paying for health care, we're not motivated to seek the lowest price and the highest quality.

But back to your basic question: Is it good to have competitors? Yes. I have to say that because that's what the Federal Trade Commission and the Attorney General's Office says. 

Q: How is the implementation of the Affordable Care Act affecting the landscape you're operating in?

A: The day you say you are going to give more access to individuals, you've got to have the primary care capacity to take care of them. It's going to be a challenge for the state, because there will be spots around the state where we won't have the right supply of physicians.

The Affordable Care Act -- which increased access for 40 million people -- was partially financed by going to the American Hospital Association and cutting a deal to reduce hospital reimbursement across the country by $151 billion over the next 10 years. So we know that for the next six years we are going to get underpaid by the Medicare program even relative to inflation by a couple percentage points a year.

It's hard to argue about expanding access; the problem is that it's making the cost to acquire care more expensive. And that's the challenge we have. We're doing better, but we're not nearly as good as we need to be in driving costs out of the system. 

Q: Your flagship, Maine Medical Center, this week announced staff reductions, including 50 layoffs. What are the unforeseen pressures that are driving these cost-cutting moves at this and other Maine hospitals?

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