10 - Sprinting toward the Mean

Summary

While the RAHC hospitals were participating in the HEP demonstration during the 1980s, their counterparts across the nation were devising market positioning strategies. After HEP, Rochester was said to “migrate” toward the competitive environment that characterized the health care industry nationwide. Once such activity among the local hospitals began, however, its pace was more a sprint than a leisurely migration.

Rochester's Competitive Hospital Systems

Rochester's local hospital landscape changed dramatically in the mid-to-late 1990s. The hospitals, unrestrained by caps on capital spending as during HEP III, began to sharply increase spending on capital improvements and technology. As the decade wore on, local “health insurers imposed policies aimed at tightening reimbursement and reducing utilization of hospital services [and] managed care organizations exerted pressure on health care delivery and medical practice.” In addition, Rochester's employers, large and small, exerted pressures on the hospitals to “reduce health care costs and on insurers to reduce health premium costs.” Toward the end of the 1990s, the Rochester community was experiencing “substantial, excess, hospital bed capacity as a result of all these pressures.”

In 1990 Monroe County had 1,736 licensed medical-surgical and rehabilitation beds operating at 92.1 percent occupancy (based on an average daily census of 1,599 patients), a very reasonable occupancy rate. By the end of 1996, the county had roughly the same number of licensed medical-surgical and rehabilitation beds (1,728) operating at 65.9 percent occupancy. Low occupancy rates were a key factor as the Rochester hospitals “began to intensify competitive activities, seeking to gain a larger market share, critical mass of primary and specialty services and improved operational efficiencies.”

Six hospitals combined into three competitive health systems between 1994 and 1997. The Greater Rochester Health System (later renamed ViaHealth) was formed in 1994 by the affiliation of The Genesee and Rochester General hospitals. Unity Health System, merging Park Ridge and St. Mary's hospitals, opened in 1997. Strong Memorial and Highland hospitals, which made up Strong Partners Health System (Strong Health), also started that year.