11 - The Relevance of the Rochester Experiment

Summary

The Rochester experiment was a locally driven, locally designed response to the financial pressures in the 1970s that affected hospitals in the Rochester area, in New York State, and across the nation. With waivers from the federal and state governments and Blue Cross and Blue Shield of Rochester, the hospital experimental payment program enabled nine Rochester-area hospitals to attain financial stability and to pursue capital plans they devised in the 1960s and 1970s but were unable to fund in those years. The experiment was conducted between 1980 and 1990. When it ended, the hospitals were better positioned to meet the technological, economic, and insurance changes of the future.

What is the relevance of the Rochester experiment decades after its conclusion? This key question will be approached in three ways. First, the legacy of HEP for the Rochester area is considered. A brief discussion follows of health reform efforts conceived and carried out voluntarily in other American communities. Finally, the legacy of HEP and that of other communities is presented from the perspective of American federalism, as we ponder the question: Whose responsibility is health care?

The Local Legacy

The Rochester experiment was undertaken against the backdrop of a distinctive local culture. Five influential institutional actors created and sustained HEP for a decade. At its conclusion, HEP's central goals of cost containment and financial stability for the local hospitals had been achieved.

Key characteristics of the pre-HEP culture have been highlighted previously. They were a community decision-making environment dominated by Eastman Kodak; an influential local payer, Blue Cross and Blue Shield of Rochester; a single academic medical center at the University of Rochester, with Strong Memorial Hospital and the School of Medicine and Dentistry; and a long-established tradition of health care planning through community institutions and hospital organizations.

The pre-HEP culture was the backdrop for the environment in the 1970s. The context was financially strapped Rochester-area hospitals with stress exacerbated by state regulatory policies. The culture and the context jointly brought about “perfect storm”—the setting in which Rochester-area hospitals grappled collectively and collaboratively with the challenge of containing health care costs.