Yet Salem Hospital has decided to increase health insurance cost-sharing for early retirees because of higher costs
October 6, 2010 -- Salem Health is sending its top executives to Japan to embark on a program to improve quality and meet patient needs. That program is estimated to cost approximately $2.5 million a year over the next five years, according to confidential sources.
At almost the same time Salem Hospital decided to buckle down on health insurance costs for employees who’ve taken early retirement because of higher costs.
A brochure about the Salem Health Production System, also known as Lean, says, “We also want healthcare that is affordable and sustainable into the future.”
Julie Howard, spokeswoman for Salem Health, parent company of Salem Hospital, couldn’t confirm the $2.5 million figure for the trip to Japan but did say, “I’m looking forward to this work to improve healthcare quality and patient safety while eliminating waste.”
Judy Schrader is irked. She spent 26 years at Salem Hospital as a medical technologist and decided to retire 3 ½ years ago feeling confident about retaining her coverage. Hospital officials reassured her she could purchase insurance at its group rate until she qualified for Medicare. There are about 100 early retirees in that plan.
Last fall, before the hospital announced it was increasing her insurance costs, Schrader had been asked if she’d come back to work if there was an extreme H1N1 infection among current staff, and at that time had been called a valuable recent retiree by hospital officials.
“So much for the valued recent retiree,” she said. “We had been assured healthcare insurance in our employee policy manual if we paid our portion and the hospital’s portion. I knew costs would rise but assumed as long as I was in the hospital group plan, I’d be able to absorb those costs. But when they started targeting early retirees, that was too much. Again, that’s why you get into a group plan. The younger people help to average the cost. That’s why I decided to retire early at age 56.”
Starting in January, Salem Hospital is changing its policy about early retirees, requiring them to pay substantially more for their health insurance, saying they were using more healthcare services than current employees.
That means Schrader will have to pay $617 a month starting in January rather than the current $440 – which represents a 40 percent increase.
Feeling shocked and disappointed, Schrader contacted Denise Hoover, manager of compensation and benefits at Salem Hospital.
“While I realize healthcare costs for older people tend to be more expensive, there are many younger active employees who help balance the hospital’s insurance costs,” Schrader wrote her. “I feel as if Salem Hospital wants me off their insurance plan because I’m too costly. You could do the right thing by allowing current retirees to continue at the hospital plus employee cost until we reach the age of 65 and become eligible for Medicare.”
But the hospital didn’t budge. Instead, Hoover told Schrader that she could “drop or change her coverage under our plan.” She was told that the majority of that 40 percent increase – 25 percent – was due to higher medical costs for early retirees.
“I asked if she could figure out how much the older employees who were still working was costing them,” Schrader said. “But she said no, they couldn’t pull that population. I’m sure they could but didn’t want to, and, admittedly, they’re still working.”
Then Schrader pointed out that Salem Hospital could qualify for financial assistance through a new federal Early Retiree Reinsurance Program offered by The Affordable Care Act. Up to $5 billion in financial assistance is available to employers and unions to help them maintain coverage for early retirees age 55 and older who are not yet eligible for Medicare. Both self-funded and insured plans can participate.
Under that program, the federal government will reimburse medical claims dating back to June 1, 2010, paying up to 80 percent of costs for health benefits between $15,000 and $90,000.
But Hoover told Schrader that the hospital considered applying but decided the program would not only be too costly, but wouldn’t benefit them since they intend to phase out the early retiree insurance program.
Hoover did not respond to calls from The Lund Report.
Besides contacting Hoover about her concerns, Schrader sent copies of her letter to Bonnie Driggers who chairs the Salem Health Board of Trustees.
When contacted, Driggers said she hadn’t received that correspondence but defended the hospital’s new venture saying, “It will lead to efficiency and quality and tremendous savings in upfront costs.”
Meanwhile, here’s a memo released by Julie Howard about the Salem Health Production System.
“Salem Health is beginning a five-year process to implement a system based on the Toyota Production System. (Lean is a set of tools in the Toyota Production System that assists in identification and steady implementation of waste reduction.) The Salem Health Production System (SHMS) will focus on ensuring that everything we do adds value for our patients and reduces waste.
“SHMS methodology places the focus on long-term results and on value to the patient.
Through a series of process improvement events, Salem Health will break down individual processes into its steps, determine which of these steps add value from the patient’s perspective, and seek to eliminate those that do not add value.
“As we do this with a number of our processes over time, value and quality for the patient improves and waste is eliminated. These are improvements that are long-term and sustainable.
“What results have other hospitals seen? Hospitals see different results based on whether they fully commit to implementing the system throughout the hospital. In addition, results are seen over time, with at least a five-year implementation process. Salem Health is basing its implementation on hospitals that have realized gains in quality, patient safety and waste reduction.
“For example, Virginia Mason Medical Center in Seattle is in its ninth year with a full implementation of the same methodology (see attached). As a result, the hospital has increased scores in both staff and patient satisfaction and has significantly improved its financial performance. Specific improvements include:
- 100 percent reduction in medication and solution labeling errors
- 98 percent reduction in the total time it takes for a gastrointestinal procedure
- 85 percent reduction in the total time it takes for a surgery
- 50 percent reduction in cases of diverting patients from a full ER
“At ThedaCare in Appleton, Wis., in 2002, the mortality rate for coronary bypass surgery was nearly 4 percent — about 12 deaths per year. After several improvement projects over seven years, in which they typically removed 40 percent of wasted time and effort with each pass, cardiac mortality was reduced to near zero. Also, a patient’s average length of stay fell from 6.3 days to 4.9 and the cost of coronary bypass declined 22 percent.
“How will the system be implemented? Leaders at all levels, along with selected front-line staff, will be certified as trainers. This certification process includes two weeks of immersion training in Japan, where they will benefit from the accelerated learning that comes through immersion in a different culture and within organizations that have fully integrated Toyota Production System methodologies.
“All employees will receive basic training in SHMS methodology. Process improvement work in the methodology is done primarily by front-line workers since they are the people who know what really occurs on a day-to-day basis. When a process is identified for a process improvement event, employees who are close to the work will participate, examining the current process and redesigning it to eliminate waste and improve value for the patient.
“Why is Salem Health investing resources in the SHMS initiative at a time when money is tight?
“In today’s healthcare environment, with rising healthcare costs and fewer employers insuring their employees, it’s imperative that Salem Health finds ways to continue to improve quality and meet patients’ needs, while reducing costs.
“Time is of the essence. The more rapidly we can learn and apply the SHMS methodology, the more quickly our patients will benefit, and the more likely we will be to continue our ability to offer healthcare to our community in unpredictable environment.
“While it is definitely a bold move to commit resources for training in Japan, other organizations that have implemented SHMS methodology tell us the value gained by the Japan experience is more than worth the cost. Leaving a familiar setting where assumptions about how things need to be done are so engrained that we no longer see them, and being immersed in the SHMS methodology in a different organization and culture with long experience in the system, is reportedly a “breakthrough” learning experience.”
Salem Health also has announced its intention to purchase the Oregon School for the Blind for $6 million and turn the site, which adjoins its property, into a parking lot.
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